What problem are you solving?
And other stuff to consider when thinking through your business
#13
“What problem are you solving?” is the first question I ask every founder who pitches a company to me. I’ve had this argument about whether every company solves a problem with some good friends of mine (*ahem* Jeph) and I still stick to my conviction that every company fundamentally exists to solve a problem. “What problem is my business solving, how do I know it’s a problem and who am I solving this problem for?” are key questions to ask yourself before moving on with your business idea. I had a conversation earlier today where a gentleman pitched a pretty nice fashion-tech business. I asked him this very question and the answers I got just weren’t convincing. The idea may be solid but we’re not in the business of investing in “whisper ideas”. I could’ve gone back and forth on why they’re not real problems with him, but ended at telling him to think through his business better.
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Couple of questions to ask yourself when evaluating your business idea:
Will this company build something lots of people really love? ——“If so, and if ‘lots’ is sufficiently large, the company has the chance to produce substantial earnings.
Will this company be easy to copy? —-“The most successful companies I’ve worked with have a significant competitive advantage—network effect, proprietary technology, complex coordination, or barrier to entry of some other sort. I understand in theory it’s possible to build a very successful commodity company, but I don’t know how to do it.”
Will these founders develop into “forces of nature””—“As most people say, it’s hard to make money unless you invest in great founders. Defining what that means is usually left as an exercise to the reader. Here are some questions I ask myself: Are these founders relentlessly determined? Are they original thinkers? Are they smart, and especially do they have new insights I haven’t heard before? Are they good communicators (and so will they be able to hire, sell, raise money, talk to the press, etc)? Are they focused and intense? Do they always seem to find a way around obstacles? Would I work for them?“This is the often the hardest factor for me to evaluate, because you have to make a judgment about trajectory—you are trying to predict where someone will be in five years.”
Does this company have a clear and important mission?—“Without this, I usually get bored. More importantly, companies that don’t have this usually have a hard time recruiting enough great people to work with them, and thus struggle to become very large.”
What is the market size? —Bucket 1: Market size. “Data tells us the ultimate size of market addressed is the single greatest determinant of outcome.” — @arachleff. If the market is not at least a multi billion dollar opportunity in 5-10 years, you may want to work on a bigger problem.
Tell us about your product/ service? What is special about it?—Bucket 2: Product. “If you don’t have a winning product, it doesn’t matter how well your company is managed, you are done.” — @bhorowitz. As a founder, you need to show 1) any evidence of product / market fit and 2) forms of crazy (i.e. unusual) in your product approach.
Who is the team and why are they relevant for this company? ——Bucket 3: Team. “When a great team meets a great market, something special happens.” - @arachleff. As a founder, you need to be obsessively curious in how to serve your customers better, have bold thinking in your plans, and be authentic in the problem you are solving.
Article List—Articles I’ve read in the past 24 hours or so
Why College Became So Expensive: “We have a bunch of debt to pay off. Learn the origins of this tomfoolery called college debt.”
Trump Invites Pence to Stay at His Place—Then Hands Taxpayers the Bill. : “Business is the art of extracting money from another man’s pocket without resorting to violence.”
Xenophobia Shames S. Africa as Regional Leaders Meet: “This is some messed up situation tbh. But I think it’s a very complex situation. Need to unpack my thoughts.”
Billionaire Founder of Lululemon Making Millions Off China Bet: “Listened to a podcast episode between Chip Wilson and Guy Raz. Not surprised he’s making these serious bets that are paying.”
Nigeria carry last for jollof competition as Ghana win: “No surprise there. End of comment.”
Belonging—why South Africans refuse to let Africa in: “Similar to my comments from before, I’m not 100% formed on my opinion this because it’s a very complex situation. Will get back to you on this.”
Amazon May Have a Counterfeit Problem: “Wasn’t it Gucci that complained to Alibaba about counterfeits on their website and Alibaba’s response was that the fakes are better quality than the real stuff? 😂😂😂”
Podcast— A podcast channel listened to this morning
American Scandal: Listened to the second episode on Enron and I’m in shock 😮. Actually not really because I’ve watched the documentary already. But these people were actually moving wild. You really need to listen to this.
Book—What I’m reading now or in the recent past or want to read…my book list is nearing 1000 books 🌚
I’ll read later tonight and update you tomorrow, boss.
Remember folks: “Until the lion learns to write, every story will glorify the hunter.”
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