TL;DR: Product + Problem + Profit + People = Potential. Does your idea have what it takes in all five Ps?
Simon Klose presenting at the hackathon TBD Malmö held in February 2012.
Recently, me and a couple of friends in Malmö have started The Startup Dojo, where soon-to-be-entrepreneurs can come and pitch their idea and get feedback on how to move forward. (It’s a very simple concept and you’re more than welcome to organise one in your own Town!) I have been part of organising a couple of different startup events like that over the last couple of years.
Organising these events have taught me a lot about quickly building value at the super-early stage of a startup. If you only have a weekend to build something, what do you focus on? How do you decide what’s the best idea to build?
For example, the latest batch of entrepreneurs at the Startup Dojo were very interesting in how different they were from each other.
The first gentleman was an excellent speaker and pitcher and had no worries about breaking in to a new market through sheer selling force. He also had identified a clear problem with a big market. However, his product was a little unclear and he lacked the skills to actually build it.
The second entrepreneur was a true inventor. He had designed a new type of shower meant to be used outdoors. He had made drawings and even 3D videos showing how it would work. But, it was unclear if there actually was a real problem on the market that needed to be solved.
The third entrepreneur had a proven product and solved a real problem on the market by saving money for farmers. A winner, right? Well, the problem was that the money it could save was far less than the cost for the product. So the business model didn’t hold and he asked the Dojo for advice on how to proceed.
As you can see the three different entrepreneurs had challenges in different areas.
One had identified a clear problem but lacked the product to solve it.
The other had a great product but was looking for an actual problem that the product would solve.
The third had a good product AND a clear problem yet lacked a business model that would unleash the full potential of the idea.
It seems a good and quick way to evaluate startups is to look on them through the same lens that we just looked at the these three potential startup projects.
You need a strong product that is technically feasible, sufficiently easy to use and scalable.
The product must solve a real market problem that sufficiently many people have.
The price of the product must be such that it leads to profit when costs are deduced.
Finally, and probably most importantly, you need the right people to execute the project.
Only when these four all work together will you reach the full potential of the idea.
So there you have it: the Five P Model for Rapid Startup Evaluation. The next time someone tells you they have a “great startup idea”, in 30 seconds you can pinpoint any holes in the idea and hopefully help the entrepreneur make it even better.
My name is Erik Starck and I work with innovation and growth for entrepreneurs and enterprises. Follow me on Twitter.
PS. We’re still running Startup Dojo in Malmö. Last Thursday every month. See you there?