Table of contents

Child pages

The goal for this page

• I had a smart friend (Stanford / Harvard Law School) laugh at the title of this page, because he seemed to interpret it as leading to a circular process: "the first step in figuring out what problem to solve is to figure out how to choose what problem to solve" sounded circular to him. But I think he was subtly misunderstanding it; I don't think it's circular. There is a difference between discovering / deciding on a process and carrying out that process. An analogy may help: if you are in your home and you want to go to the post office, the first step is to get directions to the post office, and the second step is to actually follow those directions that will result in your ending up at the post office. In the same way, if you want to arrive at the ideal problem to solve, the first step is to figure out the process that will result in your ending up at that ideal problem, and the second step is to actually carry out that process.
• So the goal of this page is to gather information on the different processes that exist, and how to choose between them.

Ways to come up with processes

Examine the advice of others

People

• Bill Gross
  • The single biggest reason why startups succeed (A: timing)
    • My thoughts:
      • Praise
        • I think this kind of research (trying to figure out how to make companies successful) should be a lot more common.
      • Criticisms
        • I'm suspicious of the idea of looking for the "biggest" reason that start-ups succeed, since the success of a start-up clearly depends in an all-or-nothing way upon lots of different things going right. If someone already agreed that timing was important, what change in their behavior would you recommend based on this finding that timing is the "most" important factor?  To spend more time gauging whether the timing is right?
        • What would this guy say about LinkedIn, which was launched in 2003 and took 10+ years to really take off?

    • I tried to look across what factors accounted the most for company success and failure. So I looked at these five. First, the idea. I used to think that the idea was everything. I named my company Idealab for how much I worship the "aha!" moment when you first come up with the idea. But then over time, I came to think that maybe the team, the execution, adaptability, that mattered even more than the idea.

      I never thought I'd be quoting boxer Mike Tyson on the TED stage, but he once said, "Everybody has a plan, until they get punched in the face." (Laughter) And I think that's so true about business as well. So much about a team's execution is its ability to adapt to getting punched in the face by the customer. The customer is the true reality. And that's why I came to think that the team maybe was the most important thing.

      Then I started looking at the business model. Does the company have a very clear path generating customer revenues? That started rising to the top in my thinking about maybe what mattered most for success.

      Then I looked at the funding. Sometimes companies received intense amounts of funding. Maybe that's the most important thing?

      And then of course, the timing. Is the idea way too early and the world's not ready for it? Is it early, as in, you're in advance and you have to educate the world? Is it just right? Or is it too late, and there's already too many competitors?

      So I tried to look very carefully at these five factors across many companies. And I looked across all 100 Idealab companies, and 100 non-Idealab companies to try and come up with something scientific about it.

      So first, on these Idealab companies, the top five companies -- Citysearch, CarsDirect, GoTo, NetZero, Tickets.com -- those all became billion-dollar successes. And the five companies on the bottom -- Z.com, Insider Pages, MyLife, Desktop Factory, Peoplelink -- we all had high hopes for, but didn't succeed.

      So I tried to rank across all of those attributes how I felt those companies scored on each of those dimensions. And then for non-Idealab companies, I looked at wild successes, like Airbnb and Instagram and Uber and Youtube and LinkedIn.

      And some failures: Webvan, Kozmo, Pets.com Flooz and Friendster. The bottom companies had intense funding, they even had business models in some cases, but they didn't succeed. I tried to look at what factors actually accounted the most for success and failure across all of these companies, and the results really surprised me.

      The number one thing was timing. Timing accounted for 42 percent of the difference between success and failure. Team and execution came in second, and the idea, the differentiability of the idea, the uniqueness of the idea, that actually came in third.

      Now, this isn't absolutely definitive, it's not to say that the idea isn't important, but it very much surprised me that the idea wasn't the most important thing. Sometimes it mattered more when it was actually timed.

      The last two, business model and funding, made sense to me actually. I think business model makes sense to be that low because you can start out without a business model and add one later if your customers are demanding what you're creating. And funding, I think as well, if you're underfunded at first but you're gaining traction, especially in today's age, it's very, very easy to get intense funding.

      So now let me give you some specific examples about each of these. So take a wild success like Airbnb that everybody knows about. Well, that company was famously passed on by many smart investors because people thought, "No one's going to rent out a space in their home to a stranger." Of course, people proved that wrong. But one of the reasons it succeeded, aside from a good business model, a good idea, great execution, is the timing.

      That company came out right during the height of the recession when people really needed extra money, and that maybe helped people overcome their objection to renting out their own home to a stranger.

      Same thing with Uber. Uber came out, incredible company, incredible business model, great execution, too. But the timing was so perfect for their need to get drivers into the system. Drivers were looking for extra money; it was very, very important.

      Some of our early successes, Citysearch, came out when people needed web pages. GoTo.com, which we announced actually at TED in 1998, was when companies were looking for cost-effective ways to get traffic. We thought the idea was so great, but actually, the timing was probably maybe more important. And then some of our failures. We started a company called Z.com, it was an online entertainment company. We were so excited about it -- we raised enough money, we had a great business model, we even signed incredibly great Hollywood talent to join the company. But broadband penetration was too low in 1999-2000. It was too hard to watch video content online, you had to put codecs in your browser and do all this stuff, and the company eventually went out of business in 2003.

      Just two years later, when the codec problem was solved by Adobe Flash and when broadband penetration crossed 50 percent in America, YouTube was perfectly timed. Great idea, but unbelievable timing. In fact, YouTube didn't even have a business model when it first started. It wasn't even certain that that would work out. But that was beautifully, beautifully timed.

      So what I would say, in summary, is execution definitely matters a lot. The idea matters a lot. But timing might matter even more. And the best way to really assess timing is to really look at whether consumers are really ready for what you have to offer them. And to be really, really honest about it, not be in denial about any results that you see, because if you have something you love, you want to push it forward, but you have to be very, very honest about that factor on timing.

• Danielle Morrill (cofounder / CEO of Mattermark)
  • rec'd by Joe(? don't remember)
• Elon Musk
  • 2012.09.07 - Kevin Rose Interview with Elon Musk
    

    • "I think its important to reason from first principles rather than by analogy…The normal way we conduct our lives is we reason by analogy…

      We are doing this because it’s like something else that was done..or it is like what other people are doing…slight iterations on a theme…

      “First principles” is a physics way of looking at the world…what that really means is that you boil things down to the most fundamental truths…and then reason up from there…that takes a lot more mental energy…

      Someone could –and people do — say battery packs are really expensive and that’s just the way they will always be because that’s the way they have been in the past…

      They would say it’s going to cost, historically it cost $600 KW/hour. It’s not going to be much better that in the future…

      So first principles..we say what are the material constituents of the batteries. What is the spot market value of the material constituents? It has carbon, nickel, aluminum, and some polymers for separation, and a steel can..break that down on a material basis, if we bought that on a London Metal Exchange, what would each of these things cost. oh geez…It’s $80 KW/hour. Clearly, you need to think of clever ways to take those materials and combine them into the shape of a battery cell, and you can have batteries that are much cheaper than anyone realizes."

  • 2011 - Elon Musk answers fans questions
    • ~24-26 he gives advice on how to start a company (coming up with an idea, getting venture capital)
    • 26:35 - Q: What's the best advice for future entrepreneurs?
    • 28:08 - Q: How do you maintain enthusiasm when things aren't going well?
      • A: I give it everything I've got regardless of the circumstances.
    • 35:40 - Q: What is the greatest factor that has enabled you to reach where you are?
      • A: I have a really high intrinsic drive. I can get set on something and keep going in that direction.
    • ~39 - Space is a very capital-intensive business, so if you're starting your first company, pick something less capital-intensive.
  • 2015 - Elon Musk and Bill Gates discuss AI, entrepreneurship and more
    • 10:00 - "I thought there were these important problems that needed to get solved and nobody was really solving them"
    • 36:00 - he gives advice about how to come up with an idea for a startup: don't start with the thought of making money, but instead ask yourself, 'What's some useful thing I wish existed?'
      
• Felix Dennis
  • How to Get Rich
    
    • Chapter 4 - The Search

      • Until one is committed, there is hesitancy; the chance to draw back; always ineffectiveness concerning all acts of initiative and creation. There is one elemental truth, the ignorance of which kills countless ideas and splendid plans: that the moment one commits oneself, Providence moves all. All sorts of things occur to help one that would never otherwise have occurred. A whole stream of events issue from the decision, raising in one's favor all manner of incidents and meetings and material assistance which no one could have dreamed would come his or her way. -- Johann Wolfgang von Goethe
        [...]
        A job for the rich-in-training is merely something to keep you ticking over, to put food on your plate and wine in your glass. Additionally, it will provide excellent training in management and negotiation skills; it will supply inside market information; above all, it will act as a salutary reminder of what happens to 99.99 percent of your colleagues--the ones who buy lottery tickets and dream of becoming rich but who haven't a hope in hell of achieving any such thing.
        [...]
        Working for others is a reconnaissance expedition; a means and not an end in itself. It is an apprenticeship and not a goal. You should have no long-term, or even medium-term, requirements of the first two or three companies you work for. Promotion is always welcome and brings with it the opportunity to learn more, but you are there to ensure that you take every opportunity to suck out the marrow of what you need to know, to understand it and place it within a greater context for a future purpose. The purpose of getting rich.
        [...]
        What else is there to consider during the Search? Some industries are more enticing and glamorous than others. Some require huge investment to get off the ground and some can be made to work in an attic or a garage. And some are growing while others are in decline. Should you choose only to work in glamorous, growing industries? Where is the most opportunity to be found?

        First off, forget glamorous. One of the richest self-made men I know digs holes in the ground to dispose of household waste. That's not how his company describes itself in its annual report, but essentially that is what it does, along with building incineration plants.

        Glamorous? No. But in a good year he puts 20-30 million pounds on the bottom line and earns a gross margin of over 20 percent. That's a sensational result for a small, wholly owned private company. Not to mention that the relentless growth of the packaged-goods industry ensures that his business will grow and grow virtually by default--providing he can find enough places to dig holes, that is.

        While you may not necessarily want to be in a glamorous sector of any market, and they are often very crowded sectors, it helps to be in a growing one. Swimming with the tide rather than against it, so to speak. A swelling tide raises all boats, including yours.

        On the other side of the "glamorous" coin, very few of those who want their picture on the front cover of Vogue, or wish to become a movie director or to run the coolest PR company in the world, get to achieve anything. The reason is obvious. The laws of supply and demand are absolute--and they apply not only to commodities, but to people. Too many people want to make a blockbuster movie and live in Beverly Hills. Not enough people want to dig holes.

        New or rapidly developing industries, whether glamorous or not, very often provide more opportunities to get rich than established sectors. The three reasons for this are availability of risk capital, ignorance and the power of a rising tide.

        Investors are drawn to emerging industries in the hope of making a fast buck. To get rich, you will need capital, and to acquire capital you need to be where loose capital is searching for a home. In addition the combination of ignorance and misconception that surrounds any new market or technology works in your favor. If you are quick at grasping concepts and jargon, you become an "instant expert". The owners of capital love "experts".

        Finally, the power of a rising tide masks many start-up difficulties, putting individuals and small companies on a more even footing with conglomerates and established operators; for a while, at least.
        [... Anecdote ...]
        By the time our bigger rivals were comfortable enough to launch against us (a hesitation resulting from ignorance), the tide had carried us beyond the reach of their big guns. New capital, ignorance and a rising tide had done the trick. In this instance, the Search had paid off in spades.

        As a general rule of thumb, then, growing industries with relatively low start-up costs offer more opportunities for those who want to get rich than declining industries, or those that require huge start-up investment. This is not an iron-clad rule, however. While magazine and newspaper sales have been in slow decline in the Western world for decades, this "declining" industry is where I made a great deal of my own money.

        More important than any particular industry are the sectors within each industry. A sizable fish in a growing sector, however small, is more attractive to prospective purchasers and investors than the same size fish in a diminishing or static pond.
        [...]
        So how to choose the arena in which you intend to carve yourself a fortune? There are usually three factors involved in the Search: inclination, aptitude and fate. [...] Your inclinations really do count. You have to pay attention to them. [...] An understanding and passionate affinity with any subject, in combination with effective management, sales and marketing techniques, could well provide a tailor-made solution to the Search. Cherish your inclinations and affinities. Though not infallible, they may well lead you in the right direction.
        [...]
        So how do you judge your own aptitudes? Trial and error is the only way I ever heard of. [...] If you do decide to ask for advice concerning your true aptitudes, then preparation shows you are serious and will be more likely to effect a serious response.
        [...]
        Inclinations are easy to list. Aptitude is far less so. Trial and error, combined with fierce determination and a willingness to discard cherished perceptions about ourselves, is the best that I can suggest.

        It is highly unsatisfactory and frustrating that the most important decision we are likely to consciously make leaves so much to chance. A small success, though--even a tiny success--can provide a clue. It was my own success at selling magazines on the street that led me to begin to publish them eventually.
        [...]
        All around us, every day, opportunities to get rich are popping up. The more alert you are, the more chance you have of spotting them. The more preparation you have done, the more chance you have of succeeding. The more bold you are, the better chance you have of getting in on the ground floor and confounding the odds. The more self-belief you can muster, the more certain will be your aim and your timing. And the less you care what the neighbors think, the more likely you are to take the plunge and exploit an opportunity.

        Here is the key, then, in the Search. Whatever your inclinations, your aptitude, your abilities or your preferences, never shrink when opportunities arrive. If you have weighed the odds and find yourself convinced, ignore the protestations of sensible people and their conventional caution.

    • Chapter 5 - The Fallacy of the Great Idea

      • [...] ideas are not hogwash. But they are very unlikely to make you rich on their own. More important, it really does not matter who gives birth to any particular idea. This is borne out by the laws relating to patents and inventions. You cannot patent an idea. You can only patent your own method for implementing an idea. It is for this reason that so many people have become rich despite never having had a single great idea in their lives. As it happens, I count myself among them.

        It is good to have a goal. True believers in a "great idea" are often obsessed with achieving a particular goal. Such an obsession, properly harnessed, can produce wealth. Sadly, that wealth rarely finds its way into the pockets of the person whose obsession created it.
        [... anecdote about his friend fighting to force BBC to release its TV listings to everyone...]
        Having a great idea is simply not enough. The eventual goal is vastly more important than any idea. It is how ideas are implemented that counts in the long run.

        Good ideas are like Nike sports shoes. They may facilitate an athlete who possesses them, but on their own they are nothing but an overpriced pair of sneakers. Specially adapted sneakers may be a good idea. But the goal is still to win, and sports shoes don't win. Athletes do. [Nathan: this reminds me of my reading that venture capitalists often want to focus heavily on the team when considering backing a startup]
        [anecdotes]
        The lesson is clear. Despite the words of the old rock 'n' roll song, the original is not the greatest. Not always. If you want to be rich, then watch your rivals closely and never be ashamed to emulate a winning strategy. They may josh you a little for doing it, but that's a price well worth paying.

        The problem with the great idea is that it concentrates the mind on the idea itself. This is fine as far as it goes. But unless the idea is executed efficiently and with panache and originality, then it doesn't matter how great the idea is, the enterprise will fail.
        [anecdote about Apple and Steve Jobs]
        ...beware of the great idea. You must encourage great ideas and search for them diligently. But either you control and develop such ideas or the ideas will come to dominate your waking thoughts. And that would not be such a great thing.
        [...]
        If you never have a single great idea in your life, but become skilled in executing the great ideas of others, you can succeed beyond your wildest dreams. Seek them out and make them work. They do not have to be your ideas. Execution is all in this regard. If, on the other hand, you spend your days thinking up and developing in your mind this great idea or that, you are unlikely to get rich. Although you are likely make many others rich. That is usually the way of it. Ideas don't make you rich. The correct execution of ideas does.

• Paul Graham
  • How to Get Startup Ideas
    • Summary / excerpts:
      • The way to get startup ideas is not to try to think of startup ideas. It's to look for problems, preferably problems you have yourself.

        The very best startup ideas tend to have three things in common: they're something the founders themselves want, that they themselves can build, and that few others realize are worth doing. Microsoft, Apple, Yahoo, Google, and Facebook all began this way.

        Why is it so important to work on a problem you have? Among other things, it ensures the problem really exists. It sounds obvious to say you should only work on problems that exist. And yet by far the most common mistake startups make is to solve problems no one has.
        [...]
        The danger of an idea like this is that when you run it by your friends with pets, they don't say "I would never use this." They say "Yeah, maybe I could see using something like that." Even when the startup launches, it will sound plausible to a lot of people. They don't want to use it themselves, at least not right now, but they could imagine other people wanting it. Sum that reaction across the entire population, and you have zero users.

        When a startup launches, there have to be at least some users who really need what they're making—not just people who could see themselves using it one day, but who want it urgently.
        [...]
        How do you tell whether there's a path out of an idea? How do you tell whether something is the germ of a giant company, or just a niche product? Often you can't. The founders of Airbnb didn't realize at first how big a market they were tapping. Initially they had a much narrower idea. They were going to let hosts rent out space on their floors during conventions. They didn't foresee the expansion of this idea; it forced itself upon them gradually. All they knew at first is that they were onto something. That's probably as much as Bill Gates or Mark Zuckerberg knew at first.
        [...]
        So if you can't predict whether there's a path out of an idea, how do you choose between ideas? The truth is disappointing but interesting: if you're the right sort of person, you have the right sort of hunches. If you're at the leading edge of a field that's changing fast, when you have a hunch that something is worth doing, you're more likely to be right.
        [...]
        Being at the leading edge of a field doesn't mean you have to be one of the people pushing it forward. You can also be at the leading edge as a user. It was not so much because he was a programmer that Facebook seemed a good idea to Mark Zuckerberg as because he used computers so much. If you'd asked most 40 year olds in 2004 whether they'd like to publish their lives semi-publicly on the Internet, they'd have been horrified at the idea. But Mark already lived online; to him it seemed natural.

        Paul Buchheit says that people at the leading edge of a rapidly changing field "live in the future." Combine that with Pirsig and you get: "Live in the future, then build what's missing."

        If you look at the way successful founders have had their ideas, it's generally the result of some external stimulus hitting a prepared mind. Bill Gates and Paul Allen hear about the Altair and think "I bet we could write a Basic interpreter for it." Drew Houston realizes he's forgotten his USB stick and thinks "I really need to make my files live online." Lots of people heard about the Altair. Lots forgot USB sticks. The reason those stimuli caused those founders to start companies was that their experiences had prepared them to notice the opportunities they represented.
        [...]
        So if you want to find startup ideas, don't merely turn on the filter "What's missing?" Also turn off every other filter, particularly "Could this be a big company?" There's plenty of time to apply that test later. But if you're thinking about that initially, it may not only filter out lots of good ideas, but also cause you to focus on bad ones.
        [...]
        Pay particular attention to things that chafe you. The advantage of taking the status quo for granted is not just that it makes life (locally) more efficient, but also that it makes life more tolerable. If you knew about all the things we'll get in the next 50 years but don't have yet, you'd find present day life pretty constraining, just as someone from the present would if they were sent back 50 years in a time machine. When something annoys you, it could be because you're living in the future. [Nathan: This is exactly what I deal with.]
        [...]
        Give yourself some time. You have a lot of control over the rate at which you turn yours into a prepared mind, but you have less control over the stimuli that spark ideas when they hit it. If Bill Gates and Paul Allen had constrained themselves to come up with a startup idea in one month, what if they'd chosen a month before the Altair appeared? They probably would have worked on a less promising idea. Drew Houston did work on a less promising idea before Dropbox: an SAT prep startup. But Dropbox was a much better idea, both in the absolute sense and also as a match for his skills.
        [...]
        Just as trying to think up startup ideas tends to produce bad ones, working on things that could be dismissed as "toys" often produces good ones. When something is described as a toy, that means it has everything an idea needs except being important. It's cool; users love it; it just doesn't matter. But if you're living in the future and you build something cool that users love, it may matter more than outsiders think.
        [...]
        So if you're a CS major and you want to start a startup, instead of taking a class on entrepreneurship you're better off taking a class on, say, genetics. Or better still, go work for a biotech company. CS majors normally get summer jobs at computer hardware or software companies. But if you want to find startup ideas, you might do better to get a summer job in some unrelated field.
        [...]
        don't feel like you have to build things that will become startups. That's premature optimization. Just build things. Preferably with other students. It's not just the classes that make a university such a good place to crank oneself into the future. You're also surrounded by other people trying to do the same thing. If you work together with them on projects, you'll end up producing not just organic ideas, but organic ideas with organic founding teams—and that, empirically, is the best combination.
        [...]
        Beware of research. If an undergrad writes something all his friends start using, it's quite likely to represent a good startup idea. Whereas a PhD dissertation is extremely unlikely to. For some reason, the more a project has to count as research, the less likely it is to be something that could be turned into a startup. [10] I think the reason is that the subset of ideas that count as research is so narrow that it's unlikely that a project that satisfied that constraint would also satisfy the orthogonal constraint of solving users' problems. Whereas when students (or professors) build something as a side-project, they automatically gravitate toward solving users' problems—perhaps even with an additional energy that comes from being freed from the constraints of research. [Nathan: What about Oracle? Or Google?]
        [...]
        Because a good idea should seem obvious, when you have one you'll tend to feel that you're late. Don't let that deter you. Worrying that you're late is one of the signs of a good idea. Ten minutes of searching the web will usually settle the question. Even if you find someone else working on the same thing, you're probably not too late. It's exceptionally rare for startups to be killed by competitors—so rare that you can almost discount the possibility. So unless you discover a competitor with the sort of lock-in that would prevent users from choosing you, don't discard the idea.
        [...]
        The question then is whether that beachhead is big enough. Or more importantly, who's in it: if the beachhead consists of people doing something lots more people will be doing in the future, then it's probably big enough no matter how small it is. For example, if you're building something differentiated from competitors by the fact that it works on phones, but it only works on the newest phones, that's probably a big enough beachhead.

        Err on the side of doing things where you'll face competitors. Inexperienced founders usually give competitors more credit than they deserve. Whether you succeed depends far more on you than on your competitors. So better a good idea with competitors than a bad one without.
        [...]
        A crowded market is actually a good sign, because it means both that there's demand and that none of the existing solutions are good enough. A startup can't hope to enter a market that's obviously big and yet in which they have no competitors. So any startup that succeeds is either going to be entering a market with existing competitors, but armed with some secret weapon that will get them all the users (like Google), or entering a market that looks small but which will turn out to be big (like Microsoft)

        There are two more filters you'll need to turn off if you want to notice startup ideas: the unsexy filter (problems you despise) and the schlep filter (messy, tedious ideas).
        [...]
        While the best way to discover startup ideas is to become the sort of person who has them and then build whatever interests you, sometimes you don't have that luxury. Sometimes you need an idea now. For example, if you're working on a startup and your initial idea turns out to be bad.

        For the rest of this essay I'll talk about tricks for coming up with startup ideas on demand. Although empirically you're better off using the organic strategy, you could succeed this way. You just have to be more disciplined.
        [...]
        When searching for ideas, look in areas where you have some expertise. If you're a database expert, don't build a chat app for teenagers (unless you're also a teenager). Maybe it's a good idea, but you can't trust your judgment about that, so ignore it. There have to be other ideas that involve databases, and whose quality you can judge.
        [...]
        The place to start looking for ideas is things you need. There must be things you need. The need has to be a strong one. You can retroactively describe any made-up idea as something you need. But do you really need that recipe site or local event aggregator as much as Drew Houston needed Dropbox, or Brian Chesky and Joe Gebbia needed Airbnb?

        One good trick is to ask yourself whether in your previous job you ever found yourself saying "Why doesn't someone make x? If someone made x we'd buy it in a second." If you can think of any x people said that about, you probably have an idea. You know there's demand, and people don't say that about things that are impossible to build.

        More generally, try asking yourself whether there's something unusual about you that makes your needs different from most other people's. You're probably not the only one. It's especially good if you're different in a way people will increasingly be.

        If you're changing ideas, one unusual thing about you is the idea you'd previously been working on. Did you discover any needs while working on it? Several well-known startups began this way. Hotmail began as something its founders wrote to talk about their previous startup idea while they were working at their day jobs. [Nathan: Zenefits also started this way.]
        [...]
        The next best thing to an unmet need of your own is an unmet need of someone else. Try talking to everyone you can about the gaps they find in the world. What's missing? What would they like to do that they can't? What's tedious or annoying, particularly in their work? Let the conversation get general; don't be trying too hard to find startup ideas. You're just looking for something to spark a thought. Maybe you'll notice a problem they didn't consciously realize they had, because you know how to solve it.
        [...]
        A good trick for bypassing the schlep and to some extent the unsexy filter is to ask what you wish someone else would build, so that you could use it. What would you pay for right now?

        Since startups often garbage-collect broken companies and industries, it can be a good trick to look for those that are dying, or deserve to, and try to imagine what kind of company would profit from their demise. For example, journalism is in free fall at the moment. But there may still be money to be made from something like journalism. What sort of company might cause people in the future to say "this replaced journalism" on some axis?
        [...]
        When startups consume incumbents, they usually start by serving some small but important market that the big players ignore. It's particularly good if there's an admixture of disdain in the big players' attitude, because that often misleads them. For example, after Steve Wozniak built the computer that became the Apple I, he felt obliged to give his then-employer Hewlett-Packard the option to produce it. Fortunately for him, they turned it down, and one of the reasons they did was that it used a TV for a monitor, which seemed intolerably déclassé to a high-end hardware company like HP was at the time.

        Are there groups of scruffy but sophisticated users like the early microcomputer "hobbyists" that are currently being ignored by the big players? A startup with its sights set on bigger things can often capture a small market easily by expending an effort that wouldn't be justified by that market alone.
        [...]
        Finding startup ideas is a subtle business, and that's why most people who try fail so miserably. It doesn't work well simply to try to think of startup ideas. If you do that, you get bad ones that sound dangerously plausible. The best approach is more indirect: if you have the right sort of background, good startup ideas will seem obvious to you. But even then, not immediately. It takes time to come across situations where you notice something missing. And often these gaps won't seem to be ideas for companies, just things that would be interesting to build. Which is why it's good to have the time and the inclination to build things just because they're interesting.

        Live in the future and build what seems interesting. Strange as it sounds, that's the real recipe.

    • HN discussion
      

      • emmett [CEO of Twitch]
        Twitter was obviously a great idea, but it wasn't an obviously great idea.
        Just because no one (including the Twitter guys) could see the direction it would grow in doesn't mean that it wasn't a great place to start. In retrospect, clearly it was. [Nathan: Huh? Later: I think he's saying that in hindsight it was a great idea because it's now extremely popular, but at the time it wasn't an obviously great idea.]

• Peter Thiel
  • 2012.09.14 - PayPal cofounder Thiel's startup advice
    • You want to find something that you are uniquely suited to be the best at.
  • In some Peter Thiel talk he mentions how in the old days you would have maps that showed what was explored and what was unexplored, and you could use that to get an idea of where you could still go explore. It would be really useful if something like this existed today for innovation ideas. One version of the map would list all of the problems in the world and what people have tried to do to fix those problems. Another version of the map could list all the different innovations that exist and the combinations in which they've been used, and could make it clear which combinations of innovations have not yet been tried together. So you have one map that focuses on the problems and another map that focuses on the solutions.
• Tomasz Tunguz (Redpoint)
  • rec'd by Vik and Joe

Examine the processes that led to (or could have led to) successful companies

Explanation

• This is different from the "examine the advice of others" in that this involves analyzing situations where the successful entrepreneur has not given advice (a recommended process), but where there are facts that an observer could interpret to come up with the actual process the entrepreneur used to arrive at the winning idea, or a process that could have led to that idea.

List of processes

Create a specialized version of a widely-used existing service

• Examples:
  • "Craigslist for X"
    • Airbnb
    • All these → 
  • "Google search for X"
    • TalentBin - They are a search engine (like Google) except for talent. They scrape the web just like Google does. 
  • "Uber for X"
    • Yoshi
  • "Facebook for X"
    
    • LinkedIn - LinkedIn started before Facebook, but I think it could have been started afterwards based on this pattern. And it may very well be the case that Facebook helped LinkedIn grow.

Take something that's expensive to manufacture and make it inexpensive to manufacture

• Examples
  • Aluminum (Alcoa)
    • 2015.08.25 - Fortune - This startup can grow metal like a tree, and it's about to hit the big time
      • In the 1800’s, aluminum was so expensive to make that it was confined to trinkets like Napoleon’s buttons and flatwear, Lomasney says. But in the late 1800’s, inventor Charles Martin Hall created a way to inexpensively make aluminum. He created a massive new industry and co-founded aluminum giant Alcoa. If Modumetal could gain a fraction of the traction that Alcoa has had it would be a major success.
  • Communicating your ideas to the world
    • Twitter drastically reduced the cost (in time) of blogging.

List of successful companies and the process that led to their big idea

• Lists
  • Fortune - Unicorns
  • Wikipedia - List of the largest information technology companies
• Top 20 startups of all time:
  • Apple
    • iWoz
      • During those four years at HP, from the time I was twenty-two to twenty-six, I constantly built my own electronics projects on the side. And that's not even including Dial-a-Joke. Some of these were really amazing. When I look back, I see that all these projects, plus the science projects I did as a kid and all the stuff my dad taught me, were actually threads of knowledge that converged in my design of the first and second Apple computers. [!!!]
        [...]
        [Talking about a VCR side-project he worked on:] This became a huge part of my life almost right away. I studied the kinds of circuits the VCR used, how it worked, went through all the manuals. I tried to figure out how they processed color, how color got recorded onto tape, how the power supply worked. This was all information that came in really handy when we did the color Apple computers.
        [...]
        [Talking about his first exposure to Pong, in a bowling alley:] I knew the minute I started thinking about it that I could design it because I knew how digital logic could create signals at the right times. And I knew how television worked on this principle. I knew all this from high school working at Sylvania, from the hotel movie system, from Cartivision, from all kinds of experience I'd already had.
        [...]
        One of my skills was that I was really good at designing things with the absolute minimum amount of chips. That goes back to the Cream Soda Computer. So I figured out how to put just a few chips together and use a crystal clock chip (like the one in my Blue Box or the one that keeps time in your watch) to control the timing and keep count of what is happening.
        [...]
        It was as if my whole life had been leading up to this point. I'd done my minicomputer redesigns, I'd done data on-screen with Pong and Breakout, and I'd already done a TV terminal. From the Cream Soda Computer and others, I knew how to connect memory and make a working system. I realized that all I needed was this Canadian processor or another processor like it and some memory chips. Then I'd have the computer I'd always wanted!
      • Lessons:
        • If you need to combine several different innovations to create a product, look for people who have already done those innovations in other situations, or people who are clearly capable enough to get the job done.
        • I think the key here is the combination of several innovations, each of which were unusual on their own. That seems to be the very definition of a unique product. But I'm not convinced you need to have all of those innovations within the mind of a single person.
  • Google
  • Microsoft
  • Amazon
  • Facebook
  • Tencent
  • Yahoo
  • Baidu
  • eBay
  • Hewlett-Packard
  • LinkedIn
  • Twitter
  • Dropbox
  • Groupon
  • Craigslist
  • Palantir
  • Netflix
  • Square
  • Zynga
  • Rovio
• Misc companies
  • Blogger

    • Williams: We took the script I wrote to puiblish my site, and we made an internal site where we coul ddo the same thing. So, even when it was only Meg and I, we had this little internal blog we called "Stuff", and we just put stuff in there. It was a blog, but it was just, "Here's a thing from a competitor or a potentially useful page or just information for each other". It was a place where we collected everything and, as we grew, it was the center of Pyra. It was where things happened. (NW: Sounds like an internal wiki.)

      So this whole time we are building our real collaboration tool, with all kinds of structure and big ideas trying to be implemented into it, but we were really using Stuff a lot. And then Paul wrote a little addition to Stuff so that certain things we posted to our internal blog we could put on our external company blog.

      We were one of the first companies to have a blog on their site–not that many people were reading. But it was neat. We were publishing news, random things we liked, whatever.

      This must have been around March of '99, so all of this happened fairly quickly. That's when I got the idea for Blogger–I know because I registered the domain then. I totally pictured the way we were publishing our own blog to an external site. I said, "Let's turn that into a product." I have always been a product guy and am just always thinking about products and thought this would be a cool little idea.

      While it did seem fairly easy to build, it was a dilemma, because one of the big lesons from my first company was to focus. After my first company died, I did an inventory of the projects I had worked on in the last year. There were something like 30 projects that I had started on and not finished. My total weakness was not focusing on things. So I had this idea and I loved it, but very clearly we were only three people and we had to contract to pay the bills and we couldn't start another product. We had this big thing we were trying to do. So it just kind of sat in the back of my head, but it wouldn't go away. It kept bugging me. Of course, what made me still think about it was that we were using it for our own purposes and we were building this collaboration tool, but we were doing this kind of collaboration with Stuff. We actually said several times, "Maybe Stuff should just be our product?" And we agreed, "That's too simple, that is too trivial."

    • I think I was also surprised by the success of something so simple. That's a mantra for many people in the technology world–simplicity. But what we built wasn't that amazing. It was the idea of putting a couple of things together and being able to establish a lead by doing something really, really simple. How far you can get on a simple idea is amazing. I have a tendency to add more and more–the ideas always get too big to implement before they even get off the ground. Simplicity is powerful.
  • Hotmail
    • Like with many other successful startups, they were solving a personal problem they encountered while trying to create a company. They developed something they could use as an internal tool for their own startup. Other examples of this: Atlassian, Zenefits, Blogger.

    • Livingston: How did the JavaSoft idea morph into Hotmail?

      Bhattia: While we were putting the business plan for JavaSoft together and were working at FirePower Systems, they installed a firewall around our corporate intranet that prevented us from dialing out to our personal email accounts. I had an account at Stanford and Jack had one at AOL, so we would dial out and email each other. But we couldn't do that anymore because the firewall prevented us from accessing our personal accounts. So we ended up exchanging information on floppy disks and on physical pieces of paper. That's when it occurred to us, "Wait a minute, we can access any website in the world through a web browser. If we made email available through the web browser, that would solve our problem."

      And then it occurred to us, "If that would solve our problem, it would solve the problems of many others." We didn't know how many others, but email was something that everyone used. To provide ubiquitous access to that email from any web browser from anywhere in the world was the killer idea.

      Livingston: This killer idea emerged because you guys were trying to solve the personal email exchange problem for yourselves?

      Bhatia: Absolutely. That we could access our email from only two places: our homes and our work. And while we were at work, we could not access our personal email accounts.

      Source: Founders At Work

  • Zenefits
    • The actual process:
      • Known: He had a start-up and HR was a huge pain for him, and he did some research and discovered that there would be a unique opportunity to jump into the market.
      • Possible: He may have had a list of ideas, and the HR idea got pushed to the top when he found out about the legal change.
    • A process that would have led to discovering Zenefits
      • Compile a list of the problems you encounter
        • Look for problems that most software engineers don't have, because:
          • That space will be more-heavily mined out.
          • If you do come up with something that works, you'll face more competition.
        • Look for problems that don't already have a ton of venture money going after them.
      • Look for situations in which you can use the skills you've learned at one company to solve another problem.
        • At his first company, Parker Conrad was in charge of a team that was doing integrations, so he had the skills necessary to do the integrations necessary at Zenefits.
      • Get a list of professions being done by large numbers of people which involve processing information
        • Get a list of all "intermediary" / "retail" positions.
          • Get a list of all professions with "agent" in the name.
            • Examples
              • "Travel agents" were replaced by websites like Priceline, Kayak, etc.
              • "Insurance agents" are being replaced by Zenefits.
      • Monitor any changes in the law that may affect a given profession.

        • The second sort of interesting thing is that, starting in 2014, commissions are gonna start coming down on health insurance for insurance brokers as a result of provisions in the Obamacare legislation. And insurance brokers have been complaining for years that they don't make enough money on their small group clients, and so a lot of them are saying that starting in 2014 they're either gonna stop working with small groups or they're going to start charging a per-member-per-month administration fee. So one of the really interesting things here is that I could be launching this product at a time when the wheels are really coming off the cart for the existing solutions in the marketplace.

        • Examples
          • This was how Hitch ended up so successful.
      • Monitor newspapers for news about professions that may be in danger.
        • 2012.11.11 - Crain's New York Business - Brokers face uncertain future

        • 2012.01.11 - Christian Science Monitor - Obama's health-care law is hurting insurance agents and millions of consumers

        • 2012.06.29 - Forbes - Insurance Agents Lose Job Security With Obamacare Ruling
        • 2011.05.26 - Kaiser Health News - Letter To The Editor: Health Insurance Agents Are Not An ‘Unnecessary Administrative Expense’
• 2012.09.12 - WSJ - The Venture Capital Secret: 3 Out of 4 Start-Ups Fail

  • But now there is evidence that venture-backed start-ups fail at far higher numbers than the rate the industry usually cites.

    About three-quarters of venture-backed firms in the U.S. don't return investors' capital, according to recent research by Shikhar Ghosh, a senior lecturer at Harvard Business School.

    Compare that with the figures that venture capitalists toss around. The common rule of thumb is that of 10 start-ups, only three or four fail completely. Another three or four return the original investment, and one or two produce substantial returns. The National Venture Capital Association estimates that 25% to 30% of venture-backed businesses fail.

  • Consider Daniel Dreymann, a founder of Goodmail Systems Inc., a service for minimizing spam. Mr. Dreymann moved his family from Israel in 2004 after co-founding Goodmail in Mountain View, Calif., the previous year. The company raised $45 million in venture capital from firms including DCM, Emergence Capital Partners and Bessemer Venture Partners, and built partnerships with AOL Inc., Comcast Corp., and Verizon Communications Inc. At its peak, in 2010, Goodmail had roughly 40 employees.

    But the company began to struggle after its relationship with Yahoo Inc. fell apart early that year, Mr. Dreymann says. A Yahoo spokeswoman declined to comment.

    In early 2011 an acquisition by a Fortune 500 company fell apart. Soon after, Mr. Dreymann turned over his Goodmail keys to a corporate liquidator.

Examine analogous phenomena

Solving problems in a village

• One of the big ideas in math is to deal with complicated situations by trying to simplify them as much as possible, and then gradually reintroducing complicating factors.
• If your goal was to amass wealth in a small village, how would you do it?
• You'd want to know everyone in the village:
  
  • all the problems they had
  • all the assets they had
  • how willing they would be to trade each of their assets for a solution to their problems
• It might take a long time to gather all of that information, though, so you might be better off just trying to get a quick "sample" and then spend more of your time actually solving problems.
  • eg you would probably really want to get a good idea of who the rich people in town were and who the poor people were, even if you didn't have all the details
• It would probably be important to be well-respected in the village.
• It would help if you were able to take advantage of your fellow villagers' tendency to occasionally agree to bad deals.
  • For example, selling a business for much less than it's worth, or buying one for more than it's worth.
  • This is essentially how Warren Buffett seems to have made his money. He calls the other villagers "Mr. Market".

Evolution

• 2015.09.14 - NYT - Plants That Are Predators
  • The kinkiness of their meat eating aside, the 590 or so known species of carnivorous plants are all legitimate, chlorophyll-carrying members of the kingdom Plantae. They photosynthesize, as other plants do, stitching together sugars from water, carbon dioxide and sunlight. Yet plants also need nutrients like nitrogen, phosphate and sulfur, which most species absorb from the ground. Carnivorous types, however, colonize marginal habitats with impoverished soil and must acquire their nutrients from alternative sources. Animal flesh happens to be a handy one.“In environments that are sunny and moist but nutrient-poor, the capture of prey can give plants a real competitive advantage,” said Thomas Givnish, a professor of botany at the University of Wisconsin-Madison. Carnivorous plants thrive in open bogs; in damp, fire-swept sand; by roadside puddles; in the leached mud of a mountainside — bright, sodden spots where competitors are negligible, the insects gullible, and nutrients alone limit plant growth.
    (...)
    Carnivorous plants are not always up for the kill. By the looks of it, Nepenthes hemsleyana, a pitcher plant in the peat swamp forests of Borneo, is gradually shrugging off meat eating in favor of the nitrogen-rich offerings of an insectivorous bat.As reported in the July issue of Current Biology, Michael Schöner of the University of Greifswald in Germany and his colleagues found that the Hardwicke’s woolly bat and the pitcher have entered a mutually satisfactory partnership. The plant offers the bat a perfect place to roost, and the bat fertilizes the plant with its feces.Weighing barely more than a penny, the bat fits in the pitcher “like a cork in a bottle,” said Mr. Schöner, a doctoral student.The pitcher plant advertises its accommodations through a special concave structure along its orifice that reflects the bat’s sonar signal from many angles, making the roost easy to find; and it keeps its pool of digestive juices well below the space where the bat cocoons itself. Bats love their pitchers, and not just for sleeping.“We’ve found bats copulating inside,” Mr. Schöner said. “Also, mothers that have given birth to their babies.”
  • Lesson: Think about how requirements that companies typically have, and how that limits the circumstances under which they operate. Then think about how you might be able to operate in an unusual way and thereby survive in a niche that the other companies could not survive in.
    • Relevant quote in the article: "Carnivorous types, however, colonize marginal habitats with impoverished soil and must acquire their nutrients from alternative sources."
  • Lesson: Compile a list of all of the waste that a company produces, and think about how you might be able to re-use that waste.
    • Relevant quote in the article: "the Hardwicke’s woolly bat and the pitcher have entered a mutually satisfactory partnership. The plant offers the bat a perfect place to roost, and the bat fertilizes the plant with its feces."
    • Offer the other company something to give you its waste. Pay them or offer some kind of perk.
    • Note that non-humans don't have the benefit of money, and so they must offer value to each other directly, without an intermediary.
      • So you may not want to think about how to benefit a company directly; money is a wonderful invention which can make it easier to come to a mutually-beneficial partnership with another company.
• 2015.08.25 - Fortune - This startup can grow metal like a tree, and it's about to hit the big time
  • Some of the more conventional ways to extract and use various types of metals often include large amounts of heat. Many metals are mined and then extracted from the ores through smelting at a high temperature. Companies can also reuse metal scraps, but they must be melted and cast into usable shapes.In contrast, Modumetal’s process only uses electricity, and therefore uses far less energy. The company’s metal process is similar to the more conventional method of electroplating, which is when electricity is used to create a metal coating on a surface.However, Modumetal uses nanotechnology — manipulation of matter at the molecular level — to micromanage at a very small scale to better control the conditions and substances through which electroplating occurs. Basically, the company grows metal on a surface in a way that makes it easier to shape and tinker with the material’s characteristics. Lomasney says it’s similar to how nature controls the environment related to a tree’s growth— sunlight, soil, location, temperature—and then creates a tree that is a product of those conditions.The process creates a metal that is grown layer-by-layer. The different ways to grow the layers creates variety in the metal’s properties and shape. Lomasney says to think about the resulting material like plywood, but the plies, or pieces, are created at the nanotech level.The industry calls these layered metals “metal laminates,” and they’ve been around in the industry for a while. Lomasney’s breakthrough is using a chemical and electrical production process combined with nanotechnology to create the metal plywoods at a low cost, with low energy and with the ability to make the metal pieces in large volumes and with large pieces (think oil rig big).

Misc links to be organized

• Datafox
• Mattermark
• Pitchbook
• CrunchBase
• Autopsy.io - Failed Startups
• 2012.09.30 - TechCrunch - Why Angel Investors Don’t Make Money … And Advice For People Who Are Going To Become Angels Anyway
  • The premier venture capital firms know the best investments have high technical risk and low market risk. Market risk causes companies to fail. In other words, you want companies that are highly likely to succeed if they can really deliver what they say they will. Unfortunately, consumer Internet companies don’t follow that pattern. They usually have low technical risk and high market risk. There is very little chance they can’t deliver their product. The big issue is whether the startup’s product is of value to a large enough audience.
• Diffusion of Innovations (5th ed.) - The Generation of Innovations
• 2015.03.05 - Kotaku - Yep, Valve Is Experimenting With Half-Life In VR
  
  • "We're not saying, 'no,'" he said, "but we don't know what the right thing is [yet]. Our most precious resource is time, and we don't have enough time for people to do everything. Would we like to make all of our franchises in VR? Absolutely. But we don't have enough time or people. So we have to figure out what's the best fit, what plays to the strengths of VR."
• 2015.06.30 - TechCrunch - Startups Serving The 99 Percent Will Be the Next Billion-Dollar Companies
  • Many fast-growing companies in Silicon Valley have one thing in common: they cater to a small, affluent, urban population — the 1 percent. [...] As a venture capitalist who has invested in both Chinese and U.S. startups since 2005, I’ve backed several companies leveraging the trickle-down model, such as GrubMarket. But, now I see it also makes sense for some founders to take the opposite approach: mass market first.
• Coursera / Stanford - Startup Engineering
  • You need at least two things:
    1. Economies of scale.
    2. You need to be solving a problem for a market large enough to make those economies of scale worthwhile.