Five Ways To Decide What To Build

By Nathaniel Whittemore , written on February 16, 2012

From The News Desk

Skillshare founder Mike Karnjanaprakorn recently wrote a post titled, "Three Big Decisions Your Startup Will Make." In his estimation, "what to build" is the first decision that has the capacity to fundamentally break your startup.

He's right, and that means it's worth some serious mental cycles to figure out what type of company is going to be most fulfilling and exciting for you and your team to work on.

Startups have different origins. Some founders are on a quest: they see some problem -- some inefficiency or injustice in the world and, for having identified it, simply can't not try to solve it. Some founders are simply preternatural entrepreneurs: they like to tinker, build, and solve problems, but are fascinated by many different things. Some founders are both; they are natural problem solvers who find themselves, over time, addicted to solving a particular problem.

But what if there isn't some huge problem staring you in the face? How do you go about figuring out what to build? Here are five strategies.

1. What do you care about? Startups are intense, time consuming, energy consuming enterprises. Even when they go well, they drain you. For the vast majority of people, they don't result in the glory and gold that it's so easy to dream about at the outset. In that context, it's essential to understand what you, as a founder, enjoy spending your time on. There simply has to be a wellspring of intrinsic motivation around either the process or the subject of your company. Gary Vaynerchuk put this well in a 2008 keynote: "Look yourself in the mirror, and ask yourself, "what do I want to do every day for the rest of my life?" Do that. I promise, you can monetize that shit. If you love Alf, do an Alf blog. You collect Smurfs? Smurf it up!"

2. Where on the problem vs. opportunity spectrum does it fall? Startups tend to fall into one of two categories: solving a problem or trying to create a new opportunity. On one end of the extreme is a company like Expensify, which solves a gnarly problem - how to easily process expense reports - that existed long before the startup. On the other end is a company like Twitter, which didn't solve a problem that people had identified, but instead took advantage of a peculiar technological and social moment to give people an opportunity they didn't know they wanted, but once exposed to, became essential. Opportunity startups can be incredibly exciting. Like Twitter and Facebook, the systems that are most essential to our lives today often start off feeling somewhat like a novelty. On the flip side, opportunity startups are inherently riskier, because of the challenges in trying to guess at behavior shifts. These types of startups tend to require a higher burden of proof in terms of traction and team for investors than companies that are addressing a highly tangible problem.

3. How big is the opportunity? While few entrepreneurs chose what to focus on based strictly on size of financial opportunity, big, fat markets are incredibly exciting and are a vector worth thinking about. Indeed, total addressable market size is one of the most essential factors in the flow of venture capital. For VCs with big funds, it is the companies that end up exiting for hundreds of millions or billions of dollars that make the fund successful. For a company to have this sort of potential, the total market size of the companies they invest in needs to be the billions. And while it's not always the case, the total scope of the financial potential can often be an indicator of the urgency or size of the problem being solved, as well.

4. How impactful is the project? Financial upside isn't the only measurement of the scale and scope of a startup. Startups are engines for solving problems, and many entrepreneurs gravitate towards building companies that make the world a better place. Software has still only scratched the surface of its potential to improve industries like health care (in the US and in the developing world), education, and financial services for the poor, making these incredibly interesting sectors for the impact-motivated entrepreneur.

5. How crowded is the field? Photo sharing startup? Groupon or Airbnb clone? Next generation enterprise social collaboration suite? Some industries have an incredible plethora of startups vying for attention. There are some obvious downsides to building a startup in a crowded space: the difficulty of differentiation, potential conflicts from the funders you might want to bring in, the chance that, if they haven't solved it yet, it's harder than it seems. But there are upsides as well: lots of activity validates the size of the opportunity and more companies working on a problem creates an opportunity for learning that can help you succeed where others haven't.

Ultimately, there is no right or wrong way to chose what you want to build. Every strategy for deciding has risks and opportunities. What's for sure is that building a startup is an immense commitment of emotional and physical energy, and understanding what motivates you as a founder is essential to being successful.

[Image credit: Fork in the Railway via ShutterStock.]