Which Problems Should Your Startup Solve?
How to think about your startup's strategic direction to maximize your chances of success
I’ve done a couple of ScholarAI posts recently. I’ll add a bit about ScholarAI at the end of the post. Today I’ll share some general startup growth thoughts.
As you build your startup, how do you decide which problems to solve? How do you know if those problems will generate revenue and eventually impact and personal wealth?
1. A World of Problems and Solutions
See a world of problems and solutions. There are lots of problems, and lots of resources available to solve them. But the market value of these solutions is uneven. A few solutions are worth trillions, many more are worth billions and millions, but the vast majority are worth zero. Unsurprisingly, this is about the same distribution that venture capitalists see when funding startups, even when allowing for VCs to select the top range of startups in the distribution. Here is an article on the topic: https://alexdanco.com/2015/03/03/startups-are-not-normally-distributed/. So how do we pick a valuable problem?
2. Capital Flows as Blood Flows
Understand capital flows. See them as blood vessels either growing or shrinking over time. More blood flow means more resources available to pay for your solutions. Connect yourself to a strong and growing blood supply. The following graphic shows increasing blood flows to some industries and shrinking flows to others.
The blood flow to Hospitals and Colleges are rapidly increasing, while the blood flow to televisions and toys are decreasing. Given that reality, you would be wise to select problems in markets with increasing blood flow that you are passionate about solving. That passion will give you the juice to overcome serial failures (happens to everyone), while the increasing blood flow will increase your odds of success and give you the confidence that all of your work with eventually pay off. Google “industries that are growing 2023” for more.
3a. (B2B) Enable Someone to Generate More Income
Enable someone to generate more income, and you’ll justify taking part of that income for yourself. Google and Facebook realized their value was in helping companies grow their revenue through targeted advertising. Their market caps are reflections of their ability to serve advertisers and help them generate qualified leads. The only ways to help create value for your B2B startup are to drive down someone else’s costs or drive up someone else’s revenue. In either case, if you can do it, they’ll be happy to share some of the improvement with you, and that share will drive your market cap and eventual personal wealth. Who’s revenue can you help to drive up? Who’s costs can you help drive down?
3b. (B2C) The You That You Are Becoming
If you are serving consumers, perhaps with clothes or books or wearables, the way you build value is by growing the customer. Perhaps you grow their confidence in a great blazer or new sneakers. Perhaps you grow their mind and their ability to have interesting dinner party conversations with a great book. The better them is on the other side of your product when you are connecting. Your consumer is trying to have a great day tomorrow, and your product or service is there to help them. Get really clear on how and why that’s worth paying for. You are also competing for share of mind and share or wallet, and the only ways to get beyond those hurdles are to offer a great experience (customer service, quality, low friction, and price).
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