How to Evaluate Startup Ideas

Part 1 How to Evaluate Startup Ideas

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Kevin Hale Founded Wufoo (W06) @ilikevests

How can I predict if an investor will like my idea?

Startup = Growth

I have a confession.

Your startup idea is a hypothesis. How do I construct this hypothesis?

Startup Idea : Problem Solution Insight

Problem : Popular Tip #1 Growing Urgent Expensive Mandatory Frequent

B = M + A + T Motivation Behavior Ability Trigger

Ideal : 1M+ Tip #1 20%/year Right Now $B Law Changed Hourly

Tip #2 Solution : Don’t start here.

SISP Solution In Search of a Problem

Tip #3 Insight : Unfair advantages. Related to growth. You need one.

Founders 1 of 10 Market 20% / year Product 10X Acquisition $0 Monopoly Boolean

Beliefs : 1. Threshold 2. Miracle

Examples!

Example #1

Y Combinator Problem : Hard for founders to raise money without knowing someone in venture capital. Solution: Y Combinator invests in companies through an open application.

Founders : First worm. LISP textbook. First SaaS co. Market : Future $B companies would be technology / software startups. Software startups need less $. Product : Covering 3 month living expenses is enough. Hackers want to do this. No coworking space is better. Other angels / VCs want to invest in these startups. Acquisition : PG wrote books and online essays with a large audience of target users: hackers. Monopoly : Alumni network more valuable than partners. Easier to recruit. Scales advice. Better beta.

Results!

Since 2005, we’ve funded over 2,000 startups.

Y Combinator is a community of over 
 4,000 founders.

Dropbox Airbnb Reddit Twitch Gitlab DoorDash Stripe Gusto Gingko Cruise Bioworks

15 $1B+ companies 93+ $100M+ companies

Our companies have a combined valuation of over $100 Billion.

Example #2

Wufoo Problem : Websites need to collect custom information, but you need to know how to code or hire a programmer. Solution: Wufoo is a WYSIWYG online form builder that let’s non-technical people create forms and surveys.

Insights Market : Almost every website needs to collect data. Product : WYSIWYG + AJAX is 10X faster than direct competition. 100X cheaper/faster than hiring someone. Acquisition : We started with an audience of 100K developers. The forms can be embedded on a website and we brand the confirmation page. Our users refer Wufoo to their users automatically.

Results!

Education Students Research Designers Real Estate Engineers Healthcare Startups Non-Pr Marketing ofits Sales Small Busines ses Banking IT

Average Startup $25.3 M 676% Wufoo $118K 29,561%

Now you!

Your startup idea is a hypothesis. How do we prove it?