Most of us must have encountered this question as an entrepreneur, or get this thrown at us from first-timers: Is my idea great? Should it be pursued given the amount of time and money it’s going to suck in? Is it worthy of leaving a job? Is this idea going to be bigger or the other one?
Here’s a simple Venn to serve as a comparative matrix:
- Viability — of course, how positive unit economics look — the money you make on one unit v/s the effort you make to sell that unit. So captures factors like low touch / high touch etc.
- Scalability in this context should be how quickly the thing can grow to cover the target market (or say 1% of the target market), which is slightly different than its Wikipedia definition. Does that time run in years or months? Could it be sold online via self-serve? Can referrals work? What’s the length of the sales cycle? What kind of time/effort it takes for user to experience delight?
- A large market size not only is the exhaustive universe of customers (in USD) which are the ideal customers but also segmented by (a) customers whom you could actually reach and convert, and (b) market yet left unserved by competitors (if there are any). Definitely captures usage frequency (marriage v/s food) and ticket size per use.
- Low Upfront Investment — not just the Capex, but also the [time + cost] to ship the MVP, added with the estimated [time + cost] to reach PMF (product-market-fit).
- External risk, of course, the regulatory risk and how volatile is the industry. Other factors like what VCs think (or about to think) of the particular sector can be added on convenience :)
I won’t count presence or absence of competitors to be a black & white parameter as two factors should nullify each other. [Presence of competition is surely a market validation, but can be a red flag to available market size. Absence of competition surely sounds like somebody else tried but failed; but doesn’t automatically imply non-worthiness as you would anyways be the first one executing on it (more details here).]
Service v/s Product play is a definite factor and should more or less be captured within the Viable-Scalable combo. Same is the case with Vitamin-Painkiller framework.
Thing to note is that the more an idea falls within a section closer to center, the better is the idea to go ahead and pursue it. For Example, should you agree with me on whether:
- Uber should fall in section 16?
- Most SaaS should fall in 13 or 21 (center), depending on what kind of competition the space has?
- Cloud Telephony lies in 18, unlike in 2009 (when it was in 21 (center))?
- Online news-content-media falls in 18, 20 or even 21 (very few)?
- Wallets should go into 15 or 16, depending on their model?
Your thoughts? [Encourage me to write daily by a heads up!]