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G103 Idea Development Guide

Page no: G103

This guide contains tips and advice to consider when developing your idea for the Founder Institute.

Below are solutions to common mistakes that Founders make when developing an initial idea for the Founder Institute.

  • Do one thing well. Identify a particular area where your business can do something better than anyone else, and make this the primary focus of your idea. New companies fail that try to do too much. Overreaching is called trying to “boil the ocean.”
  • Pursue one revenue stream. A new company only has the ability to plan, manage and optimize one revenue source at a time. Describing multiple revenue streams without in-depth knowledge of how they work makes you look naive, especially when there are less than a dozen people working with you.
  • Avoid complex models. The best models are the simplest, such as market to users and then users make a purchase. If your model requires four or more steps to happen before you earn money, especially if the steps are cumbersome, like entering significant data, then you need to simplify.
  • Be clear about what you are making. Explain what you are planning to build, not “the business” that you are in. Avoid business buzzwords and jargon that have a different meaning for different people. Are you building installed software, an online service or a hardware device? State what you are making, who will use it, and why they want it.
  • Address chicken and egg situations head-on. If your business model has a chicken and egg dilemma, you must explain how you will overcome the dilemma within the first couple sentences of describing your idea. Most marketplace ideas have a chicken and egg dilemma with how to get the first buyers and sellers. Generally, it is better to attract buyers, as sellers will follow the money.
  • Make it defensible. If somebody can copy your idea quickly, then you need to find ways to make the idea defensible. Capturing market share quickly, doing large partnerships or super-serving a niche audience are good ways to make a simple idea defensible.
  • Consider funding. The global funding environment has changed, so most ideas will only be able to raise an angel round for $500K or less after having a strong prototype and a full-time team member. The days of a multimillion dollar Series A are over, and certain types of businesses, like hardware, are nearly impossible to fund. Avoid business ideas that require more capital that can be raised.
  • Address large markets. Any idea in a market with less than 10 million people or less than $10 billion in annual revenues is small and will be very hard to address. If you have an idea in a small market, look for a way to for the idea to be relevant in a larger market. Addressing a smaller market is fine as a launch strategy.
  • Avoid arbitrage businesses in competitive markets. Any idea where you are trying to attract customers in a field where your partners and competitors spend millions in marketing is very hard. Marketing online is efficient and cutthroat, and customer acquisition costs are a race to the bottom. Trying to get an edge in fields like online education, finance or insurance marketing is both expensive and low margin.
  • Avoid services. Most service businesses do not scale. Business-to-business ideas and technology licensing ideas often offer services to help with adoption. Once offering services, it’s easy to transform into a service business.

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