What makes a great B2B startup idea

Ingredient 1: The problem is important to people

There need to be a lot of people willing to spend a lot of money to solve the problem. Most startups fail not because the idea isn’t good but because the market for the solution is just too small. If you want to build a venture-scale business, a rule of thumb is that there needs to be a clear path to $100m in revenue per year, and eventually a path to $1B a year. Here’s a great example of what you want to see, as told by Ryan Glasgow, CEO of Sprig:

“Robinhood agreed to a large contract even though we were early. They’re like, ‘We love it. We’ll install tomorrow.’ They installed it as we were building the first version.”

Hunter Walk has a great framework called LUV. Also, here’s my take on what makes a venture-scale idea, and a guide to help you think through your market size.

Ingredient 2: The market is underserved

Existing solutions need to be doing a subpar job of solving the problem. The founder of CRED, Kunal Shah, has a great framework for evaluating potential new solutions, called Delta-4:

1. What would a customer rate the existing solution on a scale of 1 to 10?

2. What would they rate your solution?

Your solution needs to be +4 better for anyone to care about your product.

This also means that if the existing solution gets a 6 or higher, it’ll be very hard to replace (e.g. Excel). Here’s what you’d love to see, as shared by Tomer London, co-founder of Gusto:

“As soon as we asked them the simple question of how they feel about their current payroll provider, they started cursing. More than half of the people we talked to just started cursing, unprompted. Two people voluntarily told me, ‘I use [competitor name], and my password is fuck[competitor name].’”

Ingredient 3: You’re excited about solving this problem

Finally, the problem needs to be something you are willing to spend many years of your life solving. This advice from Dylan Field, co-founder of Figma, captures the sentiment perfectly:

“There are actually a lot of good ideas out there. It’s kind of the weird part, especially if you’re searching for one; it feels like it’s not the case, but there are so many different markets that are underserved. The more important thing, actually, is to find something that you are personally passionate about, because any good company takes a long time to build.

If you are, let’s say, three to four years in on an idea that you hate, you’re just going to burn out and you’re going to quit. It won’t feel good and you’ll be hating life. Don’t just go for an idea because it’s kind of working. Go for an idea that you really care about, because even if it doesn’t work, you’ll still learn from it and you’ll still have one.” —Dylan Field, co-founder and CEO of Figma, via Elad Gil

Takeaway: Find an idea that solves a problem that is important, underserved, and that you’re excited about. You’ll hear a lot more about how to do this, and what this looks and feels like, below.

“It’s essential to work on something you’re deeply interested in. Interest will drive you to work harder than mere diligence ever could. When in doubt, optimize for interestingness.”
—Paul Graham