Last time I wrote about how to start your startup in 4 steps, and the first step I mention is to “Have an idea”. This can mean becoming serious about an idea you’ve had in the back of your mind, or it could mean experimenting with ways to have more ideas. In this post I want to talk about two types of ideas: “social” and “tools”.
Why we all love social ideas
Whether you’re an aspiring entrepreneur or a seasoned serial entrepreneur, I think it is inevitable that we naturally get excited by the social ideas. Things like Twitter and Facebook have taken off big time, and occupy the media and our attention much more than other ideas. We also tend to spend a lot of our time on these kinds of social platforms, and our ideas are likely to come from places we are already familiar with. I think for that reason, it can be quite easy to have these platforms in mind and discover things we’d like to be able to do on them that we can’t already. Thus, a new social idea is born.
The problem with social ideas
The problem with social ideas is that often even though they may be solving a problem in a novel and useful way, they almost always have the following traits:
- take longer to validate that the problem is something people want
- product/service is not as useful when there are fewer users (network effect)
- revenue usually comes after some kind of “tipping point” which is hard to specify
I was recently reading some great new research with data gathered from 650 startups in the Startup Genome Report, and they have some data which seems to confirm these problems. In the following snippet, “The Social Transformer” is their phrase for social ideas, and “The Automizer” is how they describe “tools”:
Type 1N - The Social Transformer
- need 50% longer than Type 1 (The Automizer) and Type 2 (The Integrator) to reach scale stage
- need more capital than Type 1 (The Automizer) and Type 2 (The Integrator)
Why tools are often the better option
When you’re working on your first real startup venture, you’re often working part-time or even full-time whilst you build your idea on the side. When I had the idea for Buffer six months ago, I was working as a contract web developer for two different clients and as a result I was working five days per week. It is hard to move fast when you have little time, and one of your goals should be to reach a stage where you can work on your idea part-time or full-time.
As a first-time entrepreneur with no track record, if your experience is anything like mine you’re going to struggle to raise funding. Therefore, you’re going to need to bootstrap your idea on the side. Bootstrapping involves generating revenues early and building on top of them. This is where social ideas give you a real disadvantage. Spencer Fry put it very well:
To bootstrap you typically need a single user to be able to benefit from the service without having to connect with anyone else. That’s Carbonmade. A user can sign up and create their own online portfolio without needing other people in the system to benefit from it.
Avoid the “network effect”
I think that’s the key - an idea where a single user can benefit immediately when they sign up. Put simply, “tools”. This is the single biggest difference between the idea of OnePage, my previous startup, and the idea of Buffer. OnePage, with its network effects, constrained me to working part-time for a full year and a half whilst building (little) traction, whereas Buffer, which was useful for people and had payment options from day 1, allowed me to quit my contract work completely within 5 months.
Whilst I think social ideas can be great, my point here is that if you’re starting out and want to be working on your idea full-time in the near future, you are much more likely to achieve that goal by building a tool which people find immediately useful.
Do you have any experience of building “social” or “tool”-based ideas? I’d love to hear from you in the comments!
Photo credit: Kate Gardiner