The Startup Starting Point: Evaluating Ideas for Success

Recently, two co-founders approached me with an idea they were excited about. "We want to create an online platform where people can easily find satsangs happening nearby and book Satsang Planners or Event Organizers for poojas. Do you think this is a good idea?”

Given my focus on pre-incubation, I often have conversations like this, where enthusiastic founders seek validation for their startup ideas. What follows is usually a much longer discussion than expected. From questions about market size and founder-market fit to exploring competition and scalability, evaluating a startup idea is far more complex than it seems.

In India, the startup ecosystem is rapidly evolving, and many founders face challenges in understanding what it takes to make their ideas successful. If the starting point is wrong, it’s tough to fix things down the road. As Jeff Bezos puts it, some decisions are like "one-way doors"—once you go through, you can't easily turn back.

After having these discussions numerous times, I've noticed recurring patterns that align with key insights from Y Combinator on evaluating startup ideas. Here are some key questions you should consider before diving in.

1. Founder-Market Fit: Are You the Right Team for This Problem?

One of the first questions you should ask is: Why are you the right person to solve this problem? Founder-market fit is often underestimated, but it’s crucial. Take Sridhar Vembu of Zoho as an example. With years of technical expertise and deep insights into the software industry, he built a suite of enterprise tools now used by businesses worldwide.

In contrast, many founders struggle because they lack the necessary domain knowledge or passion. As Paul Graham, co-founder of Y Combinator, said, “The best startup ideas tend to have three things in common: they're something the founders themselves want, that they themselves can build, and that few others realize are worth doing.” If you’ve experienced the problem firsthand, you’re more likely to navigate the challenges and find a solution that truly works.

2. Market Size: Is There Enough Room for Growth?

Startups generally need to address large, growing markets to thrive. If your idea targets a small or niche market, scaling your business could be difficult. Consider the example of Paytm. When it launched its digital wallet, it tapped into India's vast and rapidly growing digital payments market, accelerated by the government's push for cashless transactions. The enormous size of the market allowed Paytm to scale quickly and become a market leader despite competition from global giants.

A common mistake is targeting a market that’s too small. The best ideas often focus on solving problems in billion-dollar markets, where even a small share can lead to significant success.

3. Problem Acuteness: Is the Problem Pressing Enough?

You need to solve a real, pressing problem that people are willing to pay for. A great example is Dunzo, which emerged as a solution for time-starved urban residents needing on-demand delivery services. Dunzo addressed a pressing problem, and its users were willing to pay for the convenience it offered.

If people aren’t urgently looking for a solution to the problem your startup is solving, you may struggle to gain traction. Ensure the problem is significant enough that customers are ready to pay for a solution.

4. Competition: Good or Bad?

Many new founders shy away from competition, but having competitors is often a good sign. It indicates that there’s already demand for the solution you're building. For example, when Swiggy entered the food delivery market in India, it faced competition from established players like Zomato and Foodpanda. Instead of being deterred, Swiggy focused on building a robust logistics network and providing superior customer service. By addressing specific pain points like delivery reliability and speed, Swiggy carved out a significant market share.

Paul Graham advises that competition often signals a real problem that needs solving. Instead of fearing competitors, focus on differentiating yourself by providing a better, more effective solution.

5. Personal Desire for the Solution: Do You Really Want This?

Another critical factor is your connection to the solution. Do you personally want the product or know others who do? When Sachin Bansal and Binny Bansal started Flipkart, they were motivated by their frustration with the lack of reliable e-commerce options in India. Their personal desire to fix this problem kept them motivated during tough times.

If you’re solving a problem that doesn’t personally resonate with you, it’s easy to lose interest when challenges arise. Building something you and others genuinely need will keep you invested in the long run.

6. Recent Changes in Technology or Regulations: Is There a New Opportunity?

Sometimes, changes in technology or regulations create new opportunities for startups. For instance, Ather Energy capitalised on India’s push for electric vehicles by developing high-performance electric scooters. Similarly, the rollout of 4G networks and affordable smartphones opened up opportunities for app-based services like Ola and Uber to thrive in India.

Timing is crucial for a startup’s success. In a study conducted by Bill Gross of Idealab, it was found that timing was the most important factor in determining a startup's success, even more so than the idea itself or the team. Companies that launched when market conditions were right—such as after technological shifts or regulatory changes—were much more likely to succeed.

So, if your idea takes advantage of a recent shift in technology or regulations, you’re in a stronger position to thrive. Whether it's a new law, a shift in consumer behaviour, or a technological breakthrough, leveraging timing can provide a significant edge over competitors.

7. Proxy Companies: Are There Successful Similar Businesses?

A good indicator of market potential is whether large companies are already operating in a similar space, proving that demand exists. For example, Zomato started in 2008 as Foodiebay, initially focused on providing scanned restaurant menus online. Recognizing a growing demand for convenient access to restaurant information, they built a platform tailored to India’s urban population. Over time, they introduced restaurant reviews, discovery features, and online food delivery, similar to international platforms like Yelp, but adapted to the local market.

Successful companies operating in a similar space show that your idea has demand and potential. This proxy method can validate that your idea is not only viable but has a good chance of thriving with the right execution.

8. Longevity of Interest: Are You in It for the Long Haul?

Many great startups come from founders working on “boring” problems for years. Zoho, for example, has been around for over two decades and has continuously expanded its software offerings for businesses. The founders’ long-term commitment to the enterprise software space has been key to its success.

If you’re only interested in a trendy idea, you may find yourself bored or burnt out after a few months. Consider whether you’re willing to work on this idea for the next 5-10 years.

9. Scalability: Can Your Business Grow Quickly?

Growth is the defining trait of a startup. If your idea doesn’t have the potential to scale, it may end up being a small business rather than a startup. Freshworks, another Indian SaaS success story, started with a scalable customer engagement platform that allowed them to grow rapidly across the globe.

Ensure your idea can scale, whether through software, automation, or other means. Scalability allows you to serve more customers without a proportional increase in costs.

10. Good Idea Space: Are You in a Fertile Industry?

Certain industries, like fintech or SaaS, are particularly fertile for startups. When Razorpay launched its payment gateway solution, it tapped into the burgeoning fintech space in India, addressing the pain points of online payments for businesses.

If your idea operates in an industry where others have succeeded, you’re likely entering a fertile space. Being in a growing industry increases your chances of success.

Execution Over Ideation: The Entrepreneur’s Mindset

Finally, remember that ideas alone aren’t enough. Execution, persistence, and adaptability are the keys to success. As Steve Jobs famously said, “To me, ideas are worth nothing unless executed. They are just a multiplier. Execution is worth millions.”

Take Zomato as an example. It didn’t start as a food delivery giant; it began as a restaurant directory. Through continuous execution and adaptability, it evolved into the platform we know today.

Launch and Learn

At the end of our conversation, I asked the co-founders, “Are you ready to dive deep into this idea for the long term?” Their idea of booking pandits and coordinators for poojas had promise, but the only way to know if it would work was to launch it and gather feedback.

Startups rarely begin with perfect ideas. Most start small and evolve through user feedback, market forces, and persistence. As Reid Hoffman, co-founder of LinkedIn, said, “If you are not embarrassed by the first version of your product, you've launched too late.”

So, if you have an idea you’re passionate about, don’t overanalyze—launch and learn. The starting point of any successful startup is just that: a start.