To start a billion dollar startup, start looking for problems | Hacker News Reader

To start a billion dollar startup, start looking for problems

startupstunned.blogspot.com

124 pointshammadnasir62 comments

What you really want to find are the 25 million dollar problems that you can turn into a monopoly. Sure you won't ever be famous, but you will have a great lifestyle that is 99% of what a billionaire has on the upside with none of the downside.

I like this point - going for an arbitrary number like 1 billion is ridiculous. But I'd like to add if you have a $25 million company, you probably have the resources and the smarts to grow into other related spaces. You might be worth 1 billion in 30 years assuming a 15% growth rate. Not entirely unachieveable, but you will be kind of old.

> turn into a monopoly

Sure, but how do you do that? There's lots of textbook stuff (patents/copyright/trademark, consumer habit etc), but in practice, you must continuously improve it, promote it etc, to keep that "monopoly".

There's no monopoly; only temporary monopoly. [But I'm interested to hear your thoughts]

You will most likely need to work on maintaining your monopoly, but having a monopoly position in a small market allows you to extract above average profits without attracting competition. This is the path to quiet success.

From a lifestyle perspective it is much better to be a small fish in a small pond than a big fish in big pond filled with sharks.

The more complex the solution, the easier it is to lock it in permanently. People don't want to learn a new complex thing. Note that this means the minimal complexity (or close to it). If you implement something that could be simple, and you make it complex, someone else will come along and make it simple and kick your ass at market.

Imagine you've got a warehouse automation system (this is not an example of a $25 million dollar business, just an example of a problem that has no simple solutions) that is ten times as efficient for employees as the current pad-and-paper solution. If you arrive first and lock in that industry with the market leaders in owning warehouses, you don't have to worry about a competitor coming along five years later with a system that is eleven times more efficient than pad-and-paper and that costs 20% less than your system. It cost the company a half a million dollars to train all of their staff to use your system. It'd be crazy to migrate.

So...not a monopoly, but a comfortable lock on a significant portion of the market.

You do know that there are thousands of companies in the warehouse automation space, right? And that "pad and paper" (whatever broad brush that is supposed to mean) isn't really used anymore for anything but small warehouses that wouldn't be a profitable target for warehouse automation software? And that there aren't any "market leaders" that own most of the warehouses...you'd have to lock up thousands of the biggest companies even before you got to 10% market share?

I understand the point you're trying to make, but that was a terrible example. Even then, I don't agree with the answer. Complexity isn't a deterrent to market, otherwise some company would have locked up international import/export by now. The market's response to complexity isn't typically a monopoly but rather very fragmented hyperspecialization (which is the case for both international import/export and warehouse automation).

What people are suggesting here is very well studied in economics: it's called a natural monopoly. And suggesting that you just focus on building a natural monopoly is about as facile as suggesting you just become a billionaire. Building a natural monopoly takes a mountain of time, money, and expertise. It's way harder to build a natural monopoly than it is to build a $1B business that has to compete.

It was a hypothetical example. I know nothing about warehouse automation (though I know it is not using pad-and-paper as I assumed any intelligent reader would understand I was making up a hypothetical world where warehouse automation didn't exist yet), but I know it's complex and I know that if a company with a lot of employees trains them in a complex system, the odds of them changing that system are very low.

And, as I said above: It's not a monopoly. But, it is a comfortable place to exist profitably without a lot of risk of losing your customers.

Also, you've wholly missed my point about complexity. Some problems are hard because of external, uncontrollable, unpredictable, complexity. Import/export is that kind of complexity. I'm talking about predictable complexity. Again, to come back to warehouse automation as an example, which you hate, but makes my point. A warehouse has a lot of moving parts (people, machines, inventory, shelves, whatever TF), but it is finite and is a mostly closed system. The inputs and outputs usually match up, and you can predict what's going to happen with ins/outs and all the people and things that make the things move in and out. It is complex because it is large and there are a lot of people involved and many of them would need to be trained to use any new system that automates it. It is not, however, chaotic, and involving many competing factions, like import/export.

Unpacking that a bit, training costs are to do with interface complexity (in the sense of "necessary" complexity) due to integration with other systems, and other information. i.e. it's not 100% automated; you can't just press a button. It's more "amplification", where you must be trained and practised to use it effectively - a tool for skilled labour. If you're super-successful, yours becomes a de facto standard, which others copy (usually, you still command a premium; but for the life-style idea here, we'd want to avoid that).

This might be included as "installation" costs, along with and engineering integration with other information systems, Related is the organizational purchasing process, expensive for larger transactions: determining requirements, evaluating alternative vendors and solutions, sign-off from legal and upper management, and so on. Change itself is disruptive, there'll be teething problems, other systems will have to adapt, and other knock-on effects apart from training itself. These are one-off costs that you'd prefer not to incur again, unless there's a very large benefit (your example of 10x is worth it, but not (11/10)x).

All are switching costs.

Within that "fragmented hyperspecialization", might there not be good examples of the psuedo-monopoly ("comfortable lock") of the type SwellJoe describes?

This is my kind of strategy. If you could get one you'd be just fine. If you get two you've now developed a skill out of it. Sky is the limit from there. And you can walk down the street freely.

Yep. I wrote a piece for TechCrunch about this recently. There are a bunch of "Invisible Unicorns" in the startup world that have built businesses brick by brick, often without capital to start. They often have a compound interest like effect, the $1M business grows year after year and all of a sudden you have MailChimp, with a $400M ARR, which is completely controlled by its founders. Or Shutterstock, which went from bootstraps to a $2B market cap (and $1B for the founder alone).

These stories are often kind of boring. Who wants to build (or read about) a CRM for life sciences companies? Fortunately for Veeva shareholders, there was a founder who wanted to go after this $6B opportunity.

Or Guidewire Software, which powers insurer's ability to underwrite and turned a modest $29M in VC into a near $3B business.

In my post, I found 15 companies that I categorized under the heading "Blessed are the Boring." These are companies that build software to automation injection molding quotations, construction management, corporate event messaging, and have done quite well as a result.

https://techcrunch.com/2017/07/01/invisible-unicorns-35-big-...

It would be good if more startups studied their examples, rather than reading yet another profile on Elon Musk or Jack Dorsey.

I bookmarked your post

Thanks, I have a revised version coming to Medium soon, turns out I missed ~20 pretty impressive companies!

> These stories are often kind of boring.

Definitely not. Boring is subjective but people who can't understand this kind of success have no business being in business.

I'm not really in the tech scene but often wondered just this; Are there really a lot of entrepreneurs with a genuine goal of creating a 1B company? From the venture capitalists perspective of course that makes sense but most engineers I know really just want to design products and have control over the direction of the company. Seems much easier if your content with a 25m (or even less depending on how many partners) company.

I mean I can understand you need a 1B company if your going to be building rockets or autonomous cars but I would imagine this doesn't apply to 99% of founders.

My goal, and it seems infinitely challenging, is to make enough from my software to pay my bills. I do not have billion dollar bills.

Solving big problems and creating big companies is really exciting for some entrepreneurs. For that you need VC's and so now your implicit goal is $1B.

You have to match development with domain experts. Development has to take time away from domain experts until you can pay them and not everyone is willing to be a free part of a development lifecycle.

Finding anything more than vague ideas requires connections and the other person not knowing the value of being able to describe their problem (otherwise, why wouldn't they just learn programming and build something themselves?).

Good point - finding domain expertise for product/market fit is super important.

However, that's not something that is solved purely by capital. It also takes a lot of time (in practice, you need potential customers to describe their problem multiple times over multiple meetings, since what they think they want, what you think they want, and what really solves the problem take time to converge). For our company (applying ML/NLP in the customer feedback domain), finding domain experts willing to contribute their guidance took a while, but has been one of the most important things we've done.

You can shovel developers and PMs and QA at the problem, but if it's a greenfield project, (IMO) you're more likely to have people stepping on toes and vying for territory which can be fatal to a startup. Even if they don't fall to that, time/quality/money is the usual trade-off trifecta, but as long as it solves the problem, extra quality may not necessarily matter. That's where you get into laying out MVPs and getting your customers to agree to buy that MVP and what bells-and-whistles they can live without for a first product.

Customers absolutely need iterations to think things through. In fact, that's my default approach now because trying to get everything right for the first meeting is extremely unlikely. Capital does buy you time and iterations.

> Want to start a billion dollar startup?

> basically what you have to do

Just.. cringe. The book recommendation reminds me of this joke: https://www.amazon.com/How-Made-290-Selling-Books/dp/B073DMV...

back when there were magazines for starting businesses there would always be this full page ad talking about how to make millions from this secret report. Except the report would tell you to run ads selling reports.

As an aside... For those not in the know, the "author" of said book is a member of funk group Vulfpeck, which I highly recommend listening to.

One of my favorites: "So You Want to be a Flying Ace!" http://www.harkavagrant.com/index.php?id=206

When I took my optimization and design class in college, our professor would tell us "It's always smarter to find the market then design the product, rather than designing the product and finding a market for it".

What I this misses (in it's rather click-baity title) is that most problems are not going to be companies that are worth $1b. There is a very small slice of problems that end up at $1b. Most, I would imagine, end up being one time problems that are worth very little.

Or that a large portion of the solutions to said problems require R & D spend in the hundreds of millions, if not billions.

It is far more easier to create problems for whatever you are trying to solve.

Now this is funny, 5 stars.

This is also the tried and true strategy - the favourite technique of sales & marketing people. Create a (usually perceived) problem, sell the solution.

This is exactly the right strategy but finding big enough problems can be an issue.

I asked this question in Hacker News two years ago.

What problem in your industry is a potential startup.

https://news.ycombinator.com/item?id=9799007

It was a very interesting experience and I wrote an essay about some of my findings.

https://medium.com/black-n-white/the-problem-with-problems-4...

> come up with a solution which is easy to implement

This might be better phrased as, "a solution that's easy to scale". I don't think the implementation part of most valuable things is remotely easy; at least from my experience.

Thanks for the advice. I've edited the blogpost.

For examples of ideas in search of a problem (rather than addressing a problem), see the vast majority of projects that have done an ICO this year.

That's the problem, haha :P

We all got a big bunch of ideas and probably not 1% of them make any money. I mean just look at Twitter ;)

The problem are finding people who...

...think I can help them, so they talk to me in the first place

...have problems I can solve

...can formulate their problem

...don't want to own the solution and sell it on their own

Focus on yourself.

What are your problems that you would pay someone to solve?

Ask around and see if anyone agrees with you.

If so, maybe you have something.

You're not going to suddenly build a logistics system for dairy farmers, because you're not a dairy farmer and you don't know what kind of problems they have. But look at your own daily life. Your kids school might have some problems you could fix? Your daily shopping might have some annoyances you could invent a solution for? Look at your own life and stop ignoring the boring problems, while looking for the glamorous opportunities. Maybe keeping a pet has some annoying obligations that could be easier?

Talk to people in your everyday life, your doctor for example and find out what annoys them in their lives, doesn't have to be at work.

I've been working on a Realty Broker (common in Boston) idea for the past couple of months. I'd say the problem of finding people isn't that difficult really. I've built a list of 75+ companies including their contact info, website, location, etc. My next step is to go down the list and essentially cold call them. My plan is to ask what software they're currently using (if any); whether it meets all their needs -- if not, what are they looking for; etc. If anything, I hope to at least help a couple of them get a website up and running and start from there.

Even better than observing yourself is watching other people and trying to figure out what their problems are. If done with empathy, the side benefit is that you further develop abilities you will need if you ever have employees.

As a side project, I've begun collecting ideas and posting them at https://oppslist.com

Most, if not all, are NOT billion dollar ideas though.

Those descriptions and prices don't sound like they resemble anything close to what you should be charging people. You'd have to put an extra zero or two on most of them.

If people were more open about their problems, we wouldn't need to find them in the first place.

try searching for problems on bloomberry.com

Could you give an example of how a query could lead to a product idea?

In my locality connecting to small cities, transportation is big issue. There is no reliable service. Is starting a transportation service like Uber or Lyft viable? How should I evaluate the market?

I wonder if a profitable niche would be a startup that helps other startups or people looking to start a startup find Billion dollar maker segments ;-)

my problem is the whole development lifecyle, there's no "code n run" anymore, when you have to continually deploy and test.

So build your own things and do it your own way. I find that is what works best for me. Put food on the table through contracting, build my own things around the contracts to provide recurring revenue. Keep going till it's enough. I hated everything about office culture and have never been happier. Right now for me that's about 20-30hrs per week freelance to make a great income, and I spend 20-30hrs per week working on my own projects.

So, this is something that I would really like to do, mind answering some questions :D?

When you say "freelance" are you contracting 'on location', or 'remote'?

On location, I can't seem to find anything that isn't basically a 40+ hour gig, negating the benefit of 'freelancing', and remote seems to be highly competitive/lowest common denominator.

I'm a decent developer (backend), in a decent tech city and I'm struggling to find a way to ditch my 9-5 in favour of doing my own thing.

Any resources/advice would be appreciated.

all remote.. i scower the web for RFP's and people looking for developers and pitch my services.

Perfect. Now, just solve that problem, and make a billion dollars!

Want to start a $1 startup? Start finding problems instead of ideas.

Works at any scale

Back to the drawing board then, pg says to do things that don't

Does scratching your own itch count as finding problems?

Sure. But if nobody else has the same itch, you won't be able to sell it.

I think if you're talking figuratively, yes. Literally, no.

why is this on the front page? It is devoid of content.

And why do you think so?

Snapchat, bitch!

Or you could create a problem to solve! Uber is trying to underprice the taxi industry into bankrupt, then there will no more taxis and only Uber! Capitalism!

Or Snapchat. Did kids and teenagers have problems connecting with other kids and teenagers before Snapchat existed? I know I didn't. My parents didn't. Their parents didn't and so on. Until Snapchat showed us that we couldn't live without it, nobody had a problem connecting to each other.

Snapchat's value prop has nothing to do with connecting with one another. It originally lay in its proclaimed transient nature and ability to communicate off the radar from parents/relatives which at the time had begun to "infest" other social media.

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