How making money changed my perspective on startup ideas


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!

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20 Responses to “How making money changed my perspective on startup ideas”

  1. Jayanth
    1. August 2010 at 21:47

    Hey thanks …for sharing the experience!!

    Really insightful..trying to hear a version of how koomsa songs felt like..but i guess the link aint working

  2. Piyush
    1. August 2010 at 22:01

    Dear Paras,

    What a genuine and similar experience.

    I look forward to learn from you and leverage your learnings for my next journey.

    You are an inspiration to me.

    Cheers.

  3. Anand
    1. August 2010 at 23:37

    There is a logical flaw in this argument. A cool idea with good market research, etc can far outtrump an existing idea. Check out “blue ocean strategy” book for how that can be done…

  4. James Briant
    2. August 2010 at 00:08

    Awesome post. This has all probably been said before, but I’ve yet to read it in such a concise form. Making me consider if my idea is too much cool and not enough “want to pay for”! (I’m hoping its both :-)

  5. Jeff I
    2. August 2010 at 09:10

    Paras -

    Great post! Few thoughts: I am having a similar experience. My co-founder and I have been working on our “this will change the world” venture for the past few months … we built CollegeJobConnect, a platform designed to revolutionize the undergraduate recruiting system and enable undergraduates to connect with employers. It’s a sexy product with a great story. However, due to the summer time period and the “you need to do something different”-ness of the idea, the revenue has been light thus far.

    Along the way we heard a lot of pain points hiring managers and companies were having, so we built Recruitly (http://recruitly.com), a plug-n-play career portal and applicant tracking system allowing you to tap the talent that visits your website. This has been a dream to sell and much easier to monetize.

    I think it depends what you are out to do: if you are out to make money, you can jump into an existing market and produce a competitive product (“mine is cheaper!”, “mine does X better”, etc., etc.) and do fine. If you are out to change the world, you have to understand the fight you are in for: you likely will have to change a lot of people’s behavior or understanding of how to do something – no easy task. To your point, it pays to do your homework beforehand so you know the extent of the battle that faces you.

  6. My daily readings 08/02/2010 « Strange Kite
    2. August 2010 at 17:00

    [...] How making money changed my perspective on startup ideas | Paras Chopra’s Blog [...]

  7. Mahesh
    3. August 2010 at 13:17

    Paras
    Wow what a great post and great to see an Indian start-up making profit through product sealing in and outside of India.
    Best of luck for you and your start-up.

    We are also an start-up based in Noida and working on product. It would be great help for start-up like us if you write something on legal issues, payment options, evaluate pitch for PR etc.

    Thanks for this post.
    ~Mahesh

  8. Steph
    3. August 2010 at 23:44

    You hit the nail right on the head. Most people focus on the “this is a great idea” and unfortunately don’t really look at the business model, if at all.

    If the business model is terrible, it doesn’t matter how great the idea, or even how well you execute it, it won’t work.

  9. King Sidharth
    19. November 2010 at 02:14

    My first reaction after reading first paragraph.

    NO DUDE! It wasn’t cool at all.
    you are not solving a problem which is pain in the ass.
    You are not solving a problem better than it is being solved (piracy).

    But I am glad you made same points later on.

    Cheers to learning! (I am 19 btw, nice to know people at my age were doing stuff)

  10. Nischal Shetty
    19. November 2010 at 05:31

    Great insights. I’m working on a “cool” idea and even though my chances of making any money from it seem bleak, I’ll still be doing it, call me crazy but it’s worth a try and so was your first venture!

  11. kang
    19. November 2010 at 14:40

    Quite a negative way. Such thinking will give you more earnings, but you can never make it ‘big’.

  12. Cofounders Gyan
    27. November 2010 at 01:52

    Hello Paras,

    We liked this post & we think its suitable to be published at our blog space. Please revert via email with your email id & a short about-me, so that we can create your account & publish the post on your name.

  13. Paras Chopra
    27. November 2010 at 11:34

    @Cofounders Gyan: please go ahead and publish it.

  14. Business ideas are dead; chase after market opportunity | Paras Chopra's Blog
    29. November 2010 at 16:59

    [...] 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 [...]

  15. HX
    1. December 2010 at 22:41

    Soon, I am going to dive into this arena of start-ups and this post comes out as an eye-opener for me at the right time.

    Thanks,
    Hitesh
    DCE’10

  16. gautam sinha
    21. March 2011 at 18:06

    Paras
    I loved your post. having done 4 starts up , closed 2 and exited 1, i couldnt agree more with the “execution and NOT idea is king”.

    Further you have wonderfully illustrated the fact that “”ideas CAN fail BUT people DONT”".

    All the best with your latest start up.

    gautam

  17. Krish
    18. August 2011 at 14:08

    Very pragmatic advice.

    We still meet several folks pitching their ‘cool’ ideas, without any monetization plan or market validation to find if they are solving a real problems for which someone will pay. Thanks for the post Paras.

    ~Krish.

  18. Sachin
    10. November 2011 at 23:32

    Very Nice Post. from past 3 years thinking about the startup… What to start that will earn me money… Nice writeup that cool ideas need not make money….. thats why may be i have been keeping on my research to find out ways to get a startup on real or virtual world….

    Thanks Paras… Keep Writing

    Cheers Mate …

    Sachin

  19. narayankpl
    28. January 2012 at 13:35

    One guy has to start for others to follow! So this will not apply to the first guy who launches a new product

  20. Alex
    20. May 2012 at 22:35

    Great post! I know it has been a while since you first wrote it, but I just found it for the first time. I like your insights, and by the way, Visual Website Optimizer is a great tool for all of us in SEO, web design and online marketing!

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