Building a Startup #2: How To Generate Business Ideas Worth Millions

✨ Hi, I’m Sara! In this newsletter, I share my musings at the intersection of tech, product, and human tinkering, with the aim of navigating business and life in the Technology Era with purpose.

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Hey friends 👋, as announced in my previous newsletter, I've decided to take the plunge and build my own startup. This is a big deal because I have only 10 weeks to find a co-founder, build an MVP, and pitch to investors. Otherwise, I'll need to find a job to avoid running out of funds.

I’m going to document my entire journey and give you all the details of how to build a startup, including all the resources, processes and templates that I am using. This will be a step-by-step guide written as I navigate the process.

In our first issue, we discussed how to find the perfect co-founder. In this second issue, we'll explore how to come up with a business idea for a startup that has the potential to generate millions.

Before we begin, I want to offer a quick caveat: no idea, no matter how brilliant, guarantees success. Success depends on several factors, with execution being the primary one. However, it's true that not all ideas are created equal, and some have a higher likelihood of success than others. So, let's dive in.

Where Do Startup Ideas Come From?

The most common starting points for startup ideas come from one or a combination of the following:

• You have a personal problem or passion - You want to solve a nagging problem current solutions don’t address or pursue a passion you think others may share.

• You have a technology in mind - Maybe you've devised a groundbreaking technology and wish to leverage it, or you've discovered such a technology and recognize its potential for spawning a business.

• You have a sector or group in mind - You want to address problems or needs in a specific industry or for a particular demographic. For instance, you might be well-acquainted with challenges in the real estate sector, renewable energy, or you aim to assist professionals like doctors, teachers, etc.

How to Generate Startup Ideas

The most effective way to generate startup ideas is organically. This means going about your daily life until an idea strikes. Organic ideas often stem from your expertise or knowledge (e.g., understanding a problem in a field you've worked in), things you wish existed, the emergence of new technologies, events that unveil new opportunities, or the adaptation of successful concepts from one market to another.

However, if inspiration doesn't strike spontaneously, there's no need to worry. You can take a more structured approach to idea generation. Below, we'll explore three scenarios, each accompanied by exercises and follow-up questions to spark your creativity.

Scenario 1: You Have a Personal Problem or Passion

Exercises:

Personal Pain Point Diary: Keep a diary for at least a week, documenting any frustrations or inefficiencies you encounter in both personal and professional spheres. Review your notes to identify recurring themes or significant issues that might inspire a solution.

Passion Mapping: Create a mind map of your passions and interests. For each passion, brainstorm possible products or services that could be developed. Consider how these could address unmet needs or enhance people’s lives.

Follow-up Questions:

1. What specific problem do you face that existing solutions do not adequately address?

2. How do you currently deal with this problem, and what are the shortcomings of this approach?

3. Can you identify others who share this problem or passion? How do they cope with it?

4. What would the ideal solution look like for you?

5. How could this solution be turned into a product or service that others would be willing to pay for?

6. What impact would solving this problem or pursuing this passion have on a broader scale?

Bonus idea: join someone who has already an idea and is looking for a co-founder

If You Have a Technology in Mind:

Exercises:

Technology Application Brainstorming: Write down the technology at the center of a page. Around it, brainstorm various applications across different industries or aspects of life. Don’t limit yourself—think broadly about potential impacts and uses

SWOT Analysis: Conduct a SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) of the technology. This can help identify unique opportunities for application or innovation that leverages the technology’s strengths or address its weaknesses.

Follow-up Questions:

1. What is the technology, and what are its unique capabilities or advantages?

2. What existing products or services could this technology enhance or transform?

3. Are there industries or sectors that would particularly benefit from this technology?

4. What are the potential barriers to adoption for this technology (e.g., cost, complexity, regulation)?

5. How can this technology be applied in a way that hasn’t been done before?

6. What partnerships or collaborations could accelerate the development and adoption of this technology?

If You Have a Sector or a Group of People in Mind:

Exercises:

Sector/Group Deep Dive: Immerse yourself in the sector or group you’re interested in. This could involve reading industry reports, joining relevant forums or groups, attending workshops, or conducting informational interviews with key stakeholders. Journal about all the problems and opportunities of this sector/group and identify recurring themes or particularly vexing issues that could inspire a solution.

Strategy Canvas: This tool gained popularity through the book "Blue Ocean Strategy." Its purpose is to visually represent the current situation in a particular industry. To begin, you should determine the key factors of competition within the industry and plot how competitors perform in those areas. Then, you can explore how you can introduce something that revolutionizes the game by considering the following questions:

• Which of the factors that the industry takes for granted should be eliminated?

• What factors should be reduced well below the industry’s standard?

• Which factors should be raised well above the industry’s standard?

• What factors should be created that the industry has never offered?

Follow-up Questions:

1. What are the most pressing problems or needs within this sector or group?

2. How are these needs currently being met, and what gaps exist in the current offerings?

3. What changes or trends are affecting this sector or group that could create new opportunities?

4. What are the unique characteristics or constraints of this sector or group that any solution must consider?

5. How can technology or innovative business models be leveraged to serve this sector or group better?

6. Who are the stakeholders within this sector or group, and how can they be engaged in the development of your solution?

The Valley of Despair: Mistakes to Avoid When Generating Ideas

The journey to a game-changing business idea is filled with potential pitfalls. Here are some common mistakes to keep in mind:

• Creating an idea that doesn't solve a real problem: If the issue your idea addresses doesn't resonate with people, they're unlikely to be interested in your solution.

• Starting with a solution in search of a problem: This often indicates that the problem isn't genuine or pressing.

• Falling into the "tarpit idea" trap: YCombinator describes a "tarpit idea" as a concept that appears promising at first but is laden with unseen difficulties, market challenges, or complexities that render it nearly impossible to execute successfully.

  An example of a tarpit idea is a social network for pets. While it might seem appealing to build a platform for pet owners to share photos and connect, it faces numerous obstacles:

  1. Monetization Challenges: Finding a viable revenue stream beyond advertising, which comes with its own set of hurdles, could prove difficult.

  2. High User Acquisition Costs: Attracting enough users to make the platform worthwhile may demand a significant marketing investment, particularly when many pet owners use existing social networks for similar purposes.

  3. Competition and Differentiation: The service would have to contend not only with pet-specific apps but also with major social networks. Differentiating it enough to encourage a switch or dual usage is a formidable challenge.

  4. Engagement and Retention: Maintaining user interest over time requires continuous innovation and community management, demanding both creativity and resources.

• Neglecting to research past attempts at your idea: Failing to investigate who else has worked on a similar concept and their level of success can lead to repeating the same mistakes.

• Being deterred by initial obstacles: Ideas that are challenging to initiate often have the potential to be the most rewarding, as they tend to address widespread issues that, once solved, open up lucrative markets.

• Feeling discouraged by existing competition: Competitors validate the market demand. A lack of competition may suggest that there isn't a significant problem to solve. Instead, assess whether existing solutions adequately address the issue.

• Hesitating to share your idea for fear of theft, or waiting for the perfect idea to emerge before starting: Both can significantly hinder progress. Sharing your idea can provide valuable feedback and opportunities for improvement, and waiting for perfection may result in missed opportunities.

How I Discovered My Business Idea (So Far)

In my journey to build my own startup, I’m currently exploring potential co-founder synergies and problems that could make compelling businesses. Here's a brief overview of the ideas I've had so far and where they came from:

Ideas Born Organically from Personal Challenges or Knowledge:

Idea #1: In the wellness/longevity space, this idea has been with me for several years and was inspired by my own health journey and passion for self-tracking. Years ago I did initial validation but had market size concerns. However, the market has since grown, so it's worth revisiting.

Idea #2: In the grocery/distribution space, from observing inefficient supermarkets in Germany compared to Italy. I saw an opportunity to improve on this model.

Idea #3: In the relationships/dating space, due to frustrations with current dating apps designed to keep users single. I believe realigning incentives could work.

Ideas Based on Examining Specific Industries:

Idea #4: Within the healthcare sector, this idea aims to enhance the efficiency of administrative processes for doctors and patients, freeing up more time for patient care. This concept, which emerged during my residency, focuses on leveraging AI to address prevalent industry challenges and I came up with it by thinking about common jobs-to-done for doctors as well as solutions that already are working in another market, the US in this case.

Ideas Inspired by Emerging Technologies:

Idea #5: Aiming to empower creators to forge their own virtual worlds and games, this idea leverages computer vision. It reflects my observations of the potential applications of this emerging technology.

Idea #6: Inspired by a discussion on my podcast with Div Garg, founder of MultiOn, this idea explores the development of an AI autonomous agent capable of performing the functions of an entire tech team, pushing the envelope of AI capabilities.

In the next issue, we'll explore what a billion-dollar idea really looks like and how to understand if yours could be one.
I'll also share which among the ideas I just mentioned I decided to discard and the ones I'll pursue based on this process. In the meantime, if you have any feedback, please feel free to leave me a comment or reach out on LinkedIn!

📚 Resources to Inspire Business Ideas

• Product Hunt: The go-to platform to launch and discover new tech products. Focus on the most upvoted startups to understand what captivates the tech community.

• Startup Cemetery: Investigate why various startups have failed, offering insights into common pitfalls and potentially underserved markets.

• Acquire: By creating an account as a “buyer,” you can view startup revenues and acquisition prices, providing a glimpse into financial success and market valuation.

• Crunchbase: A straightforward way to see which startups are securing funding, indicating industry trends and investor interests.

• YCombinator: They recently released a startup request, outlining the specific problem area they are interested in investing in.

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