Episode 854 | How to Find Startup Ideas (Sneak Peek Chapter from My New Book)

0:00Welcome back to another episode of Startups for the Rest of Us. I'm your host Rob Walling and in this episode I'm going to read a chapter from my new book. It's called Idea to Traction, Stop Building SaaS Nobody Wants in the Age of AI. Today I'm going to be reading the chapter on how to find startup ideas. I've been getting questions about why I decided to write another book. It's my sixth book. Haven't you already said everything you need to say, Rob? Here's the thing. 16 years ago I wrote Start Small, Stay Small. I actually wrote it in 2009, so it was 17, but published it 16 years ago. And that book contained everything I had learned transitioning from developer to entrepreneur.

0:39So it was all the stuff I learned about marketing, product last market first. There was some stuff about virtual assistants. There were things about building an email list and the value of an email list. I mean, this is 16 years ago. This stuff was new and novel. It was everything I knew at that time about the earliest stages of building a great software product. It wasn't even focused on SaaS. It talked a little bit about SaaS, but just any type of software company. It included WordPress plugins and all that. And that book, I self-published, and it changed my trajectory. It got me a lot of speaking invitations.

1:13It has actually made me a significant amount of money because I self-published it. And so I keep the vast majority of the revenue. And it sold, I'd have to look exact numbers, I think it's about 35 ,000, probably approaching 40 ,000 copies. And it has really good reviews on Amazon, although if you look at the low reviews, it's all like, this is out of date. And it is. I went so far in depth in terms of the details of how to start it that it was out of date within a couple years. And so I've had literally hundreds of people ask me to update it. And that's what Idea to Attraction is. It's everything that I know today about the earliest stages of building a great software company.

1:54And of course, these days, I'm focused on SaaS. And so Idea to Traction, which publishes on November 10th, is finally ready to get into your hands. Pre-orders are open today. And I would love it if you would pre-order because I am, this time, trying to hit some of the lists, the bestseller lists. Because I've had Amazon bestsellers. I have done a six-figure Kickstarter for one of my books, the SaaS playbook. But the idea of getting on some broader lists is really intriguing to me. And so I'm going to be taking pre-orders starting today. And I'm going to talk a little more about the book before I get into the chapter.

2:30But if you just want to jump in and pre-order it and help me out and get something super valuable like my books, I think these are my best thinking on these topics. It's ideatotractionbook.com if you want to jump straight there. So in writing this book, I really did start from, not from start small, stay small, because the concepts and the tools are so different that even just covering the same material and modernizing it would not be doing you justice. But while the tools and the steps are unrecognizable, the hard part of building a SaaS company have been mostly the same. It's how do I find ideas?

3:10How do I vet ideas? is how do I know someone is willing to pay for what I'm going to build before I waste time? And even in the age of AI, when it takes a lot less time to build a product, how do I not waste my time? And how do I think about the market first? And how do I market a product as a maker? Most people don't know marketing and sales. And so the book covers a range of topics. It has a forward by Derek Sivers, who says some very kind things about me. And then I dive in, like talking about the early days being hard, how to find startup ideas. I talk about the DNA of a great SaaS business and I give 13 things that I would look for in a SaaS business.

3:47Six traps to avoid, how to validate. I go deep, deep into the 220-200 framework you've heard about on this show. Talk about go-to-market, preparing for launch, SaaS pricing, like fundamentals of how... I wrote about SaaS pricing in SaaS Playbook, but this is about how I would think about coming up with my initial SaaS pricing. Then of course, start marketing the day you start coding. Building your launch list, launching, building that early customer base, finding product market fit. Then I have a whole chapter, Building SaaS in the Age of AI, where I talk about how AI is impacting SaaS, but it's not going to kill it.

4:24What I'm actually seeing on the ground, talk about moats, a handful of SaaS moats in an AI world. And then the final chapter talks about signs it might be time to throw in the towel. right? It's deciding when you should move on, when you should pivot or just abandon things altogether. So the idea here is to help you come up with ideas worth building, to validate them before you write code, to build that launch list and to get that early traction. So if you're an aspiring founder who hasn't started yet, the book's for you. If you're someone sitting on an idea that they haven't validated, if you're a developer who can build anything but you don't know what to build, or even like second and third time founders, right?

5:02Whether you've shipped somebody nobody you wanted or had a success and you want to do more validation. It's funny, I sent this to many founders I know to get testimonials and endorsements for the book. And when I sent it to Jason Cohen, he's like, yes, this is the stuff we talk about, but no one's put it in a book. Like this is the most definitive guide to early stage validation and all the stuff that we tell people to do. And it is, this is my longest book, I think it's almost 300 pages. So Jason Cohen had kind things to say about it. Rand Fishkin, Noah Kagan, Heaton Shaw, Cortland Allen, Pell DeGilzoni, ADP &R, Arvid Kahl, Omar Zenholm, Val Soapy.

5:40Just got a lot of really great feedback and comments about the book. So I'm definitely proud of this one. I don't ship books unless I think they're going to be super valuable and really help people. And the feedback I get is that my taste is usually close to being accurate with that. And so Idea to Traction is definitely something that I fully stand behind. And even if you're already past this point of your journey, you probably know someone who isn't. And this would be a great book to hand to somebody who keeps asking you how to get started. So you can buy one copy or you can buy five copies and gift them.

6:17And if you pre-order the hardcover, because I'm doing a hardcover print run, if you pre-order before November 10th, you're going to get a free either ebook or audiobook version. You're going to get to choose. So if you buy the hardcover, you're going to get the PDF, EPUB, or audio version that I'm currently reading. I'm currently reading the audio version. You're going to hear chapter three, of course, on the show today. And if you pre-order, you're going to get a seat in a live Q &A, which I don't do public Q &As anymore, except for during events like this. But before the book comes out, you can ask your early stage questions of me.

6:56And you're going to get access to a handful of bonus PDFs that you can use. It's things like my nine to five audit, which helps you discover SaaS ideas at your day job. And we're creating a couple of other worksheets and checklists. So to get all the details to place your pre-order, love it if you had to ideatotractionbook.com. And with that, let's dive in to the chapter on how to find startup ideas to give you just a little taste of the book.

7:32Chapter 3. How to find startup ideas. One of the most common questions I'm asked is how do I find an idea for my startup? So many people get stuck at this phase and don't know how to proceed. Maybe you already have a product in development. If so, I encourage you to skim through this section. You'll get plenty of strategies to help refine your idea and potentially make it stronger. Like everything else we'll talk about, finding an idea is not a linear process. and the approaches I've seen work have changed over the past couple decades as the SaaS landscape has evolved. In the early days of Bootstrap SaaS, a popular approach was to scratch your own itch because that's the approach 37 signals used.

8:10But the world only needs so many project management, bug tracking, and to-do list applications. At a certain point, people had to start looking beyond their own itches and find problems they could solve for others. A few years ago, I began asking successful founders how they came up with their startup idea. Then in 2019, through MicroConf, we launched the State of Independence SaaS report, where we surveyed more than 1 ,000 bootstrapped and mostly bootstrapped SaaS founders. One of the 40 or so questions we asked was, how did you come up with your idea? The responses fell into a handful of buckets, which I've outlined below.

8:44I've also included an example or two for each. My advice for using these approaches is to sit down with a notebook. As you read through each approach, brainstorm ideas that relate to your unique skills or experience. Each of us has had a poor customer experience or a problem we've encountered at our day job. Combing through your memory banks to come up with ideas in each of these categories, without restraint, is a good way to begin this process. Before we dive in though, I want you to keep one question in mind. What problem are you solving? These days, when a founder asks if they can tell me all about their startup idea, I say, don't tell me your idea, tell me what problem it solves.

9:23One of the earliest lessons from our first few in-person microconf events was the realization that there are a handful of useful rules of thumb for launching a SaaS product. Number one, serve businesses, not consumers. Number two, solve a problem that businesses will pay to fix. Number three, charge higher prices to reduce churn. Number four, raise prices sooner than you think. If you don't want to solve a known problem, which I get, it's kind of boring, you should put this book down. What you're looking for is a moonshot, the next social network, the next hit video game, the next overnight sensation.

9:57Those make for great magazine covers and great movies. They also fail nine times out of 10 or 99 times out of 100, and I'd rather teach you something that works. As I said in the introduction, this book is not focused on moonshots, but rather on building profitable SaaS companies in a repeatable manner that have real customers who pay them real money. Now let's talk about the different approaches you can take for finding a product idea. Where problems come from. Since I just gave you the advice to, quote, solve a problem, let's start there. How do you find a problem that you can solve effectively?

10:33Before we get into strategic approaches for choosing a market, it's worth knowing where problems tend to show up in the first place. These are the most common ways I've seen founders stumble onto an unsolved problem. The first is to scratch your own itch. You encounter a problem in your own life or business, you search for a solution, come up dry, and build it yourself. Successful startups that took this approach include Basecamp, WP Engine, and Drip. The second is a problem at your day job. This is a variation of scratch your own itch. You hit a problem at work, can't find a solution, and decide to strike out on your own to fix it.

11:09The third is a problem of a spouse, a relative, or a colleague. Instead of scratching your own itch, you scratch someone else's. Which sounds a little weirder than I meant it to, but you get the idea. The fourth is a poor customer experience. While a bit less common, this approach involves being on the receiving end of a bad experience and deciding to fix it. Code submit was formed out of the founder's desire to never solve a contrived programming exercise during a job interview. Builder Prime was formed when its founder observed the communication complexities of working with a home improvement contractor.

11:42And the fifth approach is finding a problem online. This involves scouring Facebook groups, core threads, private Slack groups, product support forums, and other online resources to find a group of people with a common problem. It can work, but it's more challenging if you don't have someone invested in solving the problem alongside you. Only about 3 % of respondents to our survey used this approach, but if none of the others fit, it might be worth a try. So keep these in the back of your mind as we go. Any of the strategic approaches below work best when it's pointed at a real problem you've actually seen, not one you've invented in the abstract.

12:20Now let's talk about the strategic approaches you can take for finding and shaping a product idea. And there is a table in the PDF that accompanies this audiobook that runs through all eight approaches we're about to go through. Since the table is just a summary of the rest of the chapter, I'm going to skip the table in this instance. It doesn't offer any new information. It's more of a reference and allows you to see it all at a glance. And if I read the table right now, it's a total spoiler for the rest of the chapter. So there are eight approaches. Number one is translate an existing idea to a new niche.

12:56This approach involves taking a general tool and applying it to a new vertical. It's been popular since SaaS emerged in the late 2000s with low enough distribution costs to make small niches worthwhile. Think scheduling, but for hair salons, or accounting built specifically for car dealerships. In 2009, Ruben Gomez launched BidSketch as proposal software made for designers. There was online proposal software before BidSketch, but targeting designers allowed Ruben to focus on aspects of the product that mattered most to his target audience and quickly gain traction in that vertical. Later, he landed and expanded into a general proposal tool for any vertical.

13:35Tiny seed company Builder Prime did this with great success by building a CRM, customer relationship management, for the home improvement industry after an experience with a home improvement contractor. Builder Prime has since raised a Series A and continues to grow quickly. Approach number two is to find a large space with a hated competitor. One way to be sure there's demand for a product is to enter a space where large competitors already serve a need. Going head-to-head with a billion-dollar company may sound like a fool's errand until you realize that most large companies are really bad at servicing their customers.

14:07They charge too much, their support is awful, and their products are usually garbage. This can provide an opportunity for a young upstart to price reasonably, provide fantastic support, and build an amazing product, all the while riding the coattails of larger hated competitors. This is what we did with my last startup, Drip. We competed against the likes of Marketo, Pardot, and Infusionsoft, now called Keep, by offering self-serve pricing, pricing ourselves below the competition, having an incredibly usable product, and offering expert customer service. Xero did this against QuickBooks, Shopify against Yahoo Stores, Stripe against Authorize.net, and other clunky online merchant account providers.

14:47There's almost always room in large spaces for a fast-moving startup to succeed through superior user experience, pricing models, support, and positioning. Approach number three is to build on your audience. If you have an existing audience or a reputation in your space, focus on ideas that can leverage the unfair advantage you've built. Rand Fishkin did this when he launched SparkToro, a tool that caters to online marketers. Rand has a massive online audience of marketers, thus publishing a blog post and sharing it on his social account was all he needed to gain early traction with the company.

15:20The founders of Scraping Bee had written multiple books on web scraping when they launched their company. They were able to grow it quickly thanks to their reputations in the space and extremely detailed content marketing. Colleen Johnson and John Samuelson started ScatterSpoke on the momentum of Colleen's personal brand as an agile consultant and public speaker. She was speaking all over the country, educating developers on the agile methodology, which helped spread the word about ScatterSpoke and gave the tool an added level of celebrity. That said, if you don't already have an audience, I wouldn't invest the time to build one just to launch a SaaS product.

15:52Building an audience can be a great strategy for selling courses and other information products, but it's rarely the highest leverage path for SaaS. If you already have an audience, by all means, factor it in when choosing an idea. Approach number four is to build on your network. If you have a strong network in a specific market, consider limiting yourself to product ideas for that market. It's an advantage you can use to gain early product input when it's most needed, as well as gain access to other people's audiences. This is what Dan Martell did when he launched Clarity.fm. He had such a strong network of startup founders and marketing consultants that he was able to fill one side of his two-sided marketplace with relative ease.

16:29I worked my network as we launched and grew Drip, reaching out to influencers I knew were using tools like MailChimp and Aweber. I had a strong network of founders through my blog, podcast, and microconf, so it was relatively easy to find people who were unhappy with their current email service provider and willing to switch. In fact, many were willing to promote Drip to their audiences, which was an even bigger win. Approach number five is to build a less expensive version of a clunky enterprise competitor. Related to this idea of competing against a hated established competitor, another approach to idea generation is to look at markets where the competition is mostly expensive, clunky, and or focused on enterprise sales.

17:08This often leaves room on the lower end for an upstart like yourself to build a similar, though likely simpler, tool aimed at smaller companies. Xero did this in the accounting space by building web-based bookkeeping software when QuickBooks was still trying to make the change from desktop to the web. Dealforma did this in the biotech M &A and venture funding space by bringing the price of this data into a more accessible price range with great functionality to boot. ScoutDNS made content filtering at the DNS level accessible to smaller organizations and nonprofits by providing a self-serve sign-up process and by taking complex software and making it easier to use, thus removing the need for an enterprise sales process.

17:49Approach number six is to enter a fast-growing ecosystem. One way to gain an advantage is to find a fast-growing ecosystem and build a tool that serves a need that didn't exist a year or two prior. Examples include building premium WordPress themes back in 2008 when ADPNR launched WooThemes, or when Josh Pigford launched BareMetrics as a one-click Stripe analytics tool for subscription businesses. He was late to the analytics space, but early to the Stripe analytics space when he launched in 2013. Another wave leading into 2020 was podcasting, and tools like Squadcast rode the popularity of that ecosystem to fast growth.

18:25The biggest drawback to finding a fast-growing ecosystem is that by the time the growth is obvious, there are usually many competitors. So you have to take a big gamble of launching early and hoping the wave continues to grow at a pace that makes your business sustainable. There's a timing risk here, and it's easy to launch a year too early only to run out of money or not get sufficient traction to keep the lights on. It's frustrating to work on an idea for a couple of years and have to shut it down because there aren't enough people in the ecosystem. Derek Reimer had this experience when he launched Static Kit, a tool for static website builders.

18:57He was betting that static websites would grow quickly, similar to WordPress. But after a year or two with little traction, he sold Static Kit for parts and moved on to his next idea, Savvy Cow. Trying to be early to a space tends to be risky because you're gambling on something you can't control, the expected growth of a market. Approach number seven is to build on an existing product. If you have a product with paying customers, you have a unique advantage over other founders who are just starting out. It's worth your time to determine what other problems you could solve for your existing customer base, whether by observing their behavior or through one-on-one conversations.

19:31Your customer base is an audience who knows, likes, and trusts your brand, which is a nice advantage. But you can take it a step further and glean unique insights from having access to dozens or hundreds of companies that are already using your existing product. They'll likely be willing to have a conversation about how you can help them solve additional problems. Craig Hewitt did this with his Seriously Simple Podcasting, or SSP, WordPress plugin when he built a SaaS product for podcast hosting that integrated seamlessly with SSP, but also worked for podcasts that didn't use WordPress. Ruben Gomez saw users of BidSketch needing more advanced electronic signature functionality and decided to dive headlong into the extremely competitive space with SignWell.

20:13And the eighth and final approach is to look at ways you spend money at your day job. This is a simple yet underused approach. If you've run a business or worked a day job, you've likely been exposed to the large number of subscriptions you're paying for on a monthly basis. For example, task management, issue tracking, email clients, scheduling software. When Derek Reimer sought his next act after moving on from Drip, he made a list of the SaaS subscriptions we paid for while running the company. One of them was Calendly, the handy scheduling link we used for customers to schedule calls with our customer success team.

20:45Looking for a large, proven market where he could use his product chops to innovate, Derek launched SavvyCal and gained quick traction. When Jordan Gall sold his e-commerce business and went looking for his next business idea, he recalled paying monthly for abandoned cart software that emailed customers who filled a cart but didn't check out. The software was bad, but the results, increased sales, were noticeable. Wanting to be close to the money, he started CartHook, abandoned cart software with a better user experience. He later pivoted the company to post-purchase upsells, but not before building a great business on the back of this relatively simple idea.

21:19Can't I simply replicate an existing idea? So replicating is not a bad approach, but if you're bootstrapping, you shouldn't try to compete head-on. If you're replicating an existing ideal, you'll want to have one or more of the following. Number one, a unique focus or position. For example, we are the best X for Y, and using this when everyone else seems to be going after the broader market and no one's niching down. Number two, a unique traffic source, such as ranking high in Google for key terms. Or number three, a lower price. Be careful with this one. A lower price can help you gain traction if you have a real competitive advantage over an established competitor, but if price is all you offer, you'll face higher maintenance costs and higher customer churn.

22:03Without one of the above, you become a commodity fighting against larger competitors with stronger brands, and it will be hard to get people to choose you over your competitors when there's truly no differentiation. You need to give someone a reason to go with a no-name over a brand name. With that said, If I were to start another SaaS, I personally would enter a large competitive space where I could own either a traffic source or a position, and I'd aim for both. But if you're still working on your first success, I would look in small markets where the marketing's a bit less sophisticated and the competition is less fierce.

22:35Per the stair-step method, that allows you to learn in a space where it's not so brutal to gain traction. Well, thanks for joining me as we dove into how to find startup ideas. If you stuck around this long, I think you're going to get a lot out of this book. check it out at ideatotractionbook.com thanks for joining me this week and every week this is Rob Walling signing off from episode 854