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The first question most often asked when building a startup is “What will the startup do?”. My scientific guess is the first answer that comes to 97.8319672% of the entrepreneurial population relates to social networking. Don’t believe me? Head over to CrunchBase companies advanced search and search for “social networking”. Note the number of pages at the bottom of the search results. Now try searching for “waste”.

People are like lemmings. We tend to follow the hottest trends. How many of you bought the gladiator style sandals after watching Sex and The City? How many of you bought the new iPhone 3G? Like the gladiator sandals and the iPhone, social networking is the hottest trend in the startup world thanks to Facebook, MySpace, YourSpace, MyMa’sSpace and what have you. Starting a social networking site when social networking was still at its infancy was a great idea when Facebook and MySpace took on the challenge. The problem with starting another one now is you have so much competition. This leads to my definition of a startup idea.

What Is a Startup Idea?

Everyone can think of some pretty good ideas. But not all good ideas can be monetized. A startup idea is an idea that creates value that people want. I know, the definition is boring and simple. There’s nothing cool or hot about it. But the fact is, a startup idea doesn’t necessarily have to be cool, novel or even (gasp!) trendy. A social networking site for startups might be cool. But you will need tons of money to burn through to achieve critical mass and you will face tons of competition. A car with no wheels might be novel. But you are venturing into uncharted territory where no market exists. It’s a tremendous uphill battle. But a website that tells you where to buy the cheapest organic, non-fat milk in your area might be one that busy moms will pay for.

Because 99.99999% of entrepreneurs start a startup to make money, it is only logical to think about how you can monetize your idea from the beginning. There are two ways to make boatloads of money starting a startup. The traditional way is to aim for profitability and stay profitable for as long as you can. The second is to design an exit strategy that will persuade investors to write you a check the size of a mega-lotto lottery and retire on the white sands of the Maldives. Many times the first method leads to the second. If you think about it, investors tend to shy away from companies that don’t generate revenues. It makes sense because revenue is the best proof that there is demand for your product. Yes, YouTube did it and made billions. Akimbo didn’t. For every YouTube, there are many more Akimbos we have never heard of. Many entrepreneurs make the fatal mistake of ignoring the monetization of their ideas until it is too late.

Coming Up with Ideas

So, now we know that a good startup idea is also an idea that can be monetized, how do we come up with such an idea? There are many ways to come up with ideas. I have found the following methods most effective from my own experience.

Sit and Think

I find it hard to come up with ideas while talking to people. When you are engaged in a conversation, you are focused on responding to your partner. Your mind is not allowed to wander too far. If you do, your partner may think you are nuts. So, I think it is best to find some alone time to generate ideas. Let your mind wander freely. I will talk more about sources of ideas in a bit. Once you have come up with an idea, it’s time to engage your partner so you can talk about it. Present your case and let your partner tear it into shreds. Then both you and your partner should go back and refine and ask your partner out for coffee so you can both go at it again. Eventually, you will find one that both of you are sold on.

Take a Shower

No, not the kind you have in mind. Taking a shower is relaxing. It is one of the most private times you have to yourself throughout the day. No one will interrupt you with a phone call or a conversation. You have the opportunity to day dream. This is where I came up with most of my ideas. You let your mind wander freely. You begin to imagine some of the most outrageous what-if questions to solve problems that bother you the most. And then the light bulb in your head came on. In your excitement, you ran out of the shower looking for your partner to tell him about your next killer startup idea only to find that you forgot your towel. Embarrassing yet enlightening. But it’s true. If you have an entrepreneur’s block, go jump in the shower. It will do you and people around you wonders.

By Accident

In 1666, while meandering through a garden in Lincolnshire, Newton observed an apple falling from the tree to the ground. From this, he questioned whether the gravity could extend beyond the Earth to the Moon. Thus, universal gravitation was discovered. For us mere mortals, it’s unlikely we could discover something as profound as universal gravitation. But if we begin to ask questions that challenge existing boundaries of current solutions, we may well find ourselves an idea for a startup. Of course, by definition, an accident is an unforeseen incident. We can’t position ourselves in the path of an accident. Since this is not really a method and more of a happenstance, we can only prepare ourselves for it. The next time you observe something as mundane as having to remember to park your car on the other side of the street because there is a street sweep tomorrow, think about how you can help fix that problem.

Sources of ideas

After exploring the three methods of coming up with ideas, let’s explore where we can find sources of ideas.

Existing Annoyances

Men are the greatest adapters. We filter out minor annoyances and forget about them. In reality, there are hundreds of little annoyances that could make our lives a lot better had we had solutions for them. But since we don’t recognize them as annoyances to begin with, they become just another mundane incident in our daily lives. So, to seize the opportunities offered by these incidents, we need to constantly remind ourselves to focus on the little annoyances that aggravate us. Lower our threshold of tolerance and stop accepting things as they are. Demand a better solution. Post-it notes were discovered when Art Fry was frustrated that his bookmarks kept falling out of his hymnal in his church choir. So he took Spencer Silver’s low-stickiness glue and applied it to his bookmarks.

Reading

You can’t conceive ideas in areas of which you have no knowledge. For instance, I can’t even begin to imagine how synthetic blood can help speed recovery of injured athletes and save lives. Reading widens your sphere of knowledge and therefore your sources of ideas. People tend to have multiple interests. You may enjoy coding. But perhaps the euphoria you experienced from sipping a glass of 1995 Chateau Margaux last weekend turned you onto wines. To deepen your knowledge in your new-found passion, you began burying yourself in any book you can find about wine. Then it dawned on you that not many people understand great collectible wines. But thanks to your coding wizardry, you figured an algorithm that could predict the kind of wine a person would enjoy given his age, tastes, the music he listens to, the car he drives and even the hotels he chooses to stay in. (Don’t ask me how.) There are probably many people who are great programmers and many who are fine wine connoisseurs. But I bet you there are only a handful who are both.

Transfer a Working Idea to a Different Field

This last source of ideas is quite effective. It is, in fact, somewhat related to the aforementioned intersection of knowledge in different fields. You start by observing an idea that is working especially well in a field. You then begin asking questions such as “Could this also work with bookstores?” A good example here is perhaps Elance. I don’t know how the idea of Elance originated. eBay was founded in 1995. Four years later Elance was founded. If I were to come up with an idea like Elance, I would have noted how well eBay worked. And since I build websites, I would have wondered “Could this auction system also work for web development services?”

Most of the content here is a result of what I learned from reading Paul Graham’s insightful essays. If you would like to learn more about finding ideas for startups, I highly recommend Paul’s Ideas for Startups.