On each of my Stanford courses (Engineering and GSB) we start the entrepreneurship element of the course by selecting ideas to base the mentoring around. The process of selecting a viable team and startup business idea are the backbone of these courses in my opinion. If you can get good at finding the right type of idea and team to make it a success you will have learned some of the fundamentals to the startup world.
Criteria for a great startup idea
As with most Startup ideas there are a large range of criteria for picking the best one to develop. In this case we are going to focus on the very basics for simplicity. This course is about pitching a VC at the end and much of the course mark is based on doing a good job in that endeavor! Therefore the idea is controlled by this requirement i.e. it must be a VC scale idea.
- Is the idea an ADVIL? (and not a Vitamin) Does your idea address a visceral and highly painful problem that needs to be solved right NOW vs. a long term annoyance that the customer can ignore or put off solving.
- Is the scope of the addressable market large enough? Can the idea build a business of scale ($100M+ per year revenues) ? If you are raising VC funding you need to find an idea in a big potential market. You then need to address a large slice of that market and show how your business model will create a business of scale. VCs fund ideas that can generate big revenue and exit value.
- Is the idea “defensible” and “sustainable” ? Is your idea “solid” i.e. is it something tangible based on some hard science vs. a copycat internet play. Is it new and innovative, and can that innovation be protected for the long term with both legal and execution options.
These are the very basics to get started.
Criteria for a “Stanford quality” idea
Stanford is a special place and the students that get it are also very special. In addition, those that have gone before you have set the bar very high, don’t let them down by coming up with “me too” and unimaginative business ideas! My belief is that this course is also about dreaming big dreams, it’s a course after all and as such you don’t have any real world limits to your idea so why not come up with a really cutting edge, world changing idea?
- Is the idea new, innovative and world changing In the first instance we are looking for defensibility but this goes far beyond that, this is about doing something original, ground breaking, totally ingenious. An idea that will make the world a better place…this is about shooting for the moon.
- Does the idea have some real “secret sauce” that is leading edge This is about finding something “hard” within the teams background that is based on some research for example or developing a thesis that creates value from an engineering perspective. This is an engineering course after all, so let’s actually “create” something.
- Is the idea “worthy” of one of the worlds leading engineering schools This is a philosophical question. You are the privileged few, are you making the most of this opportunity. Are you looking at those that came before you and trying to beat the high bar.
Use these basic guidelines to check your first few ideas and see if they measure up. If they don’t try reviewing the background of each team member and see if they have some experience or passions around areas that could be the basis of an idea. Don’t just go with the “loudest” member of the group either, listen carefully to everyone, if you don’t you may miss some incredible potential due to the mix of personalities in the team – the quiet ones often have a huge amount to contribute given the opportunity.
The Venture Panelists that will review the pitches and plans tell us that the best plans come from students who chose projects in areas where they have domain expertise and passion for the specific idea versus those who work on someone else’s idea or pick the latest fad getting funded in the valley.
More notes about the course dynamics to be aware of:
The first challenge mentees face is finding a team (usually of 4) without necessarily having met them before, a few of the team come up with a first idea and then member join teams where they have an interest in the idea of the other folks in the team. This is the first problem in creating the best “real life” scenario in my opinion as at this stage of the game the idea has not been tested and therefore the business is selecting resources and people without having a strong basis for doing so – but for the course this has to do and in a way can show the members one of the pitfalls of not getting this matching process right in a real startup.
The other part of this process that is problematic is that the idea that is initially chosen is not necessarily the best one but the age old problem of “the ugly baby” comes into play right away – whichever team members came up with the idea can be very defensive of it. This defense is an emotional attachment to the idea rather than a logical one and can prevent other ideas from coming forward that would be better both for the course and in the real world. This post is about assessing the first idea or two and making sure they stack up against the course objectives.
In a separate post I have written up a quick check to ensure your idea and the plan you build around it meets the needs of your course:
Check your business plan measures up to business school standard before you send
The next post in the series reviews your first attempt at getting a great idea and checks it against the first key criteria.
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