A practical guide to pick your next startup idea
The most important decision for a founder is to decide what business to be in. It doesn’t matter how flawlessly a business is executed if it’s the wrong business, wrong timing or too small of a market.
Founders are biased towards action. We have an impulse to make things happen, to move fast and achieve things. Yet, when deciding what opportunity to pick next, I can’t overstate how important it is to resist the urge to start executing. To dedicate as much time necessary to pick the best opportunity for the founding team. After all… once we decide to go all in, we will dedicate our next five to ten years of our lives.
The game starts before you sit in a seat
You can work 16 hours a day, hire a great team, have a relentless attitude and still fail to reap the rewards. Because as Tony Hsieh said in his book Delivering Happiness, the business game starts before you sit at the table, as an analogy between poker and business.
“Through reading poker books and practicing by playing, I spent a lot of time learning about the best strategy to play once I was actually sitting down at a table,” he says. “My big ‘ah-ha!’ moment came when I finally learned that the game started even before I sat down in a seat.”
Hsieh says there are usually many different choices of tables, like there are businesses.
About 40% of new leaders fail in their first 18 months, mostly from choosing the wrong “table.” The same game can completely change from table to table: each has different stakes, different players, and different dynamics.
Tools I have found to pick the right table
1. Executive coaching
Goal: know yourself
I’ve done therapy and I’ve done executive coaching. These two disciplines can be confused as the same thing, and although they are related they are different.
Executive coaching is focused on the work/labor aspect of a person. In my case, it helped me realize that I became an entrepreneur because I like to build things, I love the creative process of turning something from 0 to 1.
A personal example of this important insight I’ve found, is that even though I’ve done sales in the past and I’ve managed a sales team, after doing coaching I realized it was a mistake and I should instead focus 100% on using my building skills and passion for going from “0 to 1” instead of using my energy on things I’m good at but not outstanding.
These kind of findings and learnings of your own self, affects directly the type of ideas and the roles you, the founder, should be focused on. This is also referred as Founder-Problem Fit.
2. Ikigai method
Goal: find your reason for being
Ikigai is a Japanese concept that means your ‘reason for being. ‘ ‘Iki’ in Japanese means ‘life,’ and ‘gai’ describes value or worth.
I’ve discovered this tool recently, when talking to Santiago Pinto Escalier about how to do a better job at finding the right opportunity for me.
Ikigai is a simple yet insightful exercise that makes us explore four aspects that, when met, reveal the sweet spot of opportunities we should work on.
You can do this exercise with a piece of paper and four circles that overlap. Just write a short list for these categories:
- What you love
- What you are good at
- What the world needs
- What you are paid for
The list of items in the center (the overlap of all the four circles) are the ones you should specially pay attention to.
In case you are wondering how it looks once complete, here is my Ikigai:
This exercise was eye opening for me, for several reasons:
- I didn’t know myself as I do now. Experience gave me a lot of information about what I love, what I can do well (and what I can’t). Coaching & therapy also play a big role in the introspection journey.
- I never thought that overlapping these four aspects was posible. Now I can’t think about dedicating my energy to future projects that don’t consider the “Mission” circle.
- I have three small kids, and seeing life as a father has changed my perspective of life.
If you want to do your Ikigai sheet, here is a Figma template you can use.
3. Habit of observing
Goal: identify pains
As Paul Graham describes in his legendary essay about finding startup ideas, we all experience pains or see people next to us experiencing them.
Pains are a strong signal that there is a solution waiting to be built. But pains can be subtle, it’s easy to overlook them even if you experience them on a daily basis.
One more thing I didn’t realize until recently: when we are the ones suffering a pain we are both the user and the builder, which gives us an edge to build a solution because the pain is very clear, lowering the risk of building something that is not solving a real pain. Although this scenario is probably the best one, we must also pay attention to pains suffered by people close to us:
- A close friend’s pain
- An employee’s pains
- Our wife’s pain (if we have one)
- A son’s pain
Even if we are not the user experiencing the pain, having first hand access to close people that we can observe and ask questions frequently, is highly valuable. Also, they will be the first users to test our solution and they will probably be willing to dedicate time and give us feedback.
4. The habit of taking notes
Goal: generate raw ideas
I recently stumbled upon a good post written by Jakob Greenfeld about the habit of writing ideas. I think there is value in creating a habit of writing down raw ideas based on our previous observations.
In his post he includes a story that makes a good job of describing the value of striving for quantity instead of looking for the perfect idea:
“A ceramics teacher announced on opening day that he was dividing the class into two groups. All those on the left side of the studio, he said, would be graded solely on the quantity of work they produced, all those on the right solely on its quality. His procedure was simple: on the final day of class he would bring in his bathroom scales and weigh the work of the “quantity” group: fifty pound of pots rated an “A”, forty pounds a “B”, and so on. Those being graded on “quality”, however, needed to produce only one pot — albeit a perfect one — to get an “A”. Well, came grading time and a curious fact emerged: the works of highest quality were all produced by the group being graded for quantity. It seems that while the “quantity” group was busily churning out piles of work — and learning from their mistakes — the “quality” group had sat theorizing about perfection, and in the end had little more to show for their efforts than grandiose theories and a pile of dead clay.”
So if you want to improve your ability to come up with great ideas, you should start a daily brainstorming habit.
I personally use Apple Notes to take notes of spontaneous ideas, because ideas come up at random times and places and I want to make sure I can write them down no matter where I am (for example, I’ve written ideas while running, which happens often to me and I suspect to many others).
Another way of creating this habit is to schedule time every day to sit down and 1) think of the pains suffered recently and 2) filter the notes taken in Apple Notes using a “raw idea” to “business idea” framework, which takes me to the next point.
If you are interested in learning more about habit building, I’ve written a collection of posts about this topic.
5. The Lean canvas
Goal: Turn raw ideas into business ideas
A good way to measure the potential of raw ideas is to have a framework that forces you to consider all important aspects that could turn it into a great business idea. The other benefit of having a framework is to have a consistent way of filtering and evaluating them.
I use the Lean Canvas model, which you can see below:
For those raw ideas that I believe have more potential, I just create a Google Doc and write down all my ideas and findings. You can also print the PDF and use sticky notes to add ideas into the boxes.
Here is an example of a completed Lean Canvas:
6. Testing ideas
Goal: validate potential business ideas in the real world
Once some business ideas have gone through the Lean canvas exercise, there will be a bunch that you’ll discard (that’s another great benefit of forcing yourself to write the Lean canvas). Some others will even make more sense than before the more you think about them.
At this point, you want to find signs of validation from a real market and answer two questions, usually with limited resources:
Question 1) Which of my hypothesis written in the Lean canvas are valid and which are false?
Question 2) Is there a demand for a free version of my product/service? If the free version gets adoption, is the solution perceived as a “Nice to have” or as a “Need to have” ?
This will be the exact focus of my next post, I’ll show several tools I’ve used in the past that have allowed me to test ideas with real prototypes in less than seven days.
One more thing I didn’t realize until recently: when we are the ones suffering a pain we are both the user and the builder, which gives us an edge to build a solution because the pain is very clear, lowering the risk of building something that is not solving a real pain. Although this scenario is probably the best one, we must also pay attention to pains suffered by people close to us:
- A close friend’s pain
- An employee’s pains
- Our wife’s pain (if we have one)
- A son’s pain
Even if we are not the user experiencing the pain, having first hand access to close people that we can observe and ask questions frequently, is highly valuable. Also, they will be the first users to test our solution and they will probably be willing to dedicate time and give us feedback.
