Infallible Formula to Create a Money-Making Startup

It’s as simple as this:

Go work for an established company for a year. Preferably more than a thousand employees, so it will have a sizable IT budget. During that year, pay attention to all the inefficiencies of that company. Hang out with the IT folks, and ask them lots of questions, for example:

  • What tool do they hate the most? Why?
  • Does anyone spend a significant amount of time on routine tasks that could be automated by a service?
  • Are they using cloud services? Why or why not?
  • What third-party services is the company paying for? Are they happy with those? Which of those are provided by startups?

These are just examples, you get the idea.

You may find that several people are dedicated to the administration of source control systems (which is why GitHub can become a huge company). Or perhaps they don’t have a way to automatically erase sensitive information when people leave the company. Or they don’t have a directory of people’s personal phones, and they would like to map virtual extensions to them. Maybe they are not complying with privacy logs, or not keeping records as they should. Perhaps they are in dire need of red staplers that send an sms when they need to be refilled.¬†Whatever, I’m just making these up.

During that year, find potential co-founders who work at similar companies. When you find a weakness that you believe may be generalizable, validate it with them.

Once you’ve decided on which problem you’ll address, give notice. But don’t quit before making sure you have established a relationship with a decision maker: they can become your first chartered customer.

Important tip: don’t implement anything while at the company. Make sure you start working on your product after quitting.

Another tip: don’t pick something that you find extremely tedious just because you think it will make money. If you’re not excited you’ll probably have a hard time making it happen. There are a ton of exciting products nobody has been building; the shiny Facebook Ecosystem has sucked talent away from the “boring” b2b space.

Bonus points if you and your cofounder managed to save enough money to work on your product / service for three months.

Profit!

Ok, it’s not infallible. It’s not even a formula. Still, it has better odds of success than creating a solution and then looking for a problem.

Before I started IndexTank I already knew that people would be willing to pay $$$ for such a service because I’d been making money with search consulting for a while. The only question in my mind was whether we could out-execute our competition.

TL;DR: Infiltrate BigCo, learn their weakness, take their money. Who knows, you may end liking BigCo and decide that startups are for suckers. Especially if your boss doesn’t ask you to work on weekends :)

Thread for this post on Hacker News.

 

5 thoughts on “Infallible Formula to Create a Money-Making Startup

  1. Clever hack. The only potential drawback I see is that big companies (1,000+ employees) have long approval times for budget request, and maybe you haven’t saved up to wait on it for so long.If it’s IT related service you come up with, maybe big issues like security, etc, come up that you have to develop before hand. Bottom line: clever hack, handle with care :)

  2. I’ve personally worked for several Fortune 500 companies and even if you solve their biggest problem you still have to convince the decision makers. Having the ear of the decision makers is usually better than actually having a solution that does anything at all. I’ve met my fair share of snake oil salesmen.Big companies distribute the pain. No one individual understands the pain someone might be experiencing across the organizational structure and that’s how they like it. This makes them slow to react, so slow that you might be out of business.Nice try though.

  3. @MuchoSupport: yes, I’m not proposing to solve their biggest problem. You don’t need to get to the biggest decision makers either. Pick a problem tailored to the decision makers you can access. It may well be something that flies under the radar of the C*O level (e.g. version control, bug tracking, etc).@Steve: yes. I worked for companies of all sizes. Many times my colleagues and I discussed “hey, we should leave and do a startup to solve this.” IndexTank itself was born out of the fact that lots of companies needed search and we could not scale as a consulting business. We would never had thousands of companies/sites using us if we had not understood the generalized need for a service like ours.

  4. lots of folks working at a BIG corp will also tell you the BIG corp isn’t likely to buy anything that comes from a “small” corp. The main reason is, you can’t guarantee in any contract that you will be able to stay in business or get bought by a competitor. This becomes to much of a risk for a BIG corp to take on, especially if the product becomes “mission critical” in any way.

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