What Is The Problem You Are Solving?
In today’s environment the ability to identify and solve problems can lead to highly valuable companies. But new thinking is needed. As Albert Einstein famously said, “No problem can be solved from the same level of consciousness that created it.”
When assessing an investment, I usually start with a simple question, “What is the problem you are solving?” It is surprising how most entrepreneurs can’t answer this simple question and resort to explaining what the solution does or how it works. If you can’t articulate the problem you are solving, how are you going to identify who you are solving it for, and how you will solve it? A good startup should be focused on identifying and solving a real problem. As Duke Ellington said, “A problem is a chance for you to do your best.” In order to do that, one must answer the following questions, clearly:
How Did You Identify This Problem?
Did you experience this problem personally or at work? How did you come up with this thesis?
Do You Have A Personal Connection with the Problem?
It is important that the founders have a personal connection with the problem they are solving. That demonstrates a deeper understanding of the problem, a better ability to solve it, and more commitment to solving it.
Who Are the Potential Customers?
A clear identification of the initial target customers is key in validating the thesis, understanding the customer acquisition strategy, establishing metrics, and understanding the market.
Is This A Viable Problem?
To assess the viability of a problem, one must identify the potential customers and ask them the following:
· Do they truly have, and identify with, this problem
· Are they willing to pay for it
· If so, how much
· Is this a priority or a nice to have?
Is This An Opportunity or A Company?
A company is a sustainable opportunity. So the key question to ask is whether this is a problem that will continue to exist.
Is There A Big Enough Market?
Clearly understanding the problem and the target customer help identify and calculate the potential market opportunity. Obviously, the key question is whether there is a big enough market.
Can You Build A Defensible Business Model?
The viability of a new, successful, startup is dependent on its ability to remain competitive. If you are successful, you will be copied. It is a question of execution, and implementing a defensible business model.
What Does the Competitive Landscape Look Like?
The quality and strength of the competitors is a major factor in determining your probability of success. One should look at their teams, how much they have raised, their investors, and market adoption.
Backable entrepreneurs take their time understanding the problem they are going to solve, knowing full well that their thesis, business model, and indeed team will change with time. So not only you have to be able to articulate the problem you are solving, you must be prepared to pivot and change as competition emerges and markets change. Remember, “Problem solving is hunting. It is savage pleasure and we are born to it.” Thomas Harris
May 16, 2018