How to Tell if Your Startup Idea Is Any Good

Why most founders grade the wrong thing

Founders judge ideas by how clever they are. Customers judge them by how much a problem hurts today.

Those are different tests. The clever idea with no urgent pain loses to the boring idea that removes a weekly headache.

Five questions that decide it

Every idea I've seen work passed most of these. Every one that failed skipped at least two.

1. Is the pain frequent? A problem people hit weekly beats one they hit yearly.
2. Is someone already paying to solve it? Spending, even on a bad workaround, proves the budget exists.
3. Can you name the buyer? Not an industry. A job title at a type of company.
4. Can you reach them cheaply? If every customer costs a conference booth, the math rarely works.
5. Why you? Access, experience or distribution that a stranger with the same idea wouldn't have.

Competition is usually good news

Founders panic when they find competitors. Usually they should relax.

Competitors prove the market spends money. No competition at all more often means no market than an open field.

Ask five customers to pay

Talk to twenty people who have the problem before you build anything. Ask what they do about it today, and what it costs them.

If nobody is doing anything about it, they won't pay you either. If they're stitching together spreadsheets and contractors, you've found something. The ICP Builder helps you decide who those twenty people should be.

Common mistakes

• Building for six months before a single paid conversation.
• Asking friends, who will always say it's great.
• Treating a big market size as proof. Big markets are where the well-funded competitors live.
• Picking the idea you'd enjoy building over the one people would pay for.

When the answer changes

Sometimes a weak-scoring idea is still right. If you have unfair distribution — an audience, a channel, a relationship with the buyers — you can win a crowded or modest market others can't.

And if you're deciding whether to fund it yourself or raise, that changes how big the idea needs to be. A bootstrapped business can thrive in a market far too small for venture money. Here's how to think about that choice.

What the research says about failed startups

CB Insights studied the post-mortems of failed startups and asked why they shut down. Running out of cash and having no market need were near the top every time.

Running out of cash is usually the last symptom. No market need is often the cause. The team built something people didn't want badly enough to pay for, and the money ran out while they waited for demand to show up.

That's why the five questions above matter more than the pitch. They test for demand before you spend the money.

Ideas you'd use yourself

Some of the best ideas come from problems founders hit in their own work. Paul Graham, who co-founded Y Combinator, put it this way:

The last part is the hardest. If an idea is obvious to everyone, a lot of people are already working on it. The best ideas tend to look small or strange at the start, and only make sense to people close to the problem.

That's also where your own background matters. Years in an industry show you the workarounds, the waste and the budgets that outsiders never see.

How to run the test in two weeks

You don't need months to know if an idea has a pulse. Two focused weeks will tell you a lot.

1. Days 1–3. Write down who you think has the problem. Make it a job title at a type of company.
2. Days 4–10. Talk to twenty of those people. Ask about the last time the problem happened and what they did.
3. Days 11–12. Write a one-page offer with a price. Send it to the five people who cared the most.
4. Days 13–14. Count the people who said yes, asked for a contract, or offered to pay a deposit.

Compliments don't count. A calendar invite, a signed letter of intent or a payment does.

If the answer is weak, change one thing and run it again: a different buyer, a narrower problem or a different price. If it's strong, build your ideal customer profile next so every sales conversation starts in the right place.

Signs you should keep going

Early signals are easy to misread. Some are stronger than they look, and some are weaker.

• Strong: someone asks when they can start, or what it costs, before you bring it up.
• Strong: a buyer introduces you to a colleague with the same problem.
• Strong: people describe the problem in the same words without being prompted.
• Weak: "I'd definitely use that." People say this to be kind.
• Weak: a lot of social media likes, or sign-ups to a waiting list with no follow-up.

The strong signals all cost the other person something: time, reputation or money. That's what makes them worth trusting.

Signs you should stop

Walking away from an idea is part of the job. Most founders who end up with a good company went through a few ideas first.

• After twenty conversations, nobody has asked a follow-up question.
• Everyone agrees the problem exists, but nobody has tried to fix it.
• The only people interested can't make a buying decision.
• You've changed the buyer three times and the answer is still lukewarm.

Stopping early saves the one thing you can't get back, which is time. Write down what you learned and use it on the next idea. If you're still deciding whether founding is right for you at all, read should you start a company or stay an employee.

Grade your idea

The Idea Grader asks eight questions and gives you a score with a plain verdict. It takes about two minutes, and nothing is stored. If it comes back weak, the result tells you which question to fix first.

When to keep going

Keep going when strangers pay, come back, and tell others without being asked. Any one of those is a good sign. All three together means it's time to put more of your time and money behind the idea. If you're weighing that step, read start a company or stay an employee and raise money or bootstrap.

Related: Should I raise money, or stay bootstrapped?