I am glad that my previous blog post Sorry, your “cool” webapp is probably not going to make money received good response and generated a lot of debate. What I discussed in that blog post was that most of the so called startups or webapps which are based on “game-changing” or “cool” ideas never end up making any money. So, if your aim is to make money, pursuing such ideas can be risky. While idea-driven startups rarely make money, I professed market-driven approach for someone looking to find startup ideas that actually make money.

Market-driven approach to finding startup ideas that make money

The market-driven approach is quite simple. It essentially means:

Find a startup idea that: a) is already making money for someone else in a growing industry; b) interests you; c) aligns with your skill sets. Once you find such an idea, simply carve out a niche within the industry by a) addressing pains of an under-served segment within that industry; b) or, making it much easier to use than existing solutions; c) or, disrupting the market by making your product accessible to masses at a much affordable price. And once you dominate a particular niche, expand from your niche with your eyes set on the largest player in the market.

There is a lot going on here, so let’s break it up.

Finding a startup idea

For most entrepreneurs, this is perhaps the most difficult phase of initiation. I have known people who would wait for years for that golden startup idea to strike. Truth is: even if you wait for years, startup ideas that are born out of vacuum almost never work. As Steve Blank says, no business survives first contact with the customer. So, why not skip the whole idea-game altogether and simply go ahead with ideas that other people have tried-and-tested? This is what market-driven approach is all about. Pick a growing market and simply make a better product.

Here are some essential ingredients of a market-driven startup idea:

• Growing industry: this is important because a rising tide lifts all boats. Also, a growing industry means that most probably a strong leader is yet to be established and the field is open for many new players, one of whom could be you. How to find industries that are growing? One good resource is Inc’s 5000 fastest growing companies list. In that list you can find companies that are growing at >1000% every year for last 3 years and have revenues in millions of dollars. If they can do it, why can’t you?
• Industry that interests you: aim is to not just make money but have fun on the way, right? Hence, it is important to pick a startup idea in an industry that appeals you. Even though eCommerce industry for ladies bags and purses might be growing, if you don’t see yourself passionate about it, don’t pick it!
• Industry where you have a chance: it is bit obvious, but there are a lot of things in life that appeal us but we’ve got no chance (for geeks: most obvious example is dating a hot lady!). For example, it goes without saying that even if machine vision industry is growing and people are making money licensing such technology, if it requires a PhD and you don’t have it, probably it is not worthwhile to pursue an idea in that industry.

The key idea here is to find an industry (like SEO, document management, enterprise productivity, eCommerce for travel, etc.) where you know people are making money. Inc 5000, Mixergy interviews and Flippa.com are just some of the sources where companies reveal how much money they are making. Make a list of industries that make money for other people, appeal to you and are relevant to your skill set. Finally select any one of them (though in most cases you will end up with only 1 or 2 i which satisfy all three criteria). Don’t be ashamed of this activity as we are not “copying” business ideas, we are simply using information to select which industry should your startup should belong to.

But there are competitors in an established market!

That’s precisely the key to this approach. Lack of competitors in the market is serious indicator that nobody has found it profitable. So, you would want to pick a startup idea which has competitors. In addition to signalling that a market is profitable, competition also helps in positioning your startup. When you are new, nobody understands your offering and frankly nobody has time and patience to understand it. They are simply too busy to digest an entirely new idea or product offering. However, when you position it against established competition, you instantly have their attention and they instantly understand the differentiation. Now customers don’t have to understand new concepts, they simply understand what’s so different about you.

This strategy of positioning against established competition is very powerful. That’s why when cars were invented, they were first called horseless carriages. And that’s why I have positioned my startup Visual Website Optimizer as a much easier alternative to Google Website Optimizer with all features of Omniture Test and Target. (You may not understand the positioning but my target market of people who do A/B testing day in and day out would instantly get it.)

Even with all the benefits, many entrepreneurs still fear established competition. In previous step, once you pick an industry that you would want to start with, find a niche which you can dominate initially. It is important to become a leader in at least one aspect of your industry. That aspect can be:

• Serving an under-served segment. Imagine you picked SEO as an industry, next step is to do research (hint: talking to people works best, but probably I will address this in next blog post) on what are the current pain points that are not addressed by existing solutions (including market leading). It may be the case that only a small segment is unhappy, but in a growing market even that small segment can be pretty large (in terms of revenue potential) for a startup. So, for example, you find that marketing agencies want a whitelabeled solution for their clients, there you have a startup idea: Whitelabeled SEO tools for agencies. Similarly, if it is document management, you may find that most solutions are so generic that a specific subset of market like accountants are craving for much better management of Excel spreadsheets. So, there you have another startup idea: document management for accountants and financial planners. (Warning: the two startup ideas above may or may not work. They are figment of my imagination with no market research!)
• Another differentiator of your idea could be usability and ease of use. Most likely, customers in any industry are fed up with existing, bloated solutions with hard to use interfaces. Simply pick an industry and make it drop-dead easy to use. People usually drastically under-estimate how big advantage ease-of-use can be for a startup. However, simply look at some examples. File sharing existed before Dropbox. Social networking existed before Facebook. A/B testing existed before (my) Visual Website Optimizer. What all of these products did was to dramatically simplify the key activity in an industry. You can do the same. Taking example of SEO, make a product that makes it no brainer to generate new content and build backlinks for it. Make it so simple that even a 5th grader can do it and you have a winner.
• Disrupt an industry with a lower (entry) price point. If your industry is growing and existing solutions are exorbitantly priced, there may be an opportunity to build a product as great as leading one in the market and simply provide it a dramatically lower price. Salesforce revolutionized CRM by offering their product for $10/user/month while leading CRM solutions at that point were costing tens of thousands of dollars.

Key point here is that it is important to carve out a niche that you can dominate with your startup in order to get noticed in a growing industry and get initial set of customers.

So, is this the end of my startup story?

No! In fact, this is just the beginning. Niche domination is not the aim. Industry domination is the aim. Visual Website Optimizer doesn’t only want to be the easiest A/B testing out there. In fact, aim is to be leading A/B testing tool out there. It’s going to be hard but not impossible. Idea is to expand feature-set horizontally and gain prominence outside of your niche slowly and steadily. Eventually, you should replace industry leader and in fact become a source of market-driven ideas for other startups. (I know, how meta)

Industry leading companies are run by people similar to you and they probably followed the path your startup is going to follow. So, there is no question that you cannot be an industry leader someday. It is a nice feeling to be a niche dominator, but don’t feel satisfied with it. Always set eyes on the industry leadership position! That’s where the big bucks are.

February was a great month for my startup (Visual Website Optimizer). All metrics that you can care about worked in our favo. Increase in number of customers, revenues, users (and yes, Twitter followers too). We also hired our first employee and are looking forward to hiring 2 more. (Please apply if you are in Delhi and someone you know is in Delhi and wants to work with us).

If everything seems great, why do I call this an emotional roller coaster? Well, that’s because just like a real roller coaster there is always a lingering fear that we may not be in existence 12 months down the line. When established companies such as MySpace with hundreds of employees face uncertainty, how can our small team afford to be complacent.

In a single day, we get to see so many emotions. Consider my typical work day:

• Wake up at 10 am (read below why I wake up at 10 am, we work from India during US hours since most of our customers are in US and UK). Check emails for an hour or so.
• Worst feeling ever: 2 customers want to cancel accounts. One says they will resume account in 3 months after they revamp their website. Other says we are bit expensive. Sh*t, if customers keep cancelling accounts we will be out of business soon!.
• Best feeling ever: wuhuu!! Smashing Mag tweeted about our new case study, 30 new trial signups and 4 trial users upgraded last night. Wow, one of them chose our $729/month enterprise plan. Life couldn’t be better.
• Eat breakfast, dress up and reach office about 12:30 pm
• Reality kicks in: duh, 15 new support emails to reply. Think: how can we reduce ever growing support load so we can focus on product. Team and me gets to work on solving support.
• Clear up inbox by 2 pm. Bored, what to do next?
• Open todo list and see pending tasks. OK, so today I need to write a new case study on our blog, write a guest post for another blog, design a feedback survey and write a newsletter. Phew! that’s a lot of work for today.
• It’s OK to procrastinate a bit. Before diving into work, open Hacker News. 30 minutes pass in a blink of an eye.
• Real work: write case study and publish it (1 hour). Write a newsletter and send it using Mailchimp (30 minutes)
• 5 pm: time for lunch. The team hangs out at one of the restaurants nearby. Wonder why don’t they change menu. God knows I am sick of eating Dal-Roti Thali (Noth Indian) or Noodles (Chinese) or Idli-Vada (South Indian).
• Back from lunch: life is bad, 2 people flagged newsletter as spam (we are not spammers. we follow don’t be evil and newsletter was informative and, heck, had a clear Unsubscribe button.). Life is also good, the case study published today got 50 retweets with 150 visitors on the website right now!
• 5:30 pm have evening tea and see calendar for appointments today.
• OK great, have two one hour long demos on Webex. One with a Fortune 500 company, another with a web agency. Meanwhile, more mails in inbox. Clearing up inbox takes time.
• 6:30 pm: phew, time for business strategy and product planning. We need to hire more perople, think how to find hackers / programmers in Delhi? Fire a few emails for job postings. We need to introduce a new feature: behavioral targeting. Discuss with team, draft a plan, set timelines. What about our SEO, analytics and A/B tests? Fire up Google Analytics and Visual Website Optimizer. Check how we are doing on different fronts. How are we doing on paid traffic front? Fire up Adwords and Facebook Ads and see performance of campaigns. We are losing money on Adwords! Pause them for a while.
• It is 8:30 pm already and I have a demo at 9 pm (about 11 am EST)! Rush to home.
• At home, it is 9 pm so I give 1 hour long demo to Fortune 500 company via webex. They are impressed and may sign up soon. Holy smokes, thank god.
• 10 pm: have dinner in a rush. OMG, have a demo at 10:30 pm too! How can I forget it?
• It is 10:30 pm – another 1 hour long demo via webex. Think: why can’t these guys simply watch a video or signup for free 30 day trial. Visual Website Optimizer is pretty straightforward so why do they need a demo. Anyway, demo over. They say they will signup for $49/month. Duh, should I feel happy?
• 11:30 pm – chat with the team. They inform that today our servers broke records and are doing a peak performance of 730 requests per second. OMG, need to add one more server ASAP. Sparsh (our CTO) purchases a new server from Linode and configures it. It is ready to be deployed. Work with the team for the whole time to ensure there is no downtime. It’s 1 am already. The new server is up and ready. Phew, life is good! Our servers are processing more than 1 billion pageviews per month. A momentary feeling of pride.
• 1 am: more mails. People want to schedule demos, feature requests, billing questions, advice on what to test, partnerships, discounts and special offers.
• 2 am: time for some entertainment. Check Hacker News, Oatmeal, read a book and watch some funny videos / TV shows.
• 2:30 am – sleep! (Still having some nagging feelings: will our revenue increase next month? how can we increase active usage?)
• 2:30 am to 10 am: get new product and feature ideas in dreams (just joking! barring a few days when a US customer calls at an odd Indian hour, I usually sleep well)

Needless to say, even a single day in startup life is a roller coaster ride.

Let’s face it: many of us are addicted to Facebook. It has all our friends, apps, games, instant chat, groups and what not. In fact, for the younger generation, it is the first (and only website) they visit in a day. I know several people for whom the world revolves around Facebook. They don’t check email as often they check Facebook. And some don’t check email for weeks as all their communication needs are served by Facebook. However, even those people need to visit Google every now and then to search what they are looking for.

What if Facebook incorporates a search engine within its interface?

Now that would be killer feature. Facebook becomes your start page and you no longer need to go outside Facebook to do your search and the website truly consolidates all activities an average Internet user needs to do on day to day basis. Financially, it makes sense for Facebook to go the search engine route because in current form Facebook ads don’t perform that well for advertisers. That’s because currently users on Facebook are in socializing mood and thus don’t tend to click on ads and buy stuff. However, that will change with Facebook search engine because users will then be in search/buy mode and just like Google, Facebook can serve contextual ads.

I think Facebook has a decent chance in developing a better search engine than Google because it will be able to customize search results according to users likes and wants. Google doesn’t have as much insight into my personal life as Facebook has. If Facebook doesn’t want to develop a search engine from the scratch, may be it can license search technology from Bing and just customize search results for the user.

All in all, Facebook search engine looks like a killer idea to me. Is anyone at Facebook listening?

Sorry for crushing your dreams but your web app for tracking happiness levels (or for “social-aware” todo lists) is probably not going to make enough money to let you retire in Hawaii. Many programmers and web developers find making a web app very satisfying and there is nothing wrong with that. As long as you are doing it for fun, it is OK. But making web apps is the trivial part. After all, most web apps are nothing more than a slick interface for CRUD operations. The key to making money is to find a market where people are willing to pay for those simple CRUD operations.

The usual approach for making web apps (or “startup” as some would like to call it) is this:

• Have a “cool” idea
• Implement it in X number of hours
• Try to justify its need by finding users who may use it

I am just making up a statistic here, but I have seen 9/10 efforts losing hope after the third step and the web app just languishes with the creator given up on it after initial euphoria.

That is a wrong approach.

If making money is the objective, I suggest going with the market-first approach (as opposed to idea-first approach). If you are confident that you will be able to make a good enough product/prototype, I suggest taking the following approach:

• Find an industry (ideally, an old fashioned one) where people are making money
• Find the single differentiator which will put your app apart in the already established industry (read or research what pain points are still not addressed by top 3 solutions)
• Make a web app, market it, refine it based on feedback, monetize the app
• Slowly incorporate all standard features expected out of a solution in that industry so you can shoot to be a market leader

Note that I never talked about the idea here. That’s because I believe in market-first approach. Any sufficiently big market will give you tons of interesting ideas. Why do you need to come up one of your own?

As far as finding industries that make money is concerned, I will blog about it in next post. But I will leave with an example: Survey Industry. Did you know Survey Monkey makes $45 million a year in this (boring) industry? Then there are other players who are most likely profitable: Wufoo, Survey Gizmo, Kampyle, etc. So, instead of an image-gallery app, why not make a survey software specifically targeted at, say, event attendees. Once your app is ramen profitable, fire all your engines and pivot as full-blown survey software.

Aim is to make money, not justify your “cool” idea.

Every time I watch Discovery Travel & Living on TV or read Lonely Planet magazine, I desperately long for travelling around the world. This feeling intensifies after reading posts such as 8 Exotic Destinations You Can Afford. I get all pumped up ready to pack my bags. But then I realize: Oh wait, I have a startup.

Startup requires a lot of sacrifices from you. You have to work extremely hard (think 100+ hours per week) for several years. All this hard work is justified in hope of an eventual big pay-off which may happen in a year, five years or may not happen ever. That big-payoff has potential to make you financially independent and then you can go travel the world (or explore other exotic interests such as taking a stab at string theory). But the big question is what if that eventual pay-off never happens? It is certainly a possibility because majority of businesses will either fail or will become self-sustaining for years to come. Acquisitions, IPOs and FU money is a rarity, not a norm.

I think the dilemma of exploring your passions v/s doing a startup is interesting especially for young founders who are in 20s or early 30s. Every sage professes that this is the right age to travel (or do crazy wild things) because you don’t yet have a family to support or other responsibilities which may chain you to a particular sedentary lifestyle. But an equally strong logic goes in favor of doing a startup: you don’t yet have a family to support, so you can fully dedicate yourself to a startup and increase chances of the eventual payoff. Then you have the financial freedom (hence and more importantly freedom of time) and to travel to exotic places you have always dreamed of.

I honestly don’t have a definite answer to this but as evident by working hard on my startup, you can see which camp I belong to. May be, one fine day in future, I will start on my own epic journey of 70 countries. Or, may be not.

I usually don’t do startup reviews here (because it is a personal blog) but today I will make an exception for my friend (on Hacker News): Patrick McKenzie. If, like me, you are also addicted to Hacker News you will probably know who Patrick is. He goes by his handle: patio11. Best known for his SEO, A/B testing and marketing automation advice, Patrick runs a niche business called Bingo Card Creator. The most exciting thing about his business is that finances are completely transparent! On his site, you can see all revenues, expenses, conversion rates and other interesting business metrics.

When Visual Website Optimizer (my startup) was in beta, Patrick gave loads and loads of feedback to improve the product. And when finally Visual Website Optimizer launched, he reviewed the tool in a post titled: Brining A/B Testing to Fortune 5 Million. That post alone brought hundreds of early adopters for the beta who then helped refine the product. In nutshell, my startup owes a lot to Patrick!

So, today I want to celebrate launching of Patrick’s second startup: Appointment Reminder. Quite obviously, his startup aims at simplifying the issue of clients forgetting the appointment which results in lost sales for a business. What I love about this business is that it solves a real business pain. With a plan of $79/month, even if Appointment Reminder is able to save one potential lost sale, it means the customer has got ROI out of investment. The service consists of an easy to use calender where businesses can enter their appointment with clients. Patrick’s service will then automatically call and sms the customer just before the appointment so s/he doesn’t forget to turn up. This surely is a simple yet immensely beautiful service that addresses real pain.

I wish Patrick best of luck for his new venture. He will be blogging extensively about Appointment Reminder on his blog. Make sure you follow his blog updates. I am sure it is going to be a fun (yet profitable) journey for him!

In my previous blog post titled “How making money changed my perspective on startup ideas“, I argued that business ideas don’t have a lot of value in isolation. It is the market opportunity coupled with good execution which generates value and revenues. In this post I want to go one step further and argue that most successful (software) companies got there by chasing a market opportunity and not by having a unique business idea.

Take example of any successful software company and you will find that their business idea was not unique. You say Facebook, I say Friendster. You say Google, I say Altavista. In fact, I think citing such examples is not a good idea because odds of a startup achieving a billion dollar valuation (and becoming a brand) are close to none. I am more interested in knowing how the “long tail” of software companies achieve million dollar plus revenues. That’s a realistic, achievable target and the odds of your startup becoming a Fortune 50000 business are much higher than it becoming Google. So, we should drop the dreams of IPO (for now), let’s just see how businesses make million dollar revenues.

How software businesses achieve million dollar revenues?

Go to Inc’s listing of 5000 fastest growing companies and sample a few company descriptions. For software hackers, go and study Inc’s listing of fastest growing software companies. What do you learn from this list? I realized two main patterns:

• I only recognized a few companies there (apparently you don’t need to be on TechCrunch in order to be successful)
• I did not see many “unique” business ideas here (all operate in generic industries such as backups, SEO, encryption, sales automation, etc.)

Almost every software company in that list is chasing a generic, huge market opportunity and executing really well. They have a 1000%+ growth rate today because they chose the market wisely and provided a solution that people wanted. They are not making millions today because they had a crazy good idea.

So, what’s the key point?

My key point here is that instead of coming with a business idea and then trying to validate it, why can’t you work backwards. Why can’t you first choose a market and then come up a solution to ease a recognized pain in that market. Even if you don’t make millions or achieve a spectacular growth rate, you will be at least profitable because your market is large and has people who are already spending money (I’m assuming your solution/product is good!). This scenario of slow growth and profitability in an already validated market is much better than the scenario in which you have one in a million odds of achieving hockey stick growth because of your new, revolutionary idea.

Key lesson: choose a market/nice first, come up with “idea” later. And then, execute really well and persevere for years before hitting million dollar revenue!

Note: if meaning of life and startups don’t excite you, it is recommended that you skip this post. You will find it boring.

I know this is a weird title. But I have finally convinced myself that you cannot afford to be too philosophical if you are doing a startup. Doing a startup could turn out to be a terrible experience for those who especially adhere to philosophy of Nihilism. For those who aren’t aware of Nihilism, it says that life has no meaning or purpose and is in fact pointless. This philosophy was popularized by the German philosopher Nietzsche and became popular with atheists. After all, if there is no God, what’s the point of life?

Back to startups. Working on a new venture takes an incredible amount of hard work and things go wrong time to time. If you want to make your startup successful, you will need to focus relentlessly for years and show a great deal of perseverance. Now if you are a kind of person who thinks too much about meaning of life and purpose of all that effort (especially during the bad times), you cannot be successful with your startup. How can you possibly justify all the hard work you are putting 24×7 into your baby when you are questioning the purpose of all this in back of your mind?

Unlike religions, Nihilism provides no inherent meaning of life. In fact, it says life is pointless and futile. This is a direct punch-in-the-face on your startup philosophy where you are required a wake up every single day full of energy and enthusiasm to work on yet another 18 hour marathon. If you believe in Nihilism and are doing a startup, you have to answer this question: why are you doing this? Is it to change the world or to make more money? Even when you achieve the goals (hello, million dollar exit) what’s the point of all that money when you are not even sure what’s the point of life?

In nutshell, you can’t afford to start questioning purpose of life when you are doing a startup. Those two are simply not compatible concepts which can co-exist in a single, worry-free brain. So, drop either Nihilism or your startup. (I recommend the former. See below).

PS: In case you are wondering which school of Philosophy I adhere to, it is Absurdism. Like Nihilism it says that there is no meaning of life, but it also further states that the purposelessness of life is what makes it exciting and that one has to keep doing things one feels like doing (hey, startups!) precisely because there is no grand purpose you should be working towards. Makes sense?

I’ve heard it a million times now: India is a great country for IT services, but there are no great technology product companies. After all, the golden trio of Infosys, TCS and Wipro is what defines India’s technology prowess. There is a certain degree of truth in that statement because the IT services industry has provided jobs to millions of Indian graduates and has definitely played an important role in crafting the Indian brand for outsourcing.

However, in technology (especially Web and Internet), geographies rarely matter. If we put aside VC/angel investment scene for a moment (that’s because it is emerges because a market exists to be exploited), why couldn’t Google, Amazon or Microsoft come out of India? I think it’s simply a matter of market-readiness coupled with informational advantage for US-based startups. Back in the days when these great product companies emerged, US (and to a lesser degree, Europe) was the only place where market existed. Google? Well, you needed Internet to be fully happening before a company like Google made sense. India was still lacking in that during 1996. Amazon? Well, you need people wanting to buy books over the Internet. India didn’t have a proper Internet, so obviously there was no e-Commerce market for Amazon to arise from India.

There is one major counter-argument to the “market” theory of non-emergence of product companies in India. In technology space, geographical proximity doesn’t matter a lot. Theoretically, a company like Google could have made a search engine in India and served the market in US. Well, theoretically, yes. But that’s why I mentioned informational-advantage. Back in 80s and 90s (and to a large extent, even now) the only way you could have felt the needs of market in US was to be actually in the US. (Because in India, you were posting physical letters. Email? What’s that?) In early 1990s, there was simply no infrastructure for Usenet in India, so how can you expect an Indian company (equivalent of Netscape) to have produced an Internet Browser. Even when Indians were sharp enough to be able to produce a Browser, there was simply no knowledge (and hence motivation) that such a thing should even exist.

If you now argue that why didn’t this informational-advantage work against emergence of IT services industry in India, you are completely missing my point. As I said, for product companies to exist, they needed a market or at least an intimate knowledge about that market. IT services companies had both: a) they had a hungry market in US who wanted to reduce costs; b) they had intimate knowledge of that market because the market crossed oceans to came looking for it. You see, the whole basis of saving costs through outsourcing was to surpass geographic boundaries, thereby utilizing India’s lower costs to their advantage. So, Indian IT services companies didn’t need to get intimate knowledge about the market — instead the market came for it, educating what its needs really are.

Thankfully, all that is going to change in years to come. Thanks to Facebookization and MTVization, at least in Indian metros, youth will have more-or-less exposure to similar global (notice I didn’t say US) culture and thus become basis of same market. Informational-advantage will disappear. Take any product: Twitter, Quora, LinkedIn, or even Foursquare and you will see users from all over the world. If they can use a world-class product, why can’t they make one? In my opinion, it is just a matter of time when US will loose the advantage gained by first-boom of silicon and Internet (think educational and investment infrastructure). After that, you will see great product companies from all over the world. And that’s when the real promise of Internet will get delivered: non-existent global boundaries.

Say cheers to the Internet!

I admit it: my previous (so called) “startup” Kroomsa was a failure. Back when I was starting up, I remember how game changing I thought it was. We wanted to revolutionize Indian music scene by inserting audio advertisements into music. We also vowed to donate 20% of proceeds from advertisements to a charity organization. Do you see how cool the idea was? Though this business, we combated piracy of music, made money for independent bands and helped society by supporting charities. All at once!

Except that we never made a penny out of the venture. First mistake: none of the team members was doing it full time. Second mistake: none of the team members had any experience in music industry. Third and biggest mistake: the idea was “cool”. To my hacker brain, this crazy business model was like dope. I distinctly remember being on a high for several days when I initially thought of that idea.

According to my then interpretation of “execution is important than the idea”, I started implementing the business model without doing any reality check at all. I built the music platform, roped in friends to help me, contacted a few initial music bands, uploaded music and added a dummy advertisement in songs! Before I realized my project was a startup. As time passed, I realized:

• Nobody likes to listen to advertisements in songs. In fact, people hated it. Lack of basic market research.
• Nobody in India likes to pay for music, let alone for independent rock music. Market was tiny.
• With no experience in music or corporate industry, we had no clue how to bring in advertisers. Lack of business and marketing plan.
• Finding good bands and signing them up was a non-scalable, extremely laborious task. So, our inventory of music was small. That meant even if we found an advertiser, our reach wasn’t so appealing. The chicken-and-egg problem.

Eventually we gave up on the startup when we realized: a) although we got covered in national newspaper because of the coolness of idea, it wasn’t exactly a startup; b) even theoretically, it will never grow big enough as a business (because market didn’t exist). In fact, even after months we hadn’t made even a single penny and there was no hope how it will make money.

In the process, my then 18-year old version learned the importance of business idea being grounded in reality. All this was extremely helpful when I founded Wingify last year. The first product is Visual Website Optimizer, an A/B split testing tool. Even though there are (or should I say inspite of) established companies in the market, the startup is making money and the revenues are steadily growing month-after-month.

Why is Visual Website Optimizer making money while Kroomsa didn’t? I think it boils down this:

The idea isn’t sexy. I am not going to change the world with it. But I am now solving a real pain-point in a big-enough market validated by presence of competitors. Since people are already paying for what I intend to offer, mine just needs to be easier, better or cheaper and the startup will make money and get customers. In short: I am making things that people want to pay for.

Yes, the phrase “make things that people to pay for” is worth repeating twice. Because I have now started making money with Visual Website Optimizer, my perspective on startup ideas has changed completely. A few years ago, my first reaction on getting a startup idea would be “Oh wow, this could be next Google. How do I get started implementing it?” Now my first reaction is on the lines of:

How will this make money? Who will pay for it? Is market big enough? And most importantly: do competitors exist?

So, next time you get a startup idea, ask yourself if established competitors (not other startups) exist in the market. If not, you better think twice because it could be an indication that the market doesn’t (or cannot) exist and you will never be able to make money in it.

Good luck with your startup ideas!