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Wednesday, September 25, 2013

How To Filter And Select Startup Ideas 09-25

How To Filter And Select Startup Ideas

If you're like most entrepreneurs, you probably have lots of ideas. I have them all the time. Some are good, but most aren't.
I classify ideas into one of the following categories:
1. Ideas that could become new companies.
2. Ideas that could become new products for existing companies.
3. Ideas that could become great new features for existing products.
4. Ideas that could improve existing features of existing products.
One of the challenges with ideas is figuring out how to “filter” them. Or more simply, what to do with them. For obvious reasons, most of the ideas I have are really not worth pursuing as the effort required to make something of the idea is not worth the opportunity cost of other things I’m already doing.
Every time you say yes to something, you're saying no to something else.
Here’s an example idea: Some time ago, I had an idea for improving how alarm clocks work. For most of my professional life, I’ve never really had a set time that I needed to wake up (a luxury I’m very appreciative of). Instead, I generally go to bed at varying times and give myself enough sleep (usually 7 hours, on average). My idea was to enhance an alarm clock so that instead of programming the alarm to go off at a specific time, you could do it as a function of elapsed time (i.e. wake me up 7 hours from now). The interface would be very simple. The clock would have two buttons. One for +15 minutes and one for +1 hour. If I wanted to take a 45 minute nap, I’d tap the +15 minute button three times and go to bed. If I wanted to catch 6 hours, I’d hit the +1 hour button six times and go to bed. You get the idea.
Now, this particular idea may or may not be unique (I’ve never really researched it), but I promise you that I did not read it somewhere or happen upon on it. Its unique, as far as I know.
So, what do I do with this? The answer? Nothing. Even the simple act of figuring out if there’s a market, if the idea is original, if there are existing players I could license the idea to, etc. are simply not worth it. Which brings me to a key insight (at least for me):
There is no efficient market for ideas.
If there were an efficient market, I could simply “sell” my idea to whoever wanted to buy it for “fair market value” (lets say $1,000). Right now, the simple cost of figuring out what the idea might be worth is likely more than the idea itself. This is a clear case of the transaction costs exceeding the cost of the item.
So, what’s the point of all this? The point is that absent an “efficient” market for ideas, you have to use an inefficient one. That is, you filter the ideas the best you can, figure out which ones need to be pursued and which ones don’t. In this sense, a set of “filters” should be applied. And, for optimal efficiency, the most likely filter to block/kill an idea should be applied first. The earlier you can take an idea off the list of viable things to pursue, the cheaper it is. So, instead of trying to find criteria that the idea is likely to satisfy, I look for hurdles that the idea is likely not to cross -- or apply filters that are very cheap to apply.
For example, one of the early questions I ask myself: "Is this an idea for a new company?" If so, I skip it immediately (I'm not looking to start a new company). Do not pass GO, do not collect $200. I just saved myself an hour or more trying to do a quick check as to whether the idea is original enough. As it turns out, it doesn't matter (to me) whether the idea is original if it's not something that could be a product/feature for my company HubSpot  .
Closing advice: Get very good at quickly discarding ideas that just don't "fit" for you. It can be difficult to resist the temptation, because it's important for your sanity and your schedule.