How to Evaluate Your Startup Idea

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In tech business, startups compete for customers the same way as performers compete for audience in show business. Founders compete for VC-s the same way as artists compete for judges on talent shows. There are tens of thousands of gifted singers and dancers, but only a few dozen acts actually get noticed by the crowd. Similarly, there are hundreds of thousands of talented founders that launch their companies every single year, but only a handful of dozens will reach an exit. It’s not enough for your startup to be good to be able to make it. Your company needs to be way better than all the others. You have to be the best of the best.

In order to build a successful startup, you need to have a fantastic idea followed by an outstanding execution. Silicon Valley’s common wisdom is “idea is 1% of the success, execution is 99%”. But if you have a bad idea, there is no sense to execute it at all.

So, how do you evaluate your startup idea? How do you decide if it’s even worth trying? If you invest your time into this idea, you will be unable to invest it into many others for a few years, so you need to make your decision wisely. If you have just one idea, how do you decide whether it is good or bad? If you have many ideas, how do you compare them with each other to pick a winner?

Below is a framework for you to think about your future ventures. Once you get excited about a startup idea, spend a day or two creating a virtual business plan in your mind, a mental business canvas, trying to find answers for the 1010 questions below. If you can answer “yes” to at least 7 of them, the idea is worth considering — you should then compare it with other interesting ideas and pick just one winner at the end. But if you do not know how to answer “yes” to at least half of the questions after thinking for a few days, simply label this idea a lame duck and stop playing with it.

 

How did I come up with this framework?

I currently run my 3rd startup; of the first two, one was a financial disaster and the other had a good (but not great) exit. When I was about to launch my current (third) startup a few years ago, I dedicated two months of full-time efforts just to choose an idea for a new startup. Every morning, I tried to pick a new problem. During the day, I would develop a virtual business plan in my mind for a startup to fix this problem. At night, I would compare today’s startup with the winner from my yesterday’s (exactly the same) exercise. I would then pick a new winner, using the 10¹⁰ questions below as a criterion. I would repeat the same process again the next day. After a few weeks of experimenting with this “bubble sort”, I got to an enlightenment point and knew I had an absolute winner, and I called my soon-to-become co-founders to tell them about it.

I do not know the eventual destiny of my current startup. But I am absolutely sure that my first two endeavors would have way better outcomes, had I used this methodic idea selection process whilst deciding what I wanted to do.

So, here is my 10¹⁰ framework for startup idea assessment:

  1. Will the startup address a problem which is 10X more important for its customers than the other problems they face? Why?
  2. Will we be able to build (or do we have already) a team which is 10X more awesome than founding teams of similar startups? How/who/why?
  3. Will the startup be able to learn from experiment-fail-pivot iterations 10X faster than competitors? How will we achieve this?
  4. Will the startup’s product be 10X better than alternative products? Why
  5. Will the startup’s customer base grow 10X faster than # of customers for the alternative products? How will we achieve it?
  6. Will the startup eventually reach 10X more customers than each of its competitors? How will we get there?
  7. Will the startup eventually make 10X higher profit per customer than each of its competitors? Why will we be so different?
  8. Will it be 10X more expensive for a Fortune-500 company to copy the startup vs. buying it? What exactly will be our leverage?
  9. Does the startup have the potential to eventually get 10X higher valuation than today’s the most valued unicorn? What will drive it?
  10. Will venture investors be 10X more interested in purchasing the startup’s stock vs. investing into other companies? Why?

The final question is redundant. If you know what to do to answer yes for all the questions barring the last one, you automatically win the final yes.

In the future, if you get an exciting idea, spend at least a day thinking about how many yeses it scores using 10¹⁰ framework, and how to improve it to get more yeses. Brainstorm and revamp your plan till you reach 7 or more yeses; drop it if you can’t score at least 5.

You might start thinking about a new startup only in several months, perhaps years…. you will probably forget about 10¹⁰ framework by then, right? So, spend an hour practicing the 10¹⁰ framework today to increase the likelihood of it popping in your mind when you really need it.

If you are currently running a startup, how many yeses do you get while answering the questions above? What will it take to get more yeses? If you were a startup founder in the past, consider using the 10¹⁰ framework to retrospectively assess your experience. If you have friends who are running their startups now, give some thought to these companies: how many yeses do they score? Would you score them differently if they were asking you to invest? What can they do to improve their scores? What about startups which you recently read about in the news — what are their scores?

Use one of these companies as a case study, write 10¹⁰ questions along with your answers on a sheet of paper and store it somewhere as a reminder. This way, when you get an exciting idea for a brand-new startup, the reminder will help you deal with it in a systematic way.

And remember: an initial idea is just 1% of the success, execution is 99%.

Good luck and let the venture force be with you!

P.S. Of course, 10X here is more symbolic as opposed to being an actual number. The real meaning behind 10X is “dramatically better”; it could very well be 8X or 16X.

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