HOW TO PICK A WINNING STARTUP IDEA? | METASTARTUP #20

what's up guys and girls welcome back to another episode of marara in this episode we're actually going to talk about the idea that goes into running a business right how do you pick out good ideas and how do you throw bad ideas into the dust bin hello now I've worked on 30 to 40 different ideas in the past some of them have been good absolute rubbish um some of them have been successful some of them have made no money whatsoever um and you know over the years I've picked up a few pointers on what are good ideas and what are bad ideas but for this episode I went out and did a lot of research because it's not just important to see what success is at a few million dollars of scale right um it's important to see what success is like at a few billion dollars in revenue and to do this I looked at how a lot of the bigger companies have been successful and how the investors in those companies have actually thought about the company during both the investment stage as well as when the company got bigger and I'm not just talking about companies like Facebook and Google and whatnot those are the outliers I'm talking about the smaller billion dollar companies that people have not heard of or that are not as popular as Facebook or Google so without much further Ado let's get to the deck and let's see what differentiates a good idea from a bad one and as always this deck is available in the metastar of Facebook group and access to that group is free link is in the description below you know unlike my usual episodes which are generally based on my own experiences in this one I've looked at top tier VCS and seen how they invest as well because success to me right now is a few million dollars but success to a lot of bigger VCS might be a few billion dollars so I've taken both perspectives into account and try to build a trend around what ideas end up succeeding and failing so I've looked at entrepreneurs like Paul Graham I've looked at VCS like chamat pataa and a bunch of other people and have collected all their thoughts in this deck I'm also going to try to run through my slide decks faster and get straight to the point cool so in my opinion the original

idea is the least important part of a startup most successful startups today don't do what they originally set out to do in fact you'd be hard pressed to find a startup that's doing exactly what they said they would do five or 6 years ago this is because these startups ideas and approach towards the market change with Market feedback itself and this is one of my most important observations with Chinese entrepreneurs versus entrepreneurs in Silicon Valley entrepreneur in Silicon Valley are all about you know I want to build a mission and you know the what the company will do is dependent on the mission that I set for the company whereas in China it's very Market driven if there's an opportunity and I can make money off of it I will enter that market I'm not going to say which um ideology is better but I'm going to say that generally the startups that win are the ones that end up timing the market better than anybody else validating your idea is important and you know I've laughed at this several times but going out and doing a survey to potential clients might not be the best idea because sometimes customers often don't know what they want this is going to be a cliche quote when Henry Ford told people that if he had asked what people wanted then they would have just said we want Faster Horses so people or at least the market might not know what they want talking about timing the market does not mean that the market already knows what they want in some cases they might usually what happens is an entrepreneur comes out and puts a product or a service uh out and then the market realizes holy this is what we needed all along good ideas are like surfboards and this is a quote that we use very often at Avalon good ideas are like surfboards they usually follow a particular Trend or timing and the idea comes either at the very beginning of a new trend or it Sparks the trend itself but don't get me wrong that Trend was already a trend like if you didn't do it as an entrepreneur or if that entrepreneur didn't succeed at doing it somebody else would have taken his place right so it's about a surfboard so all you have to do is find a wave and ride good ideas are worthless by

themselves everybody has good ideas a mediocre idea well executed is better than an amazing idea that is poorly executed on my Instagram I get about 100 messages a day right and very often what happens is you know I'll have young kids message me and say Von you know I have this amazing idea to do XYZ and will you be able to help me with it and I you know obviously I'm hard pressed to find time with all the things that I'm doing but I don't usually respond to these people but in general what's going on in my head is that if you really believed in your idea then you would start working on it immediately even if it's a bad idea if you work really hard at it there's a good chance you'll be successful companies like Snapchat are a good example you'll most likely have multiple ideas and in this episode what I'm going to do is I'm going to teach you how to pick a good one and discard the bad ones one problem that kind of complicates this entire scenario is your emotions when you have what you think is a good idea your body and your mind will say hey this is an idea I need to work on this right now this seems like a really good idea but without experience you don't know what a good idea and what a bad idea is so in the early days of your entrepreneurial Journey your body will trick you right so what you need to do is stop listening to what your gut says at least for the first couple of years while you gain experience in the entrepreneurial field and then over time as you get smarter as you get wiser and you as you see a few failures and successes both of yourselves and those of others you'll have a better idea and your body intrinsically will decide whether something is a good idea or not the most important factors to

determine your ideas viability is of course the timing like I said surfboard waves Market size the bigger the market chances are the more successful the idea the competition and a lot of people think you know this means that you need to pick ideas with low competition that's not true um in fact the opposite is true and I'll you know obviously talk a little more about this in a bit how relatable the problem is to you and you know I've said this in many interviews if you know Google me you'll find me talking about this in several interviews this is what sparked the idea of Avalon as well in order for an entrepreneur to really believe and be passionate in their about their problems and solve it they need to have suffered from the problems themselves the last one is user urgency how badly do these Target users want to use a product like yours right and user urgency is actually one of the most important metrics of whether your product will be adopted quickly or whether you'll have to spend four or 5 years before the market reaches the right wave for your surfboard to pick up pace the worst ideas are from Young

Founders making things they think other people will want right and I you know fell prey to this several years ago I tried to build something that other people wanted which didn't personally affect me and this was when I was really young right which is when I was 14 or 15 what I've realized is if you face a personal problem and you try to solve that problem you have a higher chance of being successful because you don't have to do market research if then your stats aren't confused by other people telling you lies or what they think they want think about what part of your daily life you can improve what's missing or broken right think about just map out your day from the time you wake up to the time you go to sleep and look for all the areas that you can improve it Millennials and I'm talking about people like you and me were native to technology solving a problem we Face will most likely solve it for a lot more people and you don't need to do too much Market r search if you're a sufferer like I just

mentioned now talking about bad ideas versus good ideas it's hard to come up with good ideas if you don't have experience in a field and you know if your gut tells you and let me think of a field I don't have any knowledge about let's see maybe protection of whales that's random if I got a really good idea on how to save whales the 16-year-old me would be like okay let's do this is a good idea I feel like it's a good idea we can actually help those whales but today as I'm really old I'm like wait there are several complexities to this and I haven't even seen a whale in real life right so um just being a sufferer of your problem and understanding the environment of that problem well goes miles into deciding whether you will be successful at what you do or not you don't get good ideas you notice them and like I mentioned you need experience in a field to be able to notice an opportunity the danger of an idea like a social network for tea lovers is that if you ask your friends or do a survey and this is my biggest problem with surveys right if you ask them you know when they like tea they're not going to say I won't use this they say yeah I might use it even when the startup launches it will sound interesting to a lot of people they will they don't want to use it themselves at least not right now but they could imagine other people needing or using it and this is the biggest red flag if somebody says that they will not use it but they can see other people like them using it run away from the idea it is a bad idea the five signs of a good idea the

first one is that there's urgency among a small number of people you want to have an idea which has a small set of people that really want it lots of people are mildly interested in a social network for T lovers but most such startups will fail you don't need mild interest is in fact the worst thing to have you need urgency the number of people who want to use your product urgently will be a very small number and this is a good thing if there was a huge Market that all knew what they wanted and they were willing to pay for it then chances are Microsoft or Google or any other big company would already be solving that problem ask yourself who wants this right now who wants this so bad that they'll use it even when there's a crappy beta version and this is something that you know Paul Graham says over and over again and for those of you don't know Paul Graham is one of the stalwarts at YC combinator which is a very popular accelerator that has several startup successes but what he says is look for an audience where people will be willing to urgently and immediately use a beta not even a full completed version of your product a large number of people suffer

from the same or similar problems but it's not urgent so remember I told you there this small set of people who really want to use your product there's also got to be a larger number of people who are not fully aware of your solution but if presented well if awareness is built they will end up using it and Snapchat and Instagram are a good example of this look for a small Market where there's a fast path out of right for example Facebook started on with college Doms right it was you know just for colleges but then they realized they could replicate that formula among all colleges in the United States so the small path or the quick path was to build a solution like Facebook for a small audience and then replicate that formula and get make it bigger once they realize it worked among small college students how do you tell whether there's a path out of an idea how do you tell whether you can get from small to big how do you tell whether something is in the early days of a billion dollar company or just something that can help maybe 100 150 people who want it urgently often you can't and this is the biggest risk that VCS and people at accelerators like y combinator or even Avalon as you know an incubator plus an accelerator these are kind of risks we take we usually invest in five or six or 10 different um ideas which we think there's a fast path out of and then we find out that only three or four of them are you know have an actual path out of it whereas the others stay small products which is not a Bad Bet for us to take this is something uh that I picked

up from the book called crossing the chasm so this is exactly what the last two points were you have an early bunch of people who want your product urgently and then you have the mainstream market and finding out whether a product is good enough to go from that early set of users to the mainstream market is where 99% of a problem of a startup lies and this is what I like to call the product Market fit you need to cross or proverbially cross this Chasm by making sure you're able to go from the early market and find a fast path out to the mainstream market knowing which startups will cross the chasm requires a lot of experience and you know I've said a little luck here but I think there's a lot of luck and a huge marketing spend involved in finding out whether your startup is going to be big or just a small Niche product it should also seem like your

startup to be an obvious part of the future and the people who will know what are obvious parts of the future are people who are younger in nature if you asked most 40-year-olds in 2010 whether they'd like to send disappearing pictures to their friends they have laughed at that idea but the founders of Snapchat lived on the mobile internet to them privacy was important even in Daily communication live in the future and then build what's missing the future is very region specific and culture matters so you might be able to predict the future of India better because you live in India but you might not be able to predict how China will be 10 years from now because you don't live there and you don't understand the trends there now here's a slide about

competition you need to make sure you have competition but not too much when you have a really good idea you'll feel anxious about somebody else already being around and that feeling that you're too late this is a good idea but according to Graham it's incredibly rare for startups to be killed by small competitors so rare that you can almost discount the possibility what ends up happening is because these competitor are super small they have no market share whatsoever and gaining that market share takes years and years and usually when two competitors are taking market share or rather competing for a market share of a product of a market that doesn't even exist then chances are both of them or many of them will survive obviously some of them will come out to be the clear leader but there's always a second third and a fourth place which is not a bad thing in my experience a crowded Market signals demand obviously too crowded is a bad thing if you're trying to build the next cloud services that's stupid there's Amazon and whatever Google competing there do not compete in the market with the same product as a billion dollar company you will get killed but small markets small competitors or big markets small competitors there's Demand right which means the small competitors are servicing that demand time for you to lace up and go out and build a product in the same space don't worry don't give too much credit to the competition finally the idea isn't sexy

yet what's cool and uncool depend on what Society thinks is cool and uncool many Founders don't want to work on ideas that seem mcky payments steel procurement Logistics or anything to do with the government I see a lot of Founders come to me and Pitch ideas that are very that seem cool on paper and I sort of feel like they you know they go after these problems only because those problems are cool in the first place or it'll make them look but the best opportunities companies like PTM stripe delivery over the last one or 5 years are the ones that are now cool but did not appear cool 5 years ago I remember being at startup tunnel which is an accelerator almost 5 years ago and there was this gentleman that was talking about building something very similar to patm and this was long before PM was even on the market and this person were or rather patm was a small name at that point and this person was talking about you know the licensing and the effort that goes into getting you know payments license from the government and he just gave up on the idea because he said hey this is not cool enough right my relatives are not going to U find it cool that I'm working on a simple wallet or payments app but today look at PTM they're a multi-billion dollar company if an idea is too sexy too many people are probably already working on it some tips when

looking for ideas doe in areas where you have expertise I've beaten this horse dead I've mentioned this 100 times if you're a 30-year-old physics teacher do not build a music app for teenagers unless you're a big music fan and hang out with teenagers it might sound like a good idea but you cannot trust your judgment because your judgment is not well developed in this field yet being young is an advantage I mentioned this again Founders in their early teens and early 20s come up with Amazing Ideas because you are the future we are the future in terms of experience you might not have as much experience as older people but you understand your own behavior and the behavior of your friends which is why you are most poised to be able to tackle those sort of problems look at companies that are dying and figure out what type of company will replace them right usually a market will always have players right so make sure that when one player is about to die what's the next company that's going to replace this think of what companies would buy your product and why they don't build it themselves if there's a huge company and there's a very obvious problem ask yourself four or five times why the biggest company in that space is not solving the problem themselves

themselves look for waves again I've mentioned this is the surfboard analogy the market will be receptive to an idea at a particular time the first few movers profit out of it so the best solution or the best way to be an entrepreneur is to wait and watch rather than come up with some and Bull Mission and a story for yourself and a problem you want to solve and then go after it instead solve the right problems at the right time so a problem you face but solve it at the right time and usually the time will be now if you face the problem on an everyday basis things like education things like um you know the travel those are very obvious problems that you face on a daily basis and those are big problems to be in traffic and travel you know it seems like um you know an unsexy or an uncool problem but there's a lot of money to be made off it at Avalon we invest not only in an idea but also in the Wave It's riding on if we feel that the time has come for an idea we will put our money behind it the bigger and stronger the wave the higher the chance of us putting our money and more importantly we also understand that you know the bigger the wave the more the ability for us to Pivot which is start with one thing realize the market you know wants something slightly different so we change our approach towards the market we are Market driven company we are a market driven uh Venture fund right we invest based on what the market tells us to put money into and most VCS are like this believe it or not so that's it

for this episode I tried to keep it as short as possible but we still you know pushed a little farther than time but hopefully in the next episode I will cover how to work with a core team and how to build your core team so that's it for me today um you know I've been working on building an ad for Avalon and I've been busy you know just generally meeting a ton of people doing you know we're about 50 employees now so just keeping things together has been uh keeping me on my toes but hopefully um I'll have the next episode up and ready very quickly thank you for your time guys this is VAR Maya out