Startup Series: Busting the Idea Myth
When I talk to most of people in Pakistan, their response is that they really want to do a start-up but they are not getting any billion-dollar ideas. This really frustrates me to the core that a lot of people think that just an idea could be worth a billion dollar. So, lets get to core of “The Idea Myth”.
No idea is a billion-dollar idea, the idea of Facebook is worth billion dollars, nor the idea of Google or Apple or Amazon. So, what is the secret behind their successes. The secret is that doing a start-up and making it to success is not a single variable problem i.e., there is not just one thing that contributes to the success of these giants. Doing a start-up is a multivariable problem. There are a lot of factors that contribute to it and an idea is the least important of them.
The proof: Facebook was not first social networking site, 6 degree was, and you might not have heard of it. Moreover, when Facebook started there was Friendster, myspace and various others. So why did Facebook achieve what 6degree, Friendster and myspace could not. What I think are the most important factors for the success of a start-up is right timing, great team, product market fit, and nailing a small market. In future, I will write separate articles on each of them. But let’s examine what Facebook had. It has great timing, as the niche of social networking was booming at the time. 6 degree had failed due to bad timing. It started in 1997 when the cost of internet was high and accessibility became a road block in its progress. AOL and dial up internet options were the only options available, but their usage was much efficient. Thus, their imperfect timing became a reason for their failure.
Next, Facebook’s CEO Mark Zuckerberg had a great team, including himself, his friends and Sean Parker. These were the people who believed in this, and according to me this is the most important factor for a great team. Moreover, Facebook was able to scale their business successfully whereas Friendster failed in scaling thus causing it to eventually fail. Myspace also had similar problem when it was sold itself to a media company which started focusing on having ads on the platform and therefore the platform lost its core essence.
Next, if we talk about product market fit, it is the part where most companies face problems, but Facebook was lucky in this part. Facebook had some sort of product market fit from day 1. The proof of product market fit is if 10 people experience your product 4/10 people stay using your product for a longer period i.e., retention rate of 40% and Facebook had amazing retention.
Coming to nailing a small market, in the start Facebook only targeted university students. They knew their target market really well and it really made them big in terms of users.
This is but a few mentioned from the several other examples. I will also write about them in future, but this analysis establishes the fact that nowhere was the idea of Facebook that much mattered. It was all the execution that mattered.
