How do you identify a billion-dollar idea? Many people advise that, if you want to build a successful startup, look for ideas in areas or topics you already know well. Kevin Ryan, AlleyCorp founder and CEO—and a leading internet entrepreneur in New York—disagrees. Hailed by the press as the “Godfather of Silicon Alley,” Ryan has founded multiple billion-dollar tech companies. His portfolio spans diverse industries—including mobile wedding gift registry, online financial news, health care, and self-serve artisan coffee. Ryan stands as proof that deep knowledge about a topic isn’t necessary to identify a big idea and build a successful business. How does he continually identify such highly lucrative ideas, in areas where he lacks expertise? In an interview with Shikhar Ghosh, Ryan shares quick tips on how to identify a big idea and the process he follows from finding an idea to building a successful business.
How Do You Identify a Big Idea? Kevin Ryan Shares Tips for Success
- Be Observant—Look for Inefficiencies and Problems Every Day
- Take Time to Define the Problem
- Identify the Right People
Expand Your Thinking
Over two decades ago, Ryan had an idea for DoubleClick, a company that developed and provided Internet ad services. It went public and then sold to Google for $3.1 billion. Other ventures he founded as part of AlleyCorp—including MongoDB, a cross-platform document-oriented database program, and Gilt Groupe, an online shopping site—were each valued at over $1 billion. Aside from their striking financial success and founder, the businesses have little in common. Ryan candidly confesses, “I really have no focus whatsoever. Mongo’s a technology company. I’ve had ad technology companies, like DoubleClick, e-Commerce companies like Gilt, media companies like Business Insider, and health companies like Spring Health. So I really look at a wide variety of different topics.”
I actually like starting a company in a new area because—just intellectually—I find it very interesting to tackle a new problem. And I think sometimes people coming from slightly outside have a more interesting and original perspective.
Expansive thinking has some limits, he clarifies. “There are many things I don’t do if I don’t understand them,” like deep science and deep technology. Plus, he emphasizes, the importance of strategically partnering with others, who he brings on as co-founders, who do have deep knowledge.
Be Observant—Look for Inefficiencies Every Day
Many people become entrepreneurs because they want to solve a particular problem. Advising hundreds of MBS students, Ghosh observes, “they organize the resources, the systems, and the people in order to address that problem.” Ryan approaches it differently. In 2007, Ryan co-founded Business Insider, which within a few years amassed over 5.4 million unique visitors and a multi-million dollar valuation before being acquired. Was Ryan well-versed in journalism or news reporting? No. The idea came to him after he observed systemic inefficiencies in timely access to business news.
Look for Inefficiencies
At the time, the primary business sites were part of major publications—Business Week, Fortune, Forbes, the Wall Street Journal. Ryan recalls, “they hardly updated their site during the day” because they wanted readers “to buy the newspaper or the magazine the next morning. They weren’t worried about speed. So it wasn’t providing what I wanted during the day.” Additionally, content produced on each site was proprietary. To have a full picture of all business news required visiting multiple sites. “If there was a good piece that showed up on Business Week, I would never see it on Fortune. Fortune only published articles by Fortune people. So it meant I missed 80% of what was going on.”
The inefficiency he observed led him to an idea to create an online financial and business news site—a space that provided all relevant business news in a timely manner, in one location.
Think about Other Products in Different Ways
Ideas come to Ryan readily and some might see that as pure luck. He believes, “the truth is people don’t spend as much time as I do.” Every day he scans his environment, searching for possible ideas. If he learns about a company launching a great shoe brand, he instantly thinks, “That’s really successful. Is someone doing that for socks? Is someone doing that for shirts? Should that be done somewhere else?” He spends his life thinking about—and being receptive to—new ideas.
If I’m in a new country and I see something, I think, “That’s interesting. I’ve never seen that in the United States. Would that work here?” I think tangentially in many different ways. Sometimes I come up with something and sometimes I don’t.
Pay Attention to Trends
In addition to noting inefficiencies and getting inspiration from existing products, Ryan pays attention to fundamental social trends, like healthy eating, automation in restaurants, or even the gig economy. He elaborates, “If I bet that’s going to continue for 20 years, the market’s going to grow by 5X.” He asks himself, “What will exist that doesn’t exist today?”
One exercise I do is list 20 ideas on the board of trends that I believe are going to exist for 10 years. And then, what are the implications that come out of that?
For instance, if the gig economy continues to grow, he thinks about services those workers will need. “Who will do the payroll taxes and insurance for these people? Is there a newsletter for them?” Sometimes, he generates big ideas by asking and answering those types of questions.
Define the Problem
Whether he’s investigating an idea about the lack of designer clothing options for plus-size women—an idea he turned into the online marketplace CoEdition—or building better databases for the Cloud, Ryan stresses the importance of clearly defining the problem.
Can You Make a Product for Less Money?
Many of his businesses grew from problems he encountered personally. Often, Ryan looks at expensive products or services—pain points for many—for areas that could be improved. While running DoubleClick he encountered database challenges. “Every technology company knows that the problem of scaling is the database. It’s getting more and more complicated and everyone knew that at the time, buying an Oracle database was incredibly expensive.”
It was really expensive. Anytime I see that, I think there must be an opportunity we can make it better and cheaper.
Note the Limitations of Current Products or Services You Use
Stumped for an idea? You’re not alone. Anecdotally, Ryan has observed that most people get ideas from other companies or products they use. After founding Gilt Groupe, he saw the limited options for plus size clothing available to women. He shares, “Our brands who would say, ‘We don’t want to create plus size clothing. We don’t want women who have plus size wearing our brands.’ But of course, a third of the country is plus size. So I think there’s an opportunity there.”
You’re working at a company and you notice, “No one is addressing X marketplace. It’s an underserved market and now I understand this industry. I see the pain points. Or, “I see that no one’s providing X and this problem exists in hundreds of other companies.” Start with that.
Identify a Big Idea through Differentiation
Ryan notes that one of the biggest ways he can identify a big idea that will turn into a lucrative business is by clearly differentiating his product or service. There has to be some compelling reason, why people will choose your product over others. How does he differentiate? One key way is to focus on the right people—not only targeting the right customers but building a strong founding team.
Identify the Right People
Many founders know to test their idea. But how do you identify a big idea—one you can turn into a business that will do $100 million or $200 million in revenue? Ryan stresses the importance of talking to customers. “I need to understand, for example, in Zola, what do brides feel about their last wedding experience? What went well? What didn’t go well? What are the gift-givers feeling about it?” At the same time, he examines the pain points from the opposite perspective. “I talk to the vendors to see if they care about something or can influence something.
I talk to enough people that I feel like I have an understanding of the dynamics.
Understand Pain Points
How many interviews do you need to conduct? There’s no magic number. “I need to do enough,” Ryan adds, “so that I’m not learning anymore.” Usually, that happens around a dozen of interviews. At that point, when “everything you tell me I’ve already heard,” he stops and begins to conceive of potential solutions for the problem.
While he recommends talking to a variety of people, at times you’ll want to go deeper into one particular group. Zola, for instance, targets “a slightly upper-income group.” When you have a smaller target audience, Ryan stresses, make sure you understand that customer group. “I understand the pain points. And I have something in my mind that can solve it.” But he also advises, “make sure the customer base is big enough.” Once he identifies a big idea, what’s the next step?
From Big Idea to Business—Your Founding Team Makes the Difference
Ryan has a knack for identifying big ideas all around him. He underscores that the idea is essentially a commodity. Without the right founding team, the idea might not materialize into a huge success. Once he has an idea for a company and decided to pursue it, he looks for two things, “One is that someone whose background fits the most important aspect of this company–which is generally going to be product, broadly defined.” Referring to Business Insider, he modestly assesses, “I had the idea. But the idea was very simple. It’s a business site. I couldn’t have done Business Insider without someone like Henry Blodget“—the veteran journalist he hired as his co-founder. After identifying a potentially big idea, Ryan prioritizes two things: first, he answers: “what core skill is most critical for the company?” Then he searches for co-founders who possess the core skill.
In addition to requiring expertise, the second thing Ryan looks for is personality and leadership. He elaborates, “in a competitive environment where everyone can work at 20 other places, this has to be a CEO people want to work for.” He advises asking a series of questions of colleagues and former staff, like, “Did people in general like this person? Did they respect this person? Would you want to work for the person again?”
He shares, “With Mongo, it would be technology. Biz Insider it would be journalism. In Zola, it would be product. Ideally, I want the CEO to come from that background.” Read more about Ryan’s insights on hiring an outside CEO and building a team and visit our recruiting and retention section to get practical advice from leading entrepreneurs on building a strong team.
Overall, the steps Ryan takes to identify a big idea seem straightforward. But they take time. Sometimes, he confesses, “I think, ‘Wow, this is a pain point but I don’t know how to solve it or it’s too hard.’ Or ‘the existing players are going to prevent me because there’s an oligopoly and I can’t break through that and so I don’t want to do it.'” That doesn’t mean you need to abandon an idea. Write it down and save it for a later date. It may take you five years to turn your idea into a profitable business idea. But, he encourages, “when you have it and you feel passionate about it then you should go do it.”
After identifying a potentially big idea, Ryan prioritizes 2 things:
- Define the core skills most critical for the company to succeed.
- Search for others who embody those core skills to build your founding team.
In “5 Steps to Finding Your Next Big Idea from Spanx’s Sara Blakely,” Reid Hoffman shares his theory, “There’s only one way to find your big idea: Look for it. Look for it. Look for it. And then act.” The post summarizes a conversation with Blakely on Masters of Scale. Blakely offers advice based on her experience building Spanx from a small idea. Her steps, “Clearly Define Your Purpose,” “Always Be On the Hunt for Your Big Idea,” “Put Yourself in Situations Where Inspiration Is Most Likely to Strike,” “Once You Find Your Big Idea, Pursue It,” and “Find Help in the Right Places,” reinforce Ryan’s tips.
In “How to Get Startup Ideas,” Y Combinator co-founder Paul Graham, lists three traits good ideas have in common: 1)”something the founders themselves want,” 2) it’s an idea “they themselves can build,” and 3) it’s an idea “that few others realize are worth doing.” He underscores the importance of defining the problem: “By far the most common mistake startups make is to solve problems no one has.”
In “How to Find the Right Startup Idea,” Foundr.com suggests that one way to identify a good idea is to “implement strategic foresight” that “looks into the past for recurring trends which apply to the future. The goal is to take all the information available in the present and actively implement strategies to shape and inform the future you want.” The author, Jonathan Chan explores how companies like Indiegogo and Remind found their big ideas.