By Chris Kay
In my previous post Part 1: Why Does Your Start-up Exist? I discussed why I ask a founder why their start-up exists to help me understand the founder’s background, motivations and the problem they are tackling. As I said previously, a start-up can’t just try to solve a problem, they have to solve a problem worth solving.
One of the best pieces of advice I’ve heard about start-ups is this: A start-up needs to answer four questions to be viable:
1. Is there a problem?
We’ve already covered this question in my last post and it’s a self explanatory concept, so I won’t duel on it. However, as I go through these questions I would like to use the example of a hole in my shoe to outline the importance of these questions.
Is there a problem? Yes, I have a hole in my shoe. Next.
2. Is the problem worth solving?
This question is asking if someone is will to pay you to solve their problem. This payment will only occur if the customer’s pain is great enough causing the perceived value of your product to be higher than its retail price. Unfortunately, many start-ups fall down on this question. I’ve spoken to many founders, who have great ideas to solve problems, but the problems are so niche or the pain isn’t great enough that they have trouble implementing a revenue model as users are reluctant to pay for the product or service. An example of this issue is highlighted when VC Hunter Walk suggested movie theaters provide wifi, outlets, and low lights, to allow for a second screen experience. Maybe this is a difference of opinion, but I doubt a large population of movie goers want to spend $15 on a movie ticket to not pay attention to the movie and play with their phone or tablet.
Now, let’s get back to the hole in my shoe problem. Is my problem worth solving? Well, it depends. If it’s raining outside, and I need to get home, and I have no transportation causing me to walk, then yes. If it’s not raining outside, and I only need to walk a block to go home to change my shoes, then no the problem is not worth solving.
3. Is your solution the right solution for the problem?
My shoe problem has a couple solutions, but depending on my situation a couple might be right for me. 1) I can plug the hole with a rubber patch. 2) I can buy new shoes. 3) I can put a plastic bag on my foot to keep it dry. 4) I can take a cab home. 5) I can dig a tunnel to my house. 6) I can stop it from raining. Obviously, patching the hole or new shoes are the right solutions, but I wanted to highlight the multiple (and sometimes outrageous) solutions than can be thought of. In Hunter Walk’s case I personally think his suggestion is outrageous and I think the right solution to his problem is for him to watch his movie from home where he can control the environment and not disturb any other paying customers.
4. What is the Minimal Viable Product to test your hypothesis?
This question is sample; it’s asking what do you need to build to test if someone is willing to pay for the solution and if it is the right solution? In his August 19th article in Inc. Magazine, Ryan Hoover creator of Startup Edition, suggests starting a blog as a lean start up tool to validate ideas with minimal effort, identify potential customers, build a following, and gather early user feedback.
In the end if a start-up can solve a deep customer pain, generating customer ROI through a cost effective and user friendly platform they are on their way to building a sustainable revenue model.
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Chris Kay is a Financial Analyst, Co-founder of Multiplicity, and the Founder of Aleph X, a collective of Entrepreneurs, Technologists and Artists experimenting on creative projects at the intersection of entrepreneurship and art. Chris writes the blog Creative Convergence where he discusses the Intersection of Film, Music and Technology. Follow him on Twitter – @ChrisJKay