Startup Opportunities. Sacca Chris

with a product, you can now quickly get into the market and demonstrate customer demand, which results in an easier path to financing.

The extreme example of this is product crowdfunding, where you no longer need investors to bless your idea. Instead, you can get traction and early revenue before you even build the solution. In 2015, more than $692 million was committed over Kickstarter (the world’s leading crowdfunding platform) to products that were not built yet (see Figure 2.2).

Figure 2.2 Total Amount Pledged per Year

      With these positives comes a downside. More people than ever are starting companies. The lack of barriers to entry allows terrible ideas to be pursued. Investing time at the very beginning to understand how to come up with a good opportunity is more important than ever.

      That is the purpose of this book.

      CHAPTER 3

      Opportunities

      At some point in your life you had an entrepreneurial epiphany. You suddenly came up with an idea that you couldn’t stop thinking about. You might have believed it was an idea that could change the world and bring you fame and fortune. It might be something that you wanted to create to solve a problem you had, or it could have been something you were completely fascinated by and obsessed with.

      Throughout history, whenever there is a problem or an unmet need, humans have tried to create something to provide a solution. The academic literature talks about these unmet needs as being the result of “suboptimal solutions,” a status quo that leaves the user or customer unsatisfied. The telegraph was invented to address the fact that the postal service was a suboptimal solution for rapid communication and addressed the unmet need of instant communication over large distances. Airplanes provided a solution to suboptimal long voyages by ship. Facebook aggregated and improved on several different suboptimal solutions for sharing information with your friends and family.

      The Four Criteria for an Opportunity

      All opportunities start with an idea. While ideas are at the heart of all opportunities, for an idea to be an opportunity, it must be actionable (i.e., an idea that can’t be executed isn’t an opportunity) and have the following characteristics:7

      1. The idea is durable: It is not a fad and will last long enough to allow it to be monetized.

      2. The idea is timely: The market is ready to buy the solution.

      3. The idea is attractive: The potential rewards and returns on investment far exceed the foreseeable costs and resources to create the product.

      4. The idea adds value: It must lead to a product or service that creates or adds value for its buyer or end user.

      Sean has spent years listening to pitches from entrepreneurs seeking investment on the business reality show Dragons’ Den, the Canadian version of Shark Tank. Throughout this book we’ll include short examples from Dragons’ Den and Shark Tank to illustrate our points. We will start with DJ R Dub,8 an entrepreneur with an idea that missed on all four of these characteristics. DJ R Dub came on Shark Tank to raise capital for his “love song dedication show.” It didn’t go well. The investors declined to fund this entrepreneur because the idea was not:

      1

      Brad Feld and David Cohen, Do More Faster: Techstars Lessons to Accelerate Your Startup (Hoboken, NJ: John Wiley & Sons, 2010), pp. 3–5.

      2

      John Case, “The Gazelle Theory,” Inc., May 15, 2001, http://www.inc.com/magazine/20010515/22613.html.

      3

      The White House’s S

1

Brad Feld and David Cohen, Do More Faster: Techstars Lessons to Accelerate Your Startup (Hoboken, NJ: John Wiley & Sons, 2010), pp. 3–5.

2

John Case, “The Gazelle Theory,” Inc., May 15, 2001, http://www.inc.com/magazine/20010515/22613.html.

3

The White House’s Startup America homepage, https://obamawhitehouse.archives.gov/economy/business/startup-america.

4

Steve Blank, “What’s a Startup? First Principles,” Steve Blank’s blog, January 25, 2010, http://steveblank.com/2010/01/25/whats-a-startup-first-principles/.

5

Steve Blank, “A Startup Is Not a Smaller Version of a Large Company,” Steve Blank’s blog, January 25, 2010, https://steveblank.com/2010/01/14/ a-startup-is-not-a-smaller-version-of-a-large-company/.

6

Don’t forget your pets, especially if you have a rubber duck. For more perspective on the value of talking out loud to yourself, see http://en.wikipedia.org/wiki/Rubber_duck_debuggin.

7

Jeffrey A. Timmons and Stephen Spinelli, New Venture Creation: Entrepreneurship for the 21st Century (New York: McGraw-Hill International, 2010).

8

Shark Tank: Season 5, Episode 4.

8

Shark Tank: Season 5, Episode 4.