By Todd Belveal
I meet a lot of people who want to build startups as a career.
They graduate from an entrepreneurship program, and they search for a startup. They have a sense of the process for building one, but they’re missing something really important.
To me, that’s putting the cart before the horse. They’re chasing projects before they’ve come up with a substantive idea. I would never have pursued either of my startups if I didn’t have a really airtight idea.
So, what’s the process for coming up with ideas? It isn’t all luck. There are some concrete steps you can take if you want to make your idea a reality.
Here’s how you start:
Identify Inadequacies In The Consumer Experience
My first startup, Silvercar, was born out of frustration with renting cars. I had plenty of terrible experiences when I traveled as a consultant, and I wasn’t an outlier.
The net promoter score for rental car companies has been as low as 11. This is an industry that spends $400 million on advertising, and yet their approval is falling off the bottom of the chart.
People have hated the rental car process for years.
It’s a bad deal for everyone involved, but the businesses still make decent money because they are consolidated on the supply side. Most people use rental car companies because they don’t have another option. But they hate doing it.
Frustration signals an industry ready for disruption, regardless of the perceived or real barriers.
You have to be able to sense when there is a negative consumer sentiment. You need a radar that pings when you see a bad business model, or at least one that’s incapable of offering a non-frustrating experience.
If you think something sucks, it’s likely a lot of people agree.
Look For A Root Cause
Once you find a negative consumer or client experience, look for the problem.
What’s the root cause of the dissatisfaction? Why does this industry offer such a poor experience?
In the case of the rental car business, the root cause wasn’t bad intentions or incapable management. It was an overly complex business model that couldn’t be updated with new technology. They have 11 classes of cars with 20 or 30 makes and models within each class. That makes it impossible for companies to actually match you with a car you want. And they’re unable to implement big enterprise systems to help fix the experience because their business is simply too complicated.
Most successful startups address the root cause of a poor experience. Find the problem. Decide if you can fix it with a startup.
Then, do some homework.
Perform Due Diligence
Put in the time and research to learn what’s being done in your industry.
You might find a lot of competitors already working on it, or you might find nothing. Either way, you’ll know if your idea has enough merit to make it as a startup.
My second startup, Washlava, is focused on improving the commercial laundry experience. The goal is for people to use their phones to reserve machines and pay for laundry. Going into this, I fully expected to find someone had beat me to the punch. I was wrong. There wasn’t another startup quite like us in laundry.
But an established company had actually tried what we’re doing right now. They had an app, but they didn’t know how to sell it. They got nowhere.
Learn From Others Failures
Initially, it sounds discouraging that a major industry player failed to implement something similar.
But to me, that’s an encouraging sign.
Large companies fail to innovate because they’re great at what they do. But they’re not organized to develop and distribute the latest technology.
So, look for startups that have tried your idea and failed. Did they fail for legitimate reasons that were out of their control? That might be a sign that you’ll run into problems. On the other hand, maybe their management was weak, or they didn’t have the experience they needed.
Performing the due diligence and taking a hard look at the industry builds confidence in your idea over time.
Once you feel comfortable with the work you’ve done and the answers you have, then you can go out and begin raising capital.