The #1 Fatal Flaw in Most Startup Ideas

Have you heard of the one where you throw an entrepreneur off a 50 story building? His investor checks in with him at every floor to see how things are going. “49th floor, everything’s great … 48th floor, great view … 47th floor, gaining great speed … 46th floor, couldn’t be better …”

There is a fatal flaw that exists in most startup ideas. It is so common that even seasoned entrepreneurs often miss it. Three close friends of mine are currently doing startups that have this fatal flaw and haven’t realized it yet. They are close friends and all three of them are smarter than me. But they are doomed to either pivot or fail, and just don’t know it yet.

Pop Quiz

Before I tell you the flaw, let’s test your instinct for the flaw. Here are two similar startup ideas, which one is better and why? Which startup would you build?

1. A service to help people come up with ideas for proposing to their partner.
2. A service to help people help come up with ideas for getting their partner to propose to them.

I use this example because I actually had the idea long ago to start company #1 as a side project. When I proposed to my wife, I spent months planning the event, which included tricking her into believing that a trip to Rome was just a business trip.

I figured that many people would like to maximize the effect of their proposal (big or small) and would be happy to pay to use a service to help them do so.

What is the Flaw?

The fatal flaw is solving a problem people don’t know they have.

Great startups solve problems people know they have.

Company #1’s logical flaw is that the very people who need the most help proposing to their significant other are the ones who don’t know they have a problem. They will probably just turn over in bed one morning and ask their partner to marry them.

With Company #2, people who have the problem (need to get their partner to propose) know they have the problem. They are likely actively looking for solutions to this problem.

Why a Flaw?

First empirically. Name 3 startups who’s services you pay for right now. For example:

• MailChimp
• DigitalOcean
• HootSuite

Do they solve problems you know you have or you don’t know you have?

• MailChimp – I know I need a mailing list
• DigitalOcean – I know I need cheap fast cloud server
• HootSuite – I know I need to collaborate on social media

In fact, can you think of any startup that is doing great that solves a problem people don’t know they have?

No? Me either. Why? If people don’t know they have a problem, they don’t look for your solution. If people don’t look for your solution, you need to spend 100x more on sales and marketing to raise awareness for your startup, which means you are spending too much money and are going to fail.

It is a fatal flaw. These ideas will either die slowly or quickly, but there is no lipstick for this pig.

How This Applied to Me

I had tons of terrible ideas before I started AppFog (originally called PHP Fog). I made every mistake in the book. But when I started PHP Fog, all I did was put a landing page up one night with a slogan (Heroku for PHP) and an email capture form. I stuck the link on Hacker News and in the morning I had 800 people signed up. Two weeks later I had thousands of people signed up… and I hadn’t done any further promotion.

AppFog was the first idea I ever had that solved a problem people knew they had. They wanted Heroku… for PHP. There was demand before there was even a product to fill that demand.

Why Entrepreneurs Often Solve the Wrong Problems

So why are entrepreneurs so often are attracted to the wrong kinds of ideas like moths to a flame. There are a few common reasons. These are justifications we tell ourselves for why our fatally flawed ideas are great:

1. We think the technology alone is too good and it trumps the crappy business model (common problem for programmers and technologists/futurists)
2. We are attracted to ideas that we think have never been solved before (often it is actually a very bad sign if nobody is making money doing what you are trying to do)
3. We believe that solving problems people know they have is boring
4. We justify solving problems people don’t know they have by thinking they are a bigger opportunity because it will make people’s lives that much better when they discover your service and realize they had a problem

These things (usually some combination of all four) make it really hard to realize just how bad an idea is.

How to Identify if You Have the Fatal Flaw

To identify if you suffer from this fatal flaw, all you have to do is answer this one simple question:

• What’s the story of how the person that pays you money discovered your startup?

Let’s apply this question to the Pop Quiz…

A guy is deeply and madly in love with his girlfriend and wants to propose. He takes her to dinner and hands her a ring.

Oh wait, this guy isn’t going to look for my service. Crap. Let me try again.

A guy is deeply and madly in love with his girlfriend and wants to propose. He doesn’t want anything corny, so he turns to her one morning and hands her a ring.

Oh wait, this guy isn’t going to look for my service either. Crap.

A guy is deeply and madly in love with his girlfriend and wants to propose. He doesn’t want anything corny, he wants something unique and special. So he thinks about their relationship and what it means to him to figure out how to come up with just the right proposal. He googles around for ideas but doesn’t want to copy anything, he wants to be original.

This guy (a small fraction of the male population) is the most likely to look for my service, but is the least likely to get value from it or pay for it since he already has the initiative to do it on his own.

Conclusion

Think very hard about the premise of your startup. If you discover it is fatally flawed, have courage. Don’t throw everything away. You probably have a seed of a great idea within your currently flawed idea. Often all it takes is a slight change of direction or focus.

Next week, we will be interviewing Jive’s founder, Dave Hersh in our podcast interview series. Dave had to go through three separate flawed (yet still profitable) ideas in the first 8 years (!!!) of Jive’s history before he stumbled on the idea that would take his company to an IPO.