The Value of a Startup Idea
Everyone knows starting a business is hard work. But how important is the idea itself to achieve success?
— Imagine this: Facebook – for dogs!
— So, what about an app like Uber, but for hairdressers?
— It will be the first 100% gluten-free food delivery app!
Working in software, we get a barrage of ideas from friends, family and clients. Whether the idea is great or not so much, all aspire to be the next million-dollar tech startup. The conversation will inevitably roll around to the question “Do you think this idea is worth it?”
Let’s say the world really has been desperate for a way to socialize through their dogs. As genius as it may be, unfortunately, it’s not the idea that guarantees success.
Ideas are incredibly hard to turn into real products. And, it’s even harder for these products to find their market and become profitable. Most ideas never pass the idea stage. That can be due to lack of time or money, and not knowing how to start a business. Therefore, it’s not the idea that has value. Rather, it’s the method you use to implement that idea.
What's Important for Startup Success
This can start with a simple Google search and expand to a full feasibility study of market trends and analytics. However, the most crucial factor is to define potential customers and engage with them.
For instance, if you want to build a Facebook for dogs, you should interview dog owners. Do they follow other people's pet accounts? Are they looking to find playmates for their dog? What limitations do they find in existing social networks? The main idea behind this research is discovering solutions for your potential clients’ problems.
The product you want to make must have a clear value offer for users. Not only that, it should be invaluable. Is it so good that, once users try it, they need to have it? A great example of this is Uber, and its value proposition: “Traditional taxi service is flawed and we can make a better experience, with on-demand, cashless rides with GPS”.
A valid idea is one that has gone through tests and shows excellent chances of being profitable. Email client startup Superhuman achieves this by getting more than 100,000 people to sign on their waitlist. This was before they released the product! They generate interest through their exclusivity and unique onboarding processes. These waitlists meant a green light to invest fully into the project.
It may be tricky, but it’s absolutely essential to find a way to test an idea. You can find hundreds of dog owners interested in your social networking idea. Yet, if you don’t get proof that they will use it, the app is not worth building.
An idea with a monetization strategy becomes a business. A product can be amazing, but won’t survive long if it’s not profitable. There are many strategies to monetize a product. These can include ads, purchases, subscriptions and even data selling. Foursquare sells the data it collects, and uses it to show its users relevant points, like most visited places nearby.
When it comes to purchases, it’s key to test if users are willing to pay, and how much. You can create a dummy “buy” button (without a finished product or payments). This will let you know how many visitors aim to purchase it.
Some will say that funding is really important. Others may believe it can detract value from a sustainable business. In any case, you must consider a funding strategy, to see if it’s right for your product.
The formality level o a business plan will largely depend on the product. For startups whose direction may pivot, this plan could quickly become obsolete. Nevertheless, it’s important for all types of startups to articulate their goals and plan. This helps both creating internal strategies and showing the project to potential investors.
A business plan should address all the previously discussed items. Furthermore, it should have:
- A marketing plan.
- Financial projections.
- A business model and plan for how to scale.
It’s key knowing starter resources and its costs, to create a funding and revenue plan.
The Right Team
It can be argued that people behind an idea are the most important part for its success. Invaluable factors include technical knowledge, business savvy, leadership ability, and sales skills.
Usually, the solution is more important, in terms of impact, than the novelty of technology to create it. Nevertheless, in some cases, is the technology itself what’s critical to the solution.
For instance, a product can use a unique algorithm that makes it superior to any competitor. Algorithms using buyer behavior to display targeted ads are a great example of this.
This is an implementation plan from a technical perspective. It must break down what has to be accomplished and in what amount of time. The main benefit at first steps is that it helps to define resources, preventing unexpected costs.
Ideas are just the spark that can start a business.
For a startup to find real success, solid business skills and great planning are essential. We love to chat about ideas! Feel free to contact us.