There is no one “best” way to come up with successful startup ideas, as the process of generating and validating new business ideas can vary greatly depending on the individual or team.
However, here are a few techniques that can help you generate potential startup ideas:
- Identify a problem: Look for problems in your own life or in the lives of people around you that you think could be solved with a new product or service.
- Look for gaps in the market: Research existing companies and products in your field of interest, and look for areas where there is room for improvement or where there is unmet demand. Usually, a good startup is in a new industry, a niche market, or has few competitors. The more innovative the idea, the better.
- Follow emerging trends: Stay informed about developments and advancements in your field of interest, as well as broader technology and cultural trends, as these can point to new unexplored opportunities.
- Network and collaborate as much as you can: It is very important to know that 99.99% of successful organizations don’t get there by the efforts of a single person or a very small group of people. Instead, they are a collective effort, so try to team up and collaborate with as many people as you can. Talk to people with diverse backgrounds and experiences, and be open to new perspectives and ideas. Collaborating with others can often lead to new insights and opportunities. I highly recommend talking about your ideas with people you can talk for hours with and people who enjoy talking with you as well, like your family and friends. Ask them on a date, or invite them for dinner and let them know you would like their feedback on your startup idea. Also talk about your ideas or new startups with as many people as possible, including your clients and potential clients. A great place to do this is at conferences that are related to your niche/industry, meetups, and hackathons! You will be surprised at how much more valuable your social network can get, the insight you can derive from these conversations, and many times these conversations will also bring you new clients, investors, employees, and even co-founders!
- Test and validate: Once you have an idea, validating your idea is the most important step, you can start to validate it by talking to potential customers and gathering feedback. As entrepreneurs it’s important to understand that the market is something that we can’t control or predict perfectly, so every time we build an idea expecting customers to come, we are taking a leap of faith, we are taking a chance, there is no way to guarantee your success, but by validating your idea and looking for early signs of demand, you can reduce your risk. By validating many ideas over and over again, you can also increase the likelihood that you stumble upon the winning idea. To validate it, you have to sell your idea and get revenue for it as fast as you can. Money from customers is the best form of validation you can get for a startup idea. This will help you understand whether there is a real demand for your product or service, and allow you to make any necessary adjustments before investing too much time and resources into the idea. More on this later in the article.
- Don’t lose enthusiasm! I learned this from Tim Draper, the legendary investor. Winston Churchill also defined success as “Going from failure to failure without losing enthusiasm”. Be willing to repeat this process that I listed, fail fast, and fail as many times as you need before you find traction, and a positive response from the market, and as I said before the preferred form of traction is sales and revenue. Without traction you won’t be able to raise money from investors or do anything else, I don’t recommend trying to get venture capital as your main focus, most of the time you need a business that has grown, and users before can even consider trying to raise money. Your number one priority after you have an idea is to get it to positive revenue and revenue growth.
Launching 12 startups in a year to validate your idea
I once heard that whenever you start working on a startup idea, your number one priority should be to get at least 10 sales for that idea in under a month, if you fail to do this, move on to the next idea, because if you weren’t able to get 10 people/businesses to pay for your prospective product or solution, it is very possible it isn’t worth paying for, probably not the right idea, or not the right time for this idea, so quickly move on to the next one!
If you were to follow this method, you should be able to test 12 ideas in a year.
Putting terrible odds in your favor
If we believe that 95% of businesses fail, and you launch at this speed (12 startups per year), these are the probabilities that you find your winning startup idea within the first X years:
You find your winning idea in the 1st year: 45.96% chance
You find your winning idea in the 2nd year: 70.80% chance
You find your winning idea in the 3rd year: 84.22% chance
You find your winning idea in the 4th year: 91.47% chance
You find your winning idea in the 5th year: 95.39% chance
You find your winning idea in the 6th year: 97.51% chance
You find your winning idea in the 7th year: 98.65% chance
You find your winning idea in the 8th year: 99.27% chance
Advice on how to test and validate an idea:
It costed me around 20,000 USD to learn this, but it’s a very common mistake that costs millions and even hundreds of millions to others.
So listen up!
One way to validate your startup idea is to pitch and sell your idea to the market by doing a “PREtotype”, which is a simple website where people can sign up for, or pre-order, your product or service.
The PREtotype is an amazing hack and I recommend that you research it more, because, with it, you can test your ideas on the market before you have a prototype, product, or MVP (minimum viable product).
One of your jobs as an entrepreneur is to sell ideas as best as you can and as convincingly as you can before they are real, this will let you measure the early response from the market, and this feedback will guide you to the right ideas.
It’s also important to remember that not every idea will be a winner, and it’s okay to fail. Failure is a part of the process of building a successful startup and learning what works and what doesn’t.
Good ideas come from really understanding the problem and identifying the unmet need for the customer. Understanding customers and what they want is the most important part of any successful startup.
Predictive entrepreneurship
Over time, the best entrepreneurs are able to predict the market with a much higher degree of accuracy than most people, because they developed a really good sense of what will work in the market, even before doing any market testing. This experience becomes an ability that makes certain entrepreneurs look time travelers, being able to predict the technologies that will be successful and demanded by people in the future.
However, even the very best entrepreneurs will still do tests through PREtotypes, prototypes and MVPs to avoid overcommitting resources and time to ideas that aren’t winners, or to ideas whose time hasn’t come.