How to assess the potential of a .com idea/venture?
I have been looking at the evolution of the .com as a .com web veteran to set some high level thumb rules for assessing new ideas. When assesing new ventures, I would take that list and work with it to try to create an emotionally independent analysis, and by the outcome of this analysis I would decide if to continue with the initial idea or not:
As a start, you want the idea to be unique. “Unique” does not mean that no one else has ever done anything similar to it, but rather that your idea has something of its own, even if very small, but still is originating from your own spirit and not just a copy of what others are doing. This point is actually more important for examining how serious you are into doing the venture, and would be a starting point for the marketing strategy.
2. How large is the target market?
Even if you have the most brilliant idea and skills to develop it, it would be useless unless the target market is large enough for you to grow your venture to large scales. So say you have the most wonderful product but the only client for it would be the Queen of England, you would rather think of something else to do as your chance of growing it to something big – is probably zero
3. Targeting a niche
So indeed you need to target a large market, but you wouldn’t want that market to be too large or not focused because then you wouldn’t be really able to brand it strongly enough for your marketing to succeed. Even global market .COM products like Facebook started first as niche products (in the case of Facebook it was university students) and were extended to the larger market only at a later stage. You want to be able to do the same – your product must target a specific niche first, with a potential to grow to extended markets at a later stage
A wedding dress made of used condoms could be a very creative idea, but you need to examine the size of the target market before you continue with it
4. Adding value / solving a problem
A good idea would not only target a specific niche, but will also solve a difficulty or a problem for the people of that niche. Facebook in its initial stages targeted the niche of university students, their problem was that they didn’t have good cross university community network tools. Facebook solved that problem.
5. Not too revolutionary, simple to use (KISS)
So we said that a good idea needs to be unique and special however you do not want be too special. Good examples would be MySpace and TheSecondLife, both were social media sites before Facebook and included smarter options, TheSecondLife is even suggesting a revolutionary 3d social media experience – a magnificant concept – yet Facebook took over merely because it was simpler and easier to use (and because of another critical design reason which I will leave you to ponder about, comment below if you wish to discuss). Facebook was not a revolutionary site, it was actually targeting people which already knew what social media is (like me), just offered them a simpler and easier way to connect – a methodology which was already invented by others but was simplified by Facebook. I actually joined Facebook in the early days, simply bscause it was faster to upload and to share photos with friends. KISS stands for Keep It Simple Stupid.
The Second Life is a brilliant 3D social media site with much more than just social media, yet it was too revolutionary to succeed as Facebook
6. Multiple income streams
You need to think of money too. Most genuine entrepreneurs don’t really care about dollars but more about fame, still bare in mind that dollars may bring you fame, so better if you have a proper and robust business plan how to achieve this. There are lots of possible money income streams: subscriptions (when you take money for timely usage), one time licensing (when you ask for payment per download / per account), fees per transacfion i.e. % of each transaction, free trial (e.g. some base functionality is free, the rest requires payment), advertisements (when you sell your traffic to third parties like Google, for Cost Per Click or any similar model), and others. The best approach would then be if your idea does not rely on one income stream only, but potentily allows multiple income ways.
7. Potential to grow to new markets
We said above that a good idea would target a niche market, and I’m not going to contradict that here, but just to add that the idea needs to be flexible enough so once you exhausted the initial niche, you would be able to change and grow to new areas and to new markets. Facebook started with universities but once it was widely used by students, they adjusted it so it would fit with the wider range of the population. Ability to adjust fast is therefore another charasteristic that you must have.
8. Competition Is Good!
I hate when I present an idea to someone and they say “oh but what if X, a large international company, would develop a similar product”. They try to let you down by waving the competition risk, but actually competition is something you do want to have, especially if it is run by large companies. Large companies can’t move fast and they tend to have long processes for everything. They are more liekly to destroy a good idea than to succeed with it, that is why most large companies would prefer to buy you than to compete with you. But let’s consider that a large company is in your market: when someone has a competing product, they open the markets, advertise and educate users about the new technology and spend lots of money on it. Yes you might be required to be faster and more creative, but you may also find that frustrated users will try your product, sales would be easier and fund raising would not be as hard as usually, simply because invesotrs have already heard the same language that you are using in your pitches.
9. Big players field
One of the things you need, regardless if it is in direct competition wih others or not, is to play where the big players are. Where the sharks are eating, there would be food left for the small fish as well, with a chance for the small fish to grow to a bigger one. Some big companies may then try to aquire your company or buy services from you. It happened to me with my search engine technologies and Yodfat Communication Limited which I sold in 1999. The large company that bought it had also bought 2 years of other development services, what made us triple our revenue each year.
10. Personalities involved
This point is a bit out of the idea context, however smart .COM partners/entrepeneurs will not just look at an idea, but also at the personalities involved: their skills, passion and abiliity to connect to other people. Ideas can change, personalities are more stagnant. So when you examine a venture, look at the people involved first, and only later at the other content.