Sunday, November 05, 2006

Comparison matrix for startup ideas

I've made a comparison spreadsheet for startup ideas that may be useful for others.

The purpose is to have all the important considerations to be made when coming up with an idea for a startup as columns and the ideas themselves as rows.

You may use it as a quick way to brainstorm all your crazy ideas, compare each other and make sure you're covering all important aspects of a successful startup.

Here's more detail on what each column means: (most of the referenced articles or quotes are from the Y-Combinator library)


A brief description of the idea itself. The initial idea is not a blueprint, but a question.


Who are the users/Wideness
Who's going to use whatever your idea is trying to do and how much they desire it:
In nearly every failed startup, the real problem was that customers didn't want the product. For most, the cause of death is listed as "ran out of funding," but that's only the immediate cause. Why couldn't they get more funding? Probably because the product was a dog, or never seemed likely to be done, or both.

Problems solved
What exactly are you trying to solve ? How well do you understand this problem? Is it really a problem people have?


Question: How much value can you ultimately deliver?

The most successful products give benefits quickly (both in the life of a product and a user's relationship with it), but also lend themselves to continual development of and discovery of additional layers of benefit later on.

But most things are deeper than they seem at first glance. Practically any application, once people start using it, can be used as a lever to more activity and benefit delivery. Being smart about what you're leveraging is key.

Understanding of users
You must understand exactly what customers want or be one yourself.

From the What Customers Want section
of How to Start a Startup:
No matter what kind of startup you start, it will probably be a stretch for you, the founders, to understand what users want. The only kind of software you can build without studying users is the sort for which you are the typical user. But this is just the kind that tends to be open source: operating systems, programming languages, editors, and so on. So if you're developing technology for money, you're probably not going to be developing it for people like you. Indeed, you can use this as a way to generate ideas for startups: what do people who are not like you want from technology?

As soon as everything is running as intended, where are revenues coming from ?

What are the costs associated with your business model?

There are
mainly five sources of startup funding:
  1. Friends and Family: Similar to angel investors.
    • Advantage: They're easy to find (you already know them)
    • Disadvantages: you mix together your business and personal life; they will probably not be as well connected as angels or venture firms; and they may not be accredited investors, which could complicate your life later.
  2. Consulting: Which means either saving money from your current salary doing whatever you currently do or working on consultancy itself. The best sort of job is a consulting project in which you can build whatever software you wanted to sell as a startup. Then you can gradually transform yourself from a consulting company into a product company, and have your clients pay your development expenses.
    • Advantage: This is a good plan for someone with kids, because it takes most of the risk out of starting a startup.
    • Disadvantage: Not enough time, energy and commitment that a startup requires.
  3. Angel Investors: Angels are individual rich people. Angels who've made money in technology are preferable, for two reasons: they understand your situation, and they're a source of contacts and advice.
  4. Seed Funding Firms: Seed firms are like angels in that they invest relatively small amounts at early stages, but like VCs in that they're companies that do it as a business, rather than individuals making occasional investments on the side.
  5. Venture Capital Funds: VC firms are like seed firms in that they're actual companies, but they invest other people's money, and much larger amounts of it. VC investments average several million dollars. So they tend to come later in the life of a startup, are harder to get, and come with tougher terms.

What operational system are you planning on using ? Based on any fancy middleware ? REST? SOAP? Which web framework?

More on that:
How do you pick the right platforms? The usual way is to hire good programmers and let them choose. But there is a trick you could use if you're not a programmer: visit a top computer science department and see what they use in research projects.
The question is: How difficult will it be to launch a worthwhile version 1.0?

According to Evan Williams:

Tractability is partially about technical difficulty and much about timing and competition—i.e., How advanced are the other solutions? Building a new blogging tool today is less-tractable, because the bar is higher. Building the very first web search engine was probably pretty easy. Conversely, building the very first airplane was difficult, even though there wasn't any competition.
Development plan
Do you have a broad idea of what the development plan (think of a roadmap) for the next months and years ? You should not release to early and not too late, so you must have a good idea when your initial prototype will be ready for release and which features to add next or an idea of what should go next.

What's the potential for integrating to other web sites? Can you leverage any external system or source of data ? Does providing an open API makes sense for your idea ?

Domain name
Which domain name to use ? Should be a catchy, small and somehow related to what your idea is about.


Who are your competitors ? Having some competition is not really bad. In a sense, it simply means that your idea is so good that others are also trying to capitalize on it.

Advantage over competitors
Now that you're aware that you have some competition, what's your advantage over them?

Question: Is it clear why people should use it?

Everything is obvious once its successful. Big wins come when you can spot something before its obvious to everyone else. There are several vectors to this: 1) Is it obvious why people should use it? 2) Is it obvious how to use? 3) Is it an obviously good business?

The key question for evaluating an idea is number one: Is it obvious why people should use it? In most cases, obviousness in this regard is inversely proportional to tractability.

How are users going to know that you can solve one of their problems ?

Focus (money X being cool)
Do you want to just make something cool out of your idea just for the sake of it or are you focusing on making money?


How motivated are you regarding this idea ?
In some fields the way to succeed is to have a vision of what you want to achieve, and to hold true to it no matter what setbacks you encounter. Starting startups is not one of them. The stick-to-your-vision approach works for something like winning an Olympic gold medal, where the problem is well-defined. Startups are more like science, where you need to follow the trail wherever it leads.
Time devotion required
A general estimate of how much time you'd have to devote for giving life to this idea.

Who will help you take the idea off the ground ?

From the People section of How to Start a Startup:

Like most startups, ours began with a group of friends, and it was through personal contacts that we got most of the people we hired. This is a crucial difference between startups and big companies. Being friends with someone for even a couple days will tell you more than companies could ever learn in interviews.

Ideally you want between two and four founders. It would be hard to start with just one. One person would find the moral weight of starting a company hard to bear.

If you can't understand users, however, you should either learn how or find a co-founder who can. That is the single most important issue for technology startups, and the rock that sinks more of them than anything else.

So who should start a startup? Someone who is a good hacker, between about 23 and 38, and who wants to solve the money problem in one shot instead of getting paid gradually over a conventional working life.

And from The 18 Mistakes that Kill Startups:

Have you ever noticed how few successful startups were founded by just one person? Even companies you think of as having one founder, like Oracle, usually turn out to have more. It seems unlikely this is a coincidence.

What's wrong with having one founder? To start with, it's a vote of no confidence. It probably means the founder couldn't talk any of his friends into starting the company with him. That's pretty alarming, because his friends are the ones who know him best.

Potential legal issues
Are you breaking any vaguely described patent? Indexing someone else's content ? Using the right disclaimers ? Do you even need to worry about terms of service ?

On which city do you plan on basing your startup ? A bad location may be a mistake:
Startups prosper in some places and not others. Silicon Valley dominates, then Boston, then Seattle, Austin, Denver, and New York. After that there's not much. Even in New York the number of startups per capita is probably a 20th of what it is in Silicon Valley. In towns like Houston and Chicago and Detroit it's too small to measure.
But that doesn't really mean that starting from other places will doom your startup...

Where are you and your partners going to work from ?

From What Business Can Learn from Open Source:
The average office is a miserable place to get work done. And a lot of what makes offices bad are the very qualities we associate with professionalism. The sterility of offices is supposed to suggest efficiency. But suggesting efficiency is a different thing from actually being efficient.

Things are different in a startup. Often as not a startup begins in an apartment. Instead of matching beige cubicles they have an assortment of furniture they bought used. They work odd hours, wearing the most casual of clothing. They look at whatever they want online without worrying whether it's "work safe." The cheery, bland language of the office is replaced by wicked humor. And you know what? The company at this stage is probably the most productive it's ever going to be.


Anonymous said...

Nice spread sheet.
Very useful.

soulstring said...


עדנה נהוראי said...

Thank you for the post. Very inspiring this long night when I am rethinking how to devise a suitable business strategy for my company (a microISV).

I'll make use of your spreadsheet to help me plan with my team and jumpstart discussions about where we want to take our company. Mostly to think of ideas, brainstorm.