The most common theme in my early failed startup attempts was that I made a lot of assumptions about how my ideas would play out in the real world that later turned out not to be true. And while I have no plans to work on another startup, I do chat with a lot of folks working on startups so I want to elaborate on this lesson learned in the hope that it will benefit a few of you future founders out there.
A hypothetical startup
When I was working heavily on Lean Domain Search, I used a service called Commission Junction (CJ) to manage its affiliate programs. CJ’s internal performance reports were terrible so I wound up building a script that signed in, scraped all of the reports, and then presented the key metrics to me in an internal dashboard. It helped me quickly gain insights about Lean Domain Search’s performance that were painful and time consuming to glean from CJ itself.
This gave me I had an idea: what if I built a startup that helped other companies using CJ gain similar actionable insights from their CJ data? They’d pay my startup $XX/month and I’d help them make more intelligent decisions about their affiliate programs.
I added it to my Workflowy “Startup Ideas” list and fortunately that’s all that ever came of it.
What assumptions did I make?
Here are a few:
- Scraping CJ does not violate their Terms of Service
- Companies would be willing to provide me their CJ login credentials so I could scrape their performance reports
- I’d be able to figure how how to securely encrypt and decrypt those credentials so a database breach would not also lead to their CJ accounts being compromised
- That there are companies that are dissatisfied by the reports CJ already provides
- That there are a lot of them
- That they’re also willing to pay for a better analysis
- That they’d gain enough value after becoming customers to stick around for a long time
- That they would somehow find my service
- That CJ wouldn’t just change their reports to include the improved analysis my service would provide
You could make long list like this for almost any startup. Imagine making one for Uber or AirBnB when they were at the idea stage. The lists would be massive. But… if you don’t think through your assumptions and how you’re going to solve them, you drastically increase the odds that your startup will fail. For this CJ idea, if any one of those assumptions turned out to be insurmountable, the startup would probably fail.
If you had asked me about my assumptions when I originally came up with the CJ idea, I probably wouldn’t have been able to come up with the same list of assumptions as I did above but likely would have thought of at least several of them. The more experienced you get, the more you’ll be able to identify the pitfalls in your ideas. This is also why you should get advisors who can help you identify areas that you’re overlooking.
One final point: a lot of the issues in the list have to do with customers and their need for a service like this. Many of these assumptions can be validated using customer development techniques. To learn more, I highly recommended the Lean Startup book by Eric Ries.
If you’re bouncing around any startup ideas, feel free to reach out and I’d be happy to provide feedback on them.