How To Decide If Your Startup Idea Is Worth Pursuing
When the idea finds the entrepreneur
After founding multiple startups, including Yodle, which sold after growing into a $200M+ revenue line business, I had settled into advising student entrepreneurs at Wharton. My professorship began in 2003 but a couple of years ago, I took a leave to pursue my itch to start a company again.
After a few weeks of ideation, I came up with four startup ideas that I found interesting:
- A CBD-based beverage brand
- An herbal medicine brand (based on Ayurveda) selling gummies & tea with herbs to boost immunity
- An explainable AI startup that would help users understand the reasoning behind predictions from ML models
- An insurance-tech startup that can assess AI risks & price AI insurance.
- A new kind of visual entertainment company (i.e., a studio) that would help democratize Hollywood for creators who can’t access the old boy’s club.
I struggled to figure out how to select a problem that could be a viable venture over the next 10 years.
My usual criteria — market size & growth, competitive moat, founder-product fit — pointed towards the 2 AI startups. But I was still debating which is the right problem to solve. That’s when I decided to step back and assess this differently.
I’ll outline below a different framework I came up with to evaluate startup ideas and select a problem worth solving. This new framework is much more powerful in helping entrepreneurs select problems worth solving. Market size and competitive moat only matter if your idea first passes what I outline below.
The pursuit of beautiful castles
Many years ago, I went on the Koblenz to Mainz cruise in the Rhine Valley with my wife. The most amazing thing about that cruise is that you see a beautiful castle up on a hill roughly every fifteen minutes. Passengers can choose to get down at any of these points and hike up to the castle. But, because they appear every fifteen minutes, my reaction soon transformed from an enthusiastic “wow, let’s go to that castle as well” to “we have seen a couple already. I don’t need to get down here.”
Over the years, I have realized that for every startup — I’ve done five, some successful and some not — I was motivated by the thought of arriving at a beautiful castle (startup glory or financial success). But when I started “hiking” towards it, one of three things happened.
In some cases, I never made it; I got lost along the way or reached somewhere else and didn’t get to see the castle.
A second possibility was that I made it to the castle. But the hike was not enjoyable; there were people with me on that journey, and I lost some of them on my way there. I lost my dad to cancer during one of these startup journeys.
And a third outcome was that I got to the castle, but once I did, my reaction was, “Is that it?” The realization of the success wasn’t anywhere as exciting as the anticipation of it.
While we all know to focus on the journey and not the destination, it’s something every entrepreneur forgets. So as I evaluated my startup ideas, I decided to ask — what will a typical day look like with each venture, and will I enjoy it? Because that is what determines whether I’d return when we run into headwinds (which every entrepreneur invariably will). As the images of the beautiful castles faded and I was able to better visualize the hike up there, I got excited about working with storytellers and filmmakers and with audiences who are moved by a good story.
A friend, Shishir Mehrotra, shared a related insight with me. He was an exec at Google, where he helped scale YouTube. And he was describing how the day-to-day at YouTube was not like the rest of Google. It wasn’t search or mobile apps. It was ultimately a video distribution company, and most of his day was therefore spent on issues tied to online video distribution. The analogy he presented was that every company is like an onion whose layers you have to peel to see what’s at the core. And that’s what you’re spending time on, and you have to fundamentally enjoy that.
As I reflected on Shishir’s point, I realized that the AI risk management idea was ultimately an insurance company. And I was not excited about insurance. To be clear, there is nothing wrong with the insurance. It’s an intellectually challenging problem, but, I couldn’t see myself working on designing, pricing, and selling insurance for the next ten years.
At the core of the studio, the idea was content and stories, and I have always found that exciting. All these thoughts ultimately led me to pursue the media startup idea. Jumpcut is still an early-stage company, and not every day is great. But I am currently focused on the journey rather than the beautiful castle I see up there for Jumpcut.
Does the entrepreneur find the problem or does the problem find the entrepreneur?
Like most people, I had always believed that entrepreneurs find the problem they solve. Every time I had an itch to start up, I’d list the ideas I had & evaluate them against criteria such as market growth and competitive moat. Many do this, too, and it is flawed.
As part of a Coursera course on entrepreneurship that I helped put together, I came across an interview with Andy Rackleff, the founder of the VC firm Benchmark Capital and the robo advisor Wealthfront. In the interview, he mentioned that after looking at hundreds of startups, he felt that the ones that work were those where the idea found the entrepreneur.
What does it mean for an idea to find the entrepreneur?
Every once in a while, we all have ideas that, for some reason, we cannot let go of. It’s as though the idea is there somehow chasing you. For me, I felt like this idea of approaching content creation in a new way was one that I just couldn’t let go of.
- In 2003, during an academic job interview, I told my interviewer that I wanted to make a movie someday (not sure if that was the best idea, but I got that job offer anyway).
- Between 2008 and 2010, I had enrolled in two separate filmmaking courses and had even written a screenplay (which went nowhere).
- In 2015, I had explored the possibility of writing a fiction novel (but eventually wrote my first book, a nonfiction book on AI and the implications of algorithmic decision making).
- And in 2016, I had explored the possibility of starting a writer’s room in India to support young screenwriters who struggled to break into an industry notorious for emphasizing relationships over talent.
In short, these ideas would keep coming back in different forms. I had spent so much time thinking about how to make film and TV differently. There were easier and better problems to tackle for someone with a tech and data background but no entertainment background. But the idea of doing something around stories and filmmaking kept coming back.
My point is that the goal must conform to the individual and not the individual to the goal. When I look at all startups I have been involved with, I realize that most of them were ideas that stacked well against a checklist. They were all examples of entrepreneurs finding ideas. But with every startup, you run into major issues that you cannot anticipate beforehand. When you do, the question is what keeps you going. Large market size or a competitive moat on paper is not sufficient to keep you going when you find customers don’t care about your product or you cannot get along with cofounders.
I am not saying that one shouldn’t worry about market trends and competitive moats. There is ample room to shape the product and business model based on these factors. It would be foolish to blindly pursue an idea based on passion without formally considering where your customers, competitors, and potential investors are going.
But great companies are not born from stacking ideas based on a checklist. Instead, when an idea finds you and won’t let go, it’s worth paying attention.
