Be the VC Firm of Your Own Life
The best way to vet your own ideas is to pitch them to yourself
This is Part Three of my Real-Time Journal — Starting a Startup, where I document in real(ish) time our attempts to start a startup.
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After a couple of months of unsuccessful brainstorms and more successful free-wheeling discussions, Zach and I had come up with several ideas we wanted to explore further, audio-newsletters, text-message ecommence orders, and analytics for professional gamers.
At this point, each of these ideas was still vague. However, we did notice some general trends that suggested each might be promising.
The consumption of audio-content is growing at a striking pace as is the number of niche newsletters. Could we build something at the intersection of those two ideas?
Direct to consumer brands are also growing like crazy and some like Lemon had remarkable success with text-message ordering. Could we generalize their text-message ordering system so other direct to consumer brands could use it?
Professional gamers that broadcast themselves playing games get thousands and thousands of hits. Could we build something that lets them see which content they produce is getting the most traffic?
All of these are good trends. But, as we learned with Owl & Scroll, good trends are not enough to justify building something. We need a clear value proposition that we can evaluate and test with minimal development effort.
The minimal effort piece is critical. For one thing, we both want to get rich with our amazing startup idea while we’re still young enough to enjoy it. For another, we both have other jobs to pay the bills in the meantime so we can’t spend 40 hours a week developing something.
We a way to refine these ideas into a clear value proposition, and decide which one (or max two) is the most promising. In other words, we need to be like a VC firm, ruthlessly evaluating our own ideas and quickly deciding which ones to spend more time and energy on, while heartlessly dropping the rest.
It turns out that VC firms like Y-Combinator are pretty good at evaluating start-up ideas already. And, as you probably know, the most critical piece of their process is pitching. Conveniently, they have pitch-deck template they’ve created to help aspiring entrepreneurs like Zach and I easily turn our ideas in pitch-decks. Sometimes the internet is a really neat place.
The outline of the Y-Combinator pitch deck is simple but powerful.
- State the problem
- State your solution
- Show success metrics or trends
- Explain why your solution works
- Explain your business model
- Show the market size and potential growth
Using this, Zach and I created a pitch deck for each of the ideas above and pitched each other (and our wives, they are involuntary investors in our plans after all). Doing so required us to do more in-depth research on the general trends outlined above and make a compelling case for why we could capitalize on them.
For instance, while creating the audio-newsletter pitch deck, I discover that Substack, a newsletter software platform, grew from zero to 50,000 PAID subscribers in ten months. Also, the number of smark-speakers (Amazon Echo, Google Home, etc) is expected to grow to 100 M devices by 2020 and fully 1/3 of their owners use them to listen to news.
This extra research and the pitch-deck format helped me crystalize the audio-newsletter idea into a much more concrete problem and solution. Namely, that niche newsletters need a way to easily create and distribute their audio content to their subscribers.
Side note: we struggled to make a compelling pitch-deck for the analytics for professional gamers idea. Excellent. That made it easy to cross it off the list.
Conclusion
Things we tried:
👍 Creating Pitch Decks for your ideas
👍 Thinking like a VC firm
Takeaways
The best way to evaluate your own startup ideas is the same way VC firms will evaluate them (they do it for a living after all). Doing so is hard because you’re already biased in favor of your idea.
The Y Combinator pitch deck separates you from your idea by requiring you to research it deeply and develop a clear, compelling value proposition, backed up with evidence. It also forces you to turn vague ideas into concrete statements that you won’t be embarrassed to share with people who don’t share the same skull as you.
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