Five Sources of Start-up Ideas

Source | Harvard Business Review : By Daniel Gulati

Does anyone dispute that 2013 has been the year of the tech company? LinkedIn has surged over 100%. Twitter and Zulily popped more than 70% and 80% respectively on the day of their recent IPOs. Even Facebook’s stock, once completely out of favor, has doubled in value over the past six months.

As prices of internet bellwethers reach stratospheric levels, more people are being enticed to start companies than ever before. Just one example: Roughly 16% of Stanford’s MBA Class of 2011 chose to start their own companies at graduation, eclipsing the previous high of 12% during the dot-com bubble.

That’s great for them. But as I’ve discovered recently, there are still countless more would-be entrepreneurs looking for a lightbulb moment before beginning their quest for fulfilling work, an independent agenda, and the potentially life-changing financial outcome that a start-up promises. In fact, when I interviewed my peers looking to become founders, the number one reason holding people back was the lack of a suitable idea. One remarked, “I have been working all my life, so funding isn’t a problem. I just don’t have any good ideas.” Said another: “I would start my own company tomorrow if I had an idea worth quitting my job for.”

To inspire the idealess, I’ve spent the past month investigating exactly where successful founders got their revelations. I surveyed 50 entrepreneurs at three different stages (pre-funding, growth, and acquired/gone public) and conducted detailed follow-up interviews with 15. Given that 90% of all ideas raised fit into one of the categories below, there’s a pretty good chance your next big thing will appear in the list.

Here are the top five sources of start-up ideas:

1. I experienced a pain point in my life and wanted to solve it. By far the most popular source of ideas among respondents was a frustration that the founder experienced in his or her personal life. Ever wonder how much your own problems might be worth? Ask Kent Plunkett, who founded when hiring a secretary and finding himself unsure of what to pay. After building the world’s largest compensation information database, Kent eventually took the company public in 2007 at a valuation of $175M.

2. I met someone talented, and we started a company together. If you’re interested in starting a company, look at those around you, specifically at your workplace or school. Others have cautioned against starting companies with business school friends as a strategy for eventual success, but the data care to differ. Of the 39 companies started since 2003 and valued at over $1B by private or public market investors, almost half were started by founders who met at school. Close proximity of like-minded individuals seems to be a key catalyst for surfacing new ideas. Cofounders Corey Capasso, Andrew Fereneci, and Dan Reich first met at the University of Wisconsin, starting Spinback together many years later before the company was acquired by Buddy Media in 2011.

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