We had a visitor from out of state drop in to today’s breakfast in Milipitas who had “ten ideas for my next startup” and asked for advice on how to sort the list or pick the best one. Here are some of the criteria that were suggested for someone to evaluate how likely they would be able to bootstrap a new business:

  • Understand who the customer will be for the product, the customer is the one who will pay you. If you can’t define a customer, or the person/firm paying is different from who benefits, look at the problem from different angles to try and align who is paying and who benefits.
  • Look for customers who are in a lot of pain. Preferably who face a deadline or an impending event. It’s dangerous to develop a “nice to have” product that doesn’t need to be used by a customer.
  • Don’t judge a product by the size of the market, consider the size of the niche market that you can access directly to get started. If you are selling a product to an airplane manufacturer you should know someone at Boeing or Airbus (to cite an extreme example).
  • Pick a business model where your skills and background are intrinsic to managing or differentiating the product. If you have an idea for solving a problem in an industry that you have never worked in, you should look for a co-founder who has some good knowledge (and connections) with folks in that industry.
  • Be careful of businesses that require a lot of customers to be viable. If your business needs a million unique visitors to your website before advertisers will be interested, consider targeting a smaller population that advertisers will pay more for (e.g. “everybody” vs. “college students” or “network engineers” or “technical writers”). Consider a subscription model where you create enough value to charge $10-100 per year per customer. This should lower break even operation to hundreds to a few thousand customers (admittedly this may make it harder to get a customer, but it’s also very hard to get 100K unique visitors a month, much less a million).
  • Pick a business that’s an Act 2 or a Phase 2 for you: if you can build on your existing skills or know how it’s less likely you will fail. Also, if it’s phase 2 you can still define a phase 5 that is hugely successful if somewhat distant in time, but if it’s “act 1” or a new beginning it may be difficult to convince co-founders to join you or customers to pay you.