Once you’ve gotten a good understanding of your target customers and the problem they have, you can start sketching ideas to solve that problem. Every startup idea is established somewhat differently, and there’s not really any “correct” way to do it or a set path to follow. You also can’t force an idea to appear, but there are some things you can do in order to help you generate valid ideas:
1) Be proactive
Spend time talking to potential customers and try to understand their needs as thoroughly as possible. Get to know the domain by searching for current trends online and talking to people that know about it. Be enthusiastic about the subject.
2) Analyze existing products
Search for products and services that are already solving (or have failed to solve) the same problem or a similar one within the same industry. Read reviews, forums and comments, and interview current users to identify possible weaknesses that you could tap into.
Don’t be afraid of competition. If somewhat similar companies already exist, this usually just proves that someone else also thinks that this is a problem. There is a first-mover advantage, but quite often there is also a second-mover advantage. Many startups that have scaled globally are not the first ones with the idea.
3) Consider your skill set
Think about your strengths and which skills you could potentially utilize when proceeding with the idea. What makes you exclusively qualified to work on the problem?
4) Collect ideas
Keep a notebook or another type of note taking tool with you at all times and write down any ideas as soon as they appear. The best ideas usually happen at random moments, and if you don’t collect them then and there, it is possible you’ll forget them for good.
Technology or concept innovation?
Startups and their solutions can be divided into two broad categories:
A concept innovation
A technological innovation
By concept innovation, we mean that a startup uses existing technologies to solve a problem in a smarter way. We call this a concept innovation because, at the end of the day, it’s about coming up with better concepts to solve problems. A technology innovation on the other hand means actually creating a technology that no one else has made before. Some startups are doing both of these, so the line is often blurred in real life.
For concept innovation to be successful, the entrepreneurs have understood something no one else has understood. For example, the startup Karma has created an app where the user can order surplus food from restaurants, cafes and grocery stores at half the regular price. There is nothing special in the technology itself – the innovation is understanding that restaurants are willing to sell their surplus food at a cheaper price and that people like to buy cheaper food and eat in a sustainable manner. With a digital platform, this kind of concept is easy to facilitate.
People often don’t see how things can be done differently as we all get used to our routines. Perhaps that’s why in some cases, successful entrepreneurs come from outside of an industry. On the other hand, some concept innovations are born after someone has spent 20 years in an industry and understands that something could be done in a smarter way. The essential thing is to be open minded. If you are trying to understand something no one else has understood it is probably not going to be obvious, otherwise someone would have done it already.
In the past decade(s), many startups have been based on digitalization, business model restructuring, removing manual processes with software, machine learning, or creating a platform where different stakeholders can easily interact. So you can also think if a similar approach could be applied to your problem. But we definitely warn against thinking superficially. For example, the entrepreneurs who say they are creating the “Airbnb of X” or the “Uber of Y” often haven’t investigated their case properly and have just quickly copied the logic of a popular company.
For a startup to be based on technological innovation, the team has to of course have the knowhow to produce the new technology. So it is harder for an entrepreneur to choose this path. If you are an expert in some field (or your team is), maybe you have the possibility to try to create a technological innovation. Sometimes you can also do it together with a partner.
Insights from an entrepreneur – deeptech startups
When a startup is heavily about technological innovation and scientific discovery, it’s called a deeptech startup. Inka Mero, an entrepreneur and deep tech startup investor and founder of Voima Ventures, a fund focusing on deep tech, explains more.
How are deep tech startups born?
“Deeptech startups are technology or science-driven. A research group creates some kind of new technology and then they start thinking about how this could be utilized. There are some cases where research groups have been formed to work on finding solutions to a certain problem. But in most cases, the beginning of a deeptech startup is more technology-driven.
“Often deeptech startup ideas start from situations where people approach a given issue differently. What is common for deeptech startups is that they arise from multidisciplinary projects or when one person with a multidisciplinary background gets the idea. Another setting where these ideas can be born is collaboration projects with companies.
“At some point the project gets spun off from the university and becomes a startup. The maturity of the spinoffs varies a lot. Some can be ready to go to the market very soon and for some it might still take several years.”
What makes deeptech different?
“In most cases, deeptech startups are based on university research and the needed R&D efforts are much bigger. More time and money are needed before you’re able to sell a product to customers.
“It usually requires someone from the research group to be entrepreneurially driven, or it could be that a serial entrepreneur knows the technology and buys it from the university. There are also some university incubation programs which aim to commercialize and spin-off startups.
“Deeptech startups have more need to validate when compared to ‘regular’ startups. Often in the beginning, they have to do several proof of concepts with industrial partners to find out if the technology works in the expected way and if it’s scalable. Of course, deeptech startups also have to do customer and market validation like every other startup.”
Validating your idea
Although many startup ideas seem reasonable and aim to solve an existing problem, they don’t necessarily result in products that customers want to buy. It’s common for founders to fall in love with their solution instead of the problem, make assumptions about customers’ behavior and needs, and end up spending months or even years developing products that nobody (or only a small group of people) wants to use. That’s why validating the idea properly in the beginning – as opposed to developing a solution right away and overlooking the customer – is essential.
Again, going back to your target customers and interviewing them is a great way to validate your hypothesis (see Chapter 3 to get advice on how to conduct interviews and avoid false positives from your interviewees).
You can also start validating any ideas you have during the same interview as you validate the problem. Start with the problem first.
You can test your hypothesis in various other ways as well. One common way is to create a prototype (the very first draft of the concept). This can be used to convey the idea to stakeholders — such as customers, potential partners, or investors — either in the form of a landing page, mockup, video, 3D print or a simple algorithm that produces results with a limited dataset. The purpose isn’t to deliver any actual value to the customer, but to show in a tangible way how an identified customer problem could be solved.
One common example of a prototype is a simple landing page (created for example using Wix or Squarespace) where you explain the idea and give people a call-to-action like a newsletter signup to test their reaction to your proposed solution. In order to gain traffic to your site, you may post it to any relevant groups or forums within the field, or run a few Facebook ads with a small budget targeted at the right audience. If your site fails to get any traffic, it’s unlikely that your solution will be something that people want. If, on the other hand, click metrics are off the chart and people seem to respond to the call-to-action, you should move to develop the first working version of the actual solution itself.
The next step from a prototype is a proof of concept, which is a small project to test whether the prototype or some selected feature or functionality of it is feasible. For a B2B company, it can be done in collaboration with a potential end customer. A successful proof of concept gives the green light to start the development of the Minimum Viable Product.
The need for prototypes and proof of concepts is dependent on what kind of solution you are developing. The fundamental idea is to test the solution with something (either not functional or with limited functionalities) that is more concrete than only talking about your idea. When you have something to show for example to potential customers, it’s easier for them to give feedback and you probably will also get new ideas on how to improve the solution.
Insights from an entrepreneur – finding startup ideas and developing them
How do you find an idea for a startup? Moaffak Ahmed is a serial entrepreneur and an experienced startup investor. He founded and successfully exited the financial software company Trema (today Wall Street Systems) and has invested in several successful startups including Smartly and Next Games from Finland. Today Moaffak is part of Nordic Makers, a group of top Nordic angel investors.
Where does someone start looking for startup ideas?
“You can find startup ideas anywhere. You often hear that 20 year olds solve problems for other 20 year olds. The older you get, the more common it becomes that you stop solving problems directly from your personal life, instead maybe focusing on something you have noticed at work.
"Ideas can come from anywhere and ideas are in a way worthless. It’s the execution of the idea which makes great startups stand out from the ones who don’t succeed. For example, Smartly started by doing something different to what they do today – they started by doing something that they thought was cool. But as they were meeting customers, they realized that Facebook marketing is actually causing much more pain and problems for customers so they started thinking about solutions for that.”
What ideas are the hardest to execute well?
“The hardest startups to succeed with, in my opinion, are the ones that are super easy to imagine. For example, marketplace platforms where two different parties meet are usually easy to imagine, but people imagine only how they could work when everything is functioning perfectly. They don’t realize how hard it is to execute those ideas and especially how hard it is to build them from zero.
“I like to encourage entrepreneurs to think about ideas for meaningful big problems. Just type SDG (Sustainable Development Goals) into a search engine and you have there 17 problems like equal access to education, clean water for everyone and affordable and sustainable energy in all regions. Often these problems have not been seen as interesting for businesses as ‘poor people don’t have money to pay’.
“However, the reality is that roughly one billion people will move from poverty to the middle class in the next ten years and they will create a new purchasing power of trillions of dollars. And they want to have the same things that we in western countries have, like cars, traveling, eating burgers, etc. However, if we produce all these things in the same way we’ve been doing up to now, our planet can’t simply handle it. So this is a huge problem and simultaneously a great opportunity.”
Why are niche solutions important?
“Often, when people try to ‘do good’, they fall into the trap of trying to solve too big a problem or too many problems at the same time. It’s much smarter for an early-stage startup to first focus on solving one problem for a certain group of people.
“And one shouldn’t mix the long-term vision with the market-entry product. It can be a good strategy to first solve something simple and then expand. Just look at Google – it was first a page with one box where the user could type something and it tried to answer. If Google would have launched immediately with a service where you have to register, and had search with pictures, text, videos, maps and email, none of them would have worked well and Google would have probably died immediately.
“Also, many people don’t understand how big something that seems relatively niche can be globally. Entrepreneurs say that they are aiming to be global, but in reality when they evaluate their options they usually only consider the customer base in their home market.”
How do you develop and test an idea further?
“The first thing one should do for a startup idea is try to falsify it. This means not to validate the idea but to find people who understand the area and try to get them to say all the reasons why this won’t work. And don’t talk to people who are likely to answer ‘yes’; find people who understand the subject but have no reason to support you and your idea.
“In a way, you want to be lazy. Don’t build anything if it’s not going to work. With this kind of process, if you learn that the idea probably can’t work you’ll save years of your life from being wasted and can do something else. Or then you get validation and the idea will probably develop towards something that could work.
“Of course, as an entrepreneur you have to believe in your idea but you should always try to falsify it.”
Should startups only focus on “must-have” products?
“You often hear people say that startups should create ‘must-have’ products and not ‘nice-to-have’ products – and that is true. However, it might be that a product is first nice to have, but when the user starts using it, the product becomes a must have. For example, in the beginning Facebook was nice to have. But for many people it has become a must have as now all their friends and social life is on the platform. These types of startups often answer very fundamental needs of people (in this case the need to be in contact with other people), but they can do it in very different ways.”