Finding A Startup Idea In The Age Of AI
Tools and tips to help you start smarter and faster, with some help from AI.
Helping startups find the best AI tools, so they can move faster and do more with less.
Please subscribe here, if you haven’t already:
So, you’re thinking of an idea for a startup… I’ve been doing that on and off for nearly 30 years now (yikes!). It’s one of my favorite things to do, and to help entrepreneurs with. Today, I’ll share some of the tips and tools I find helpful when going through the process.
AI and Ideation
Some aspects of generating startup ideas are timeless. For example, you’ll always have to find a customer with an important, unmet need or desire, and offer them a solution they find far better than the one they’re using today. But in other ways, AI is starting to change the process. You can use AI tools as a brainstorming partner, to generate potential ideas, or to act as your customer (in addition to interviewing actual customers). You can also look for business ideas that use AI to radically improve solutions to customer problems. And once you’re ready to test your ideas, you can use AI to build and share prototypes and value propositions, and to collect and interpret feedback - all in ways that are faster and less expensive than just a few years ago.
Ideation Mindset
Here are some tips I’ve found helpful for getting into the right mindset when coming up with an idea:
The process is usually iterative, not linear. So think about it as a series of small steps that can lead to something bigger. It tends to be hard to envision the right idea from the start. You’re more likely to learn and change your mind as you go. You will be making a series of experiments, coming up with hypotheses and testing them like a scientist. Many of those experiments will fail, but you’ll learn and gain insights along the way. That’s part of the process, so embrace it.
Fall in love with the customer and their problem, not your solution. It’s always tempting to start by dreaming up the product you’ll build that customers will love. That’s exciting, creative - and safe, since you’re doing it without the risk that customers won’t want it, use it or buy it. And you can keep making it “better”, from your own perspective, adding to it, and delaying contact with the real world. That can work - there are always exceptions - but you’ll probably save lots of headaches down the road if you focus on getting in front of customers early, to learn who they are and what they care about, before spending too much time and money building something they may not want.
Adopt a “beginner’s mindset”. That’s a buddhist concept where people try to let go of their preconceptions, and look at situations with a fresh perspective. Be open to new ideas and ways of looking at things. Be curious and explore. Give yourself the freedom to make mistakes, to admit what you don’t know, to learn.
Areas of Interest
What excites or bothers you personally right now? Is there something you care deeply about? Or an everyday problem that’s driving you crazy? Pay attention to what piques your curiosity, especially if you’ve been going deeper and deeper into a rabbit hole, like reading books, listening to podcasts, talking to others about it, going to industry events - and you keep finding it more and more interesting. Make lists of these areas of interest. Collect them. See which ones stay with you over time, and which ones you get tired of quickly.
Idea Screen
Once you choose an area of interest, make a screen - a set of guidelines to follow when you brainstorm potential ideas. A screen can keep you focused, and weed out ideas that don’t deserve your attention. You’ll want to make your own personalized screen, but here are some ideas you may want to incorporate.
Customer
You know the customer. Meaning you know about them, and you know many of them personally. They could be people like you, or people and / or companies you know well or work with often. If you’re going to come up with something they want, you’ll need to understand them. It’s also a big help if you have access to at least a few dozen of the potential customers already, so it’s easy to talk to them, learn about them, and try to sell to them.
You care deeply about the customer. Building a company that solves the needs of customers you respect, trust and care about is much more interesting and fulfilling. If things work out, you’ll be thinking about this customer and talking to and about them constantly, for years to come. So choose wisely.
The customer spends money. This bleeds over a little bit into the problem, because you want to make sure they spend money to address a specific need. But in general, be wary of serving a customer that expects to get everything for free.
The customer is open to making decisions. Try to avoid starting with customers that have long, complicated decision making processes, and customers that are highly risk averse. You can always work your way to these customers later, but they’re a tough group to start with. You’re better off picking early customers that are interested in trying new things, and have the ability to make fairly quick purchasing decisions.
Problem
They have a “hair on fire” problem. Don’t look for something a lot of people care about a little. Instead, find something a small number of people have such a big problem with, they’re desperate to find a solution, and will even welcome a mediocre early version of it. Even better if that problem is frequent, and / or has a big impact, such as on costs or revenue for a business, or on health, wealth or happiness for consumers.
You have a unique insight into this problem. By knowing this customer well, you see something about them that’s not obvious to others, like a problem they face that existing solutions don’t satisfy. An insight like that is super valuable. You may not find the right solution right away, but if you get the insight right, you can keep experimenting with different solutions until you find one that works.
Solution
Why now? It’s hard to start a successful company, but it’s even harder when there’s a ton of competition, and you have to win by doing the same thing better than everyone else. There is a flip-side, of course, which is that if there’s competition, at least you know there’s a real customer with a real problem and a solution they’ll use and pay for. But if you want to find a big, innovative opportunity, look for situations where there’s a new technology, a change in regulations, or some other factor that’s driving or unlocking new behaviors for consumers or companies. For example, generative AI, blockchain, GLP-1, or autonomous vehicles. What do these or other new developments make possible that wasn’t before, when it comes to solving an important problem you have a unique insight about?
Why you? It’s a big help if you can personally take on one or more of the key roles involved in providing the solution. Maybe you’re an industry expert, so you have specialized knowledge or relationships. Or maybe you’re a functional expert, so you can build a solution or market or sell it. In the early stages of building a business, the more hands on you can be, the better. That way, you can stay close to the customer, building and modifying the solution to meet their needs. Also, you can take on the work yourself, instead of paying someone else to do it.
Other considerations
Market size. Is the opportunity big enough to fit your goals? This is always a tricky one, especially since you’ll probably start with a niche, and expand into adjacent or concentric parts of the market. But it’s worth thinking about, so you don’t run into a nasty surprise down the road. Even doing some back of the envelope math, like how many customers you estimate to need the product, times the revenue you expect from each one, and the number of those customers you think you can realistically capture given competition and resources.
Distribution. How will you reach the customer? Does each customer generate enough revenue so it makes sense to do direct sales? Is that something you know how to do? Or will you need to reach a much bigger number of customers that each pay a smaller amount through marketing or partnerships - and are those things you know how to do?
Go explore
Once you have one or more areas of interest that you’re excited about, and an idea screener to keep you honest, become a sponge. Go meet with the types of people you think have the problem, people who serve the market, industry experts, entrepreneurs in related areas. Read, listen, watch - become a student of the space. Maybe even start an email newsletter or podcast or social media series about it, to share your learnings, connect with others who share your interest, and collect followers. Start to form some hypotheses around who your customer is, what problems of theirs you have a unique insight about, and why there’s an opportunity for you to solve it, now.
Draft a lean canvas
Resist the urge to do any of the following yet:
Find a domain name
Build an MVP
Raise capital
Form a corporation
Sign a partner agreement
Write a business plan
First, draft a lean canvas. A lean canvas is a simple tool that helps organize your hypotheses, so you can see them all in one place, and test them. It’s intentionally low-fi, with just a minimum amount of text, mostly in bullets. That way, you won’t waste time building a beautiful pitch deck, before you even know what you’re pitching. Also, a lean canvas lets you make changes in seconds, in keeping with the fast, flexible approach outlined above.
Here’s a lean canvas we used before launching Stash, an app that eventually helped millions of people start investing. We got some of these assumptions right, and others wrong - and made a lot of changes along the way. Note: This is a slight variation on the classic lean canvas template.
Here’s a blank version you can copy and adapt.
Using AI to Brainstorm
At this stage of building a startup, general purpose AI tools like Perplexity and ChatGPT can be very helpful. Here are a few prompts you can try:
I want to build a startup with potential to scale. What are some recent changes in technology, science or regulations that could unlock new ways to solve existing problems for consumers?
Play the role of a (product manager designing a new feature at a seed stage b2b tech startup, 30 year old woman from LA shopping for dog treats online, etc.). What are some of your biggest frustrations with the way you currently do this?
I’m interested in (mental health for teenagers, fitness and nutrition for people taking GLP-1, personalized preparation for college, etc.). What are some startup opportunities that exist today thanks to these new changes in technology, science or regulations, that couldn’t be done before?
What are some of the most successful (apps, SAAS tools), and how could they be made 10x better today using AI?
I want to build or buy an existing small business (e.g. law firm, accounting firm, catering business, etc.), and make it 10x more efficient using new technology. Help me brainstorm ideas.
Got ideas for using AI to find startup ideas? Reply and let me know so I can share them. And please subscribe if you haven’t already.