Building a startup is a long process, and it begins with finding the right idea. Finding this pot of gold is a complex problem that requires locating an interesting spot at the intersection of team capabilities, market trends, unmet customer needs, and holes in the competitive landscape.
In this article, we’ll cover a systematic approach you can use to find and pick a winning startup idea.
Discovering Potential Startup Ideas
Discovering the right idea is an intricate process that blends creativity, curiosity, and methodical analysis. We recommend using the following three lenses to guide your ideation:
- Lens 1: Personal Experience - Each person brings a unique set of skills, knowledge, and experiences to the table. For instance, if you have worked with NASA in space engineering, you should probably explore startup ideas that have to do with space and not a direct-to-consumer clothing brand.
- Lens 2: Innovative Technologies - The tech landscape is constantly evolving, with emerging technologies regularly surfacing. These can be leveraged to solve existing problems or even open doors to unexplored opportunities. Staying up-to-date with these trends can lead to groundbreaking startup ideas that push the boundaries of innovation
- Lens 3: Funding Trends - Understanding the ebbs and flows of market trends can be extremely helpful in identifying potential opportunities. Keep an eye on sectors that are attracting investment and the type of startups gaining traction. Be cautious, though, as trends can be fleeting, and today's hot sector might be tomorrow's bubble. A good recent example is the crypto market in 2022.
Ranking and Prioritizing Your Startup Ideas
After amassing a list of potential ideas, the next thing you need to do is systemically assess and rank them. We recommend creating a simple spreadsheet either in Google Sheets or in Frame and then grading each idea based on criteria such as:
- Innovation: Evaluate the novelty of the idea. Unique or improved solutions can give you an edge in a competitive marketplace. Ask yourself: how is my solution to the problem any different and/or better than existing products and services?
- Defensibility: A defensible business model can help maintain a unique market position. Assess how resilient the idea would be against potential competition. If the idea has no moat, it’s probably not worth pursuing. Defensibility can come from brands, network efforts, or technology.
- Market Size: Consider the potential market size. Larger markets can offer larger opportunities, increasing the likelihood that you scale and raise venture capital. Typically, you want a market size greater than $1B to be VC-fundable.
- Market Growth: Rapidly expanding markets can offer enticing opportunities. If you can get in early on a market quickly gaining traction (i.e. AI in 2022, crypto in 2020/2021), then it becomes much easier to find PMF, gain customers, and raise outside capital.
- Expertise: The stronger the alignment between your skills, knowledge, and the idea, the higher the chances of your startup's success. The best ideas are ones where you are able to use your expertise to uniquely solve a problem.
- Passion: Creating a business is a 7-year journey. You’ll need a certain level of passion for the idea to get you through the ups and downs.
Analyze Your Top Ideas
Based on the above rankings, we recommend selecting your top three ideas. Then, for each idea, write a simple one-pager presenting the idea (get started on Frame’s Note app idea analysis template).
From there, take some time to digest those three ideas, talk to potential investors and customers, create mockups to make it more tangible, and then decide on one idea.
The process of identifying a startup idea is not an easy task. However, having a structured approach leveraging clearly established criteria can massively help. A good idea matters more than one might think, and finding the right one is your first test as a startup founder.
Nicolas is the founder of Frame, an all-in-one collaboration OS for startups. Frame offers pre-built collaboration apps like Notes, Task, Wiki, Whiteboard, and more. If you want to find a free ‘startup idea template’ on our Wiki app, sign up today!