Accelerating Startups: Problems

Part 1: Why start a startup with a problem?

Why read this.

Its never been easier to start a startup — but its also never been harder to build and grow a startup.

A foundational principle of starting, building and growing a startup is addressing a particular problem.

In part 1 of this series — Accelerating Startups, you will learn three fundamental things about starting with a problem:

  1. Why start with a problem

  2. Three ways you should think about a problem

  3. How to create a problem statement

This is aimed at idea-stage and early seed-stage startups. And corporate teams and startup communities supporting them.

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Why start with a problem?

What do tech companies like Uber, Airbnb, Google, and Facebook have in common?

It's not just that they are all American-founded multi-billion-dollar tech companies. It's also they all began simply by trying to address a problem:

  • Uber, aimed to address the problem of inefficiencies getting from one part of your city to another.

  • Airbnb, the problem finding somewhere to stay and do things when you travel that is more to your unique tastes.

  • Google, the problem with finding the information you need at the very moment you need it.

  • Facebook, the problem of knowing more about what's happening in the lives of people they know and meet. And staying connected to them.

Many of us have great ideas that can seem like that big idea we've been waiting for. Or waiting for a big money-making idea to fall out of the sky. But the truth is great innovators and entrepreneurs rarely start with an idea.

They more often start with a problem. The best ones start with a big one.

The bigger the problem — or the more people who have a problem the bigger the opportunity. And the bigger the potential upside reward for addressing it:

  • Hundred’s of thousands of people also had inefficiencies getting from one part of their city to another — Uber was rewarded for addressing it.

  • Millions of people didn’t have a way of finding somewhere to stay that was unique to them (as an alternative to standard hotels) when they travelled — Airbnb was rewarded for addressing it.

  • Billions of people needed an easier way to find the information they needed at the moment they needed it via the web — Google was hugely rewarded for addressing it.

  • And billions of people wanted to stay connected to others they know (and don’t know) — Facebook was hugely rewarded for addressing it.

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The truth is great innovators and entrepreneurs rarely start with an idea. They more often start with a problem.

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How to think about a problem:

Experience.

As mentioned, great innovators start with a problem.

However, to be more specific, they start by having some kind of experience of a problem. Or understanding a problem others have and thinking about how they might solve it.

It's often said that if you can find a problem a lot of people have, there's a great business waiting to be built around it. But if you can find a big problem there's an even bigger business waiting to be built.

You too may have had some kind of experience in life: working in a particular industry, or living in a part of the world. And experienced some kind of problem as a result.

Maybe something that frustrates you, over and over, over a period of time. Maybe you’ve observed up close how a particular problem affects others.

Think for a moment about what these problems might be.

Validation.

Secondly, you need to look for ways to validate this problem. So sure, you may have this problem but do other people experience this problem the same way, or similar to the way you do?

Talk to other people about it. Initially, those you think may experience this problem too. And then find out more by doing some online research.

At this point you're not trying to find what might solve the problem, you're simply trying to understand other people’s experiences of this problem.

Impact.

Third, have a think about the impact of this problem. Both good and bad.

What might the positive impact be if this problem were solved? And what might the negative impact be over a period of time if this problem were not solved?

What might the impact be on people, families, communities, businesses, cities, or regions of the world?

Whomever this problem affects, think about how their experience of the problem might get significantly worse over time if the problem you’re thinking about was not solved.  

Essentially, you should think about and show the problem in 3 ways:

  • Historic: your past experience of it.

  • Current: other people's experience with this problem today.

  • Future: the future impact of this problem if left unaddressed.

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If you can find a problem a lot of people have, there’s a great business waiting to be built around it.

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WeFarm.

A great example of this is a startup that joined our Telefonica tech accelerator programme, Wayra, back around 2015 — called WeFarm.

The founder, Kenny, spent a lot of time in Latin America, developing sustainability projects. And through this work, he understood more about the lives of farmers.

And learned some very interesting things about many of the challenges and problems you might imagine small-scale formers have, managing their farms.

He realised that a majority of the time, it was other small farmers that could help solve another farmers problem. If only they had an effective and efficient way to communicate with each other. Especially if the problem was time-critical.   

And here's an added challenge: they had to be able to communicate offline. Because many of them lived and worked in areas without an internet connection: specific areas of Uganda or Kenya, or other parts of rural Africa. Or they didn't use phones with internet access.

So Kenny and his team developed a solution which began as a simple text messaging service. Connecting farmers who could ask a simple question to a problem they had and receive an answer for free from another farmer, who had the solution to it — within moments.

All by using text messaging.

Now, you can imagine the impact that some of these problems might have if a farmer doesn't have a way to deal with them. The impact that might have on that farmer's livelihood, his family — economically, his neighbouring farmers, and even their wider community. 

Fast forward to today, and WeFarm has grown to one of the world's largest platforms for small-scale farmers. With more than 2 million farmers and over 350 million messages shared between them. And in 2019, the team raised $13 million (£9.5m) series A round investment to continue growing their community of small farmers. 

The point is, not only did the founder have experience of the problem from working in a part of the world where it affected others, but he also then spent the time validating his hypothesis of the problem. And then understanding the impact of the problem on others if it wasn't addressed.

The impact on the farmers, their families and livelihoods, and even economically on entire regions of the world where a lack of access to a basic resource such as information would have a devastating impact over the long term.

Problem statements.

Therefore, crafting a problem statement for your startup should be made up of these same 3 key factors. No matter how short your problem statement:

  1. Historic experience

  2. Current day validation

  3. Future potential impact

These 3 key factors demonstrate something hugely valuable about how you understand the problem you’re aiming to address in building a startup:

  • You have a unique experience of the problem

  • You understand how big the problem is for others

  • You understand why it should be addressed

Here are a few examples to help you understand this better and how each factor works together in a problem statement:

Statement 1.

We worked in food retail for 8 years. Nearly 40 per cent of all food we buy is thrown away. Yet food poverty is growing by 1 per cent on average each year.

Statement 2.

We worked at law firms for 9 years. 80 per cent of people find acquiring legal services confusing and expensive. Leading to less trust, and financial strain.

Statement 3.

We’ve been AI developers for 7 years. Only 2 in 10 companies have a strategy for an AI future. It’s predicted 50 million companies will die by 2030 as a result.

You see how each problem statement captures the 3 key factors of a problem in a concise, concrete, and measurable way. Each one demonstrates that:

  • You have the experience to understand the problem in a unique way.

  • You have an understanding of how big the problem is for others.

  • You have the foresight to see how this problem will likely worsen in future, and why it needs to be addressed now.

Conclusion.

So don't think so much about the idea. Start with the problem. A problem you have some kind of experience of. Or one that you’ve observed others have.

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Ideas are common. But understanding how a problem affects others comes from experience. Which is rare. And that is your starting point.

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Again, how might you validate this problem? Who can you talk to? And what data or research can you find?

Remember at this point you’re not trying to find a solution. You’re simply trying to establish that other people experience this problem too. And ideally, a lot of people.

And finally, think about the impact of this problem. Both the good and the bad. The positive impact if it were solved. And the negative impact if this problem was not solved.

Actions.

Action 1: Think about the experiences you’ve had in your life. Places you've worked, the places you've travelled, people you’ve met. What problems have you experienced that you know others have also?

Write them all down. Focus more about the problems you understand best.

Action 2: Write a plan to talk to other people — as many as you know and can connect with — who might also experience this problem. 

Again, at this point you're not trying to find the solution to that problem, you're just trying to understand more about the problem and people’s experience of it.

The solution comes later.

Do some online research to find any data you can on this problem. Facts and figures to back up your hypothesis. See if you can find any research already done on this problem that you can use to help validate it.

Action 3: Share this with your team (if you’re part of a team) and discuss how the problem you're working on together follows this way of thinking. 

For early-stage startup founders pitching for investment, always take a little time to explain your experience, your validation, and the potential future impact of the problem you're aiming to address. This helps investors and accelerator managers understand an important decision-making factor — your founder-fit. 

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In a world of ideas, the world rewards those who solve problems. But in a world full of big problems, the world rewards, even more, those who build solutions.

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So just like 3 guys wanting to solve problems for travellers by opening other peoples homes. Or another guy wanting to solve problems for farmers around the world — you never know the big problem that you too may discover, that your product may address.

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