Filtering Startup Ideas

November 28, 2005

I have, on average, about 4-5 ideas a month.  These ideas fall into one of the following categories:


  1. Ideas that could become new companies
  2. Ideas that could become new products for existing companies (mine or someone else’s)
  3. Ideas that could become great new features for existing products
  4. Ideas that could improve existing features of existing products


I haven’t really logged all of my ideas or tried to classify how many of them fall into each of the above categories (though now that I think about it, that’s not a bad idea).  I’ll create a mini database and start doing that.


One of the challenges with ideas is figuring out how to “filter” them.  Or more simply, what to do with them.  For obvious reasons, most of the ideas I have are really not worth pursuing as the effort required to make something of the idea is not worth the opportunity cost of other things I’m already doing.  


Here’s an example:  Some time ago (I think it was last year sometime), I had an idea for improving how alarm clocks work.  For most of my professional life, I’ve never really had a set time that I needed to wake up (a luxury I’m very appreciative of).  Instead, I generally go to bed at varying times and give myself enough sleep (usually 7-8 hours, on average).  My idea was to enhance an alarm clock so that instead of programming the alarm to go off at a specific time, you could do it as a function of elapsed time (i.e. wake me up 7 hours from now).  The interface would be very simple.  The clock would have two buttons.  One for +15 minutes and one for +1 hour.  If I wanted to take a 45 minute nap, I’d tap the +15 minute button three times and go to bed.  If I wanted to catch 6 hours, I’d hit the +1 hour button six times and go to bed.  You get the idea.


Now, this particular idea may or may not be unique (I’ve never really researched it), but I promise you that I did not read it somewhere or happen upon on it.  Its unique, as far as I know.


So, what do I do with this?  The answer?  Nothing.  Even the simple act of figuring out if there’s a market, if the idea is original, if there are existing players I could license the idea to, etc. are simply not worth it.  Which brings me to a key insight (at least for me):


There is no efficient market for ideas.


If there were an efficient market, I could simply “sell” my idea to whoever wanted to buy it for “fair market value” (lets say $1,000).  Right now, the simple cost of figuring out what the idea might be worth is likely more than the idea itself.  This is a clear case of the transaction costs exceeding the cost of the item.  


So, what’s the point of all this?  The point is that absent an “efficient” market for ideas, you have to use an inefficient one.  That is, you filter the ideas the best you can, figure out which ones need to be pursued and which ones don’t.  In this sense, a set of “filters” should be applied.  And, for optimal efficiency, the most likely filter to block/kill an idea should be applied first.  The earlier you can take an idea off the list of viable things to pursue, the cheaper it is.  So, instead of trying to find criteria that the idea is likely to satisfy, I look for hurdles that the idea is likely not to cross.  Often, an easy one is “originality” (i.e. has it already been done).  Later, I’ll write about the different kind of mental filters I use for ideas and how I select to apply them.  So that I don’t misrepresent my process here, things are rarely as organized or analytical as I’m describing, but there is a process, and I do go through it.


Written by Dharmesh Shah


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