Dear Professor Investor, how do I know if my startup opportunity is worth pursuing?
Dane from Boulder.
Well Dane, you could read my new book ;) Startup Opportunities: know when to quit your day job In it you would learn that the best way to judge your opportunity is to look at it from four angles: durability, timeliness, attractiveness, and value add.
Durability is knowing whether or not your product will be around for a long time or if it will fizzle out quickly. Is your product something that we need or is it something that is more of a fad and will disappear once it has run it's course? Timeliness refers to whether the market is ready for your product. An example of this is electric cars. Electric cars have been around for over 100 years, but the market was not ready until recently. Attractiveness is whether or not your idea can make more money than it costs over the long run. Finally,value add, does your solution provide value to a defined customer or user. If your opportunity hits all four of these, then it may be worth pursuing and could be a viable business.
Also remember that opportunities are subjective too. Do you, as founder, have an unfair advantage? Can you produce a better solution? Is this solving a problem that you're obsessed with and willing to work on 24 hours a day, seven days a week. If you say no to any of these questions then this may not be the opportunity that you should pursue. After all,this may be an opportunity, but it may not be YOUR opportunity.
Finally, never forget the 10X rule. i.e. In order for you to gain market share you have to be exponentially better than existing solutions. e.g. Netflix has 10 times the content and ease of accessibility than Blockbuster video. If you lack the ability to make your solution exponentially better than an existing alternative, you should not pursue it.
So Dane, before you quit your day job, sell your blood to science or mortgage the house, get out the building and go talk to potential customers. See if your customers find your solution exponentially better (10x), valuable, timely and durable. Watch for buying signals, proof that the problem is worth solving and the solution you propose is worth adopting. If customers are willing to buy early then you are on to something worth pursuing. That is why I think crowdfunding is so valuable. Not only do you pre-sell inventory before it is even made, you get direct access to customer feedback, and that is priceless.
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Questions can be sent to sean.wise@ryerson.ca or to @SeanWise. Please be sure to include "Dear Professor" in the subject line. For more startup wisdom check out Dr. Wise's new book: STARTUP OPPORTUNITIES: know when to quit your day job