Where I Go For Startup Ideas

What's up, everyone? Welcome back to Founders Journal, my personal diary around the lessons and learnings from building companies. I'm your host, Alex Lieberman, co-founder and executive chairman of Morning Brew. First off, I want to give a huge shout out to a few listeners that recently wrote in. First is Eugene, who listened to my episode on building an audience on the internet, and then he actually created a template for creating your own content strategy based on the episode. Then there's Natalie, who listened to the episode on the power of curation and is now looking for my list of curated sources. And finally, big shout out to Maria, who's been building startups and working at startups for a long time. And she gave me feedback on my recent episode around random thoughts that I've had over the last few weeks around building companies, as well as my more improv style of recording the podcast, which I was testing out on that episode. As you can tell, I love talking to my audience. So shoot me an email to alex@morningbrew.com, introduce yourself, and share one episode topic that you would like to hear me cover in the future. Now today, I am talking about why the best business ideas live on the fringes of society. Let's hop into it. So yesterday was Wednesday, which means it was my one day off from exercise. And on these days, I will typically keep my body moving with a long walk. So I did just that. I put in my AirPods, I queued up a podcast episode that I've been wanting to listen to, and I did a 3.5-mile stroll through Hoboken. The podcast episode I listened to was an episode of Invest Like the Best by Patrick O'Shaughnessy. It's one of my favorite Podcasts for business. And the guest was Justin Maris, who is the founder of 4 healthy food and consumer healthcare-related businesses, including Perfect Keto, Shirley Wine, Kettle and Fire, and now TruMed. And I linked to the full episode in the show notes if you wanna check out the full thing. This episode was packed with information about our health and food crisis in this country, which has me itching to go deeper down this rabbit hole. But the part of the conversation I found most interesting as a founder who's always looking for my next business to spin up was Justin's description of this concept that he calls Edge City and why Edge City is the most important thing that led Justin to starting every single one of his businesses. Now, I'm gonna make you wait to hear what Edge City is and why it's so important for you to find as an entrepreneur, because I want to set the foundation such that you understand why Edge City is mandatory for finding great business ideas. So let's start from the top. There is a simple truth around entrepreneurship. Every entrepreneurial person wants to find great startup ideas. I can tell you it is something that I am thinking about constantly, and I'll end up doing a full episode in the future on how I find startup ideas. But let me just walk you through my high-level process for finding ideas on a daily basis. First, I turn my brain off what I call autopilot, and I force myself to notice things that are annoying and painful to me in my life. And I turn off my autopilot brain by asking the question why about everything I do. So today when I was walking with my wife and we were walking our dog, I was asking, why is it that we have a dog leash that allows our dog to tug on the leash? Why is it that I feel like I'm gonna burn my mouth every time I drink coffee in the morning? You know, why is it that I'm wearing a t-shirt but I still feel really hot because of the humidity? Of course, every time I ask why, it's not gonna lead to an interesting idea, but by asking why, it basically takes away— The autopilot. The filter in my brain that just accepts the status quo of everything we do or everything we have. Second, when I've created a list of problems, I highlight those that were painful to me and that I feel energy about potentially solving. So for example, I don't feel a ton of energy about potentially solving the problem of coffee burning my mouth every morning, but maybe I do feel energy around training my dog to be better behaved. Third, I pick the one idea that is a hell yes to the following questions. First, is this a painful problem to me? Second, is this a painful problem for a lot of people? And third, would I be excited about solving this painful problem for a long time? So that is my process, very high level. But there is a flaw in my process that I want to talk about. Most of the ideas that you or I will think of are not great ideas. Why? Because they fall into one of two traps. Either it's an idea that is so painful for so many people that many companies have already built the exact idea you're talking about. I would say that's like 70% of my ideas have already been built. There's already a great solution. I just didn't know about the solution. And I call these ideas where it's so painful for so many people oceans. And I'll explain why I call them oceans in a second. The other form or the other bucket or the other trap that you can fall into is the idea is not that painful for a lot of people such that if you build it, you will struggle to ever find product market fit because people do not feel like they must use what you've built. And I call these, uh, ideas puddles. And again, I'll describe it in a second. The reason I call these things puddles and oceans plays into a famous essay by Paul Graham, the founder of Y Combinator. Paul Graham has a very simple framework for thinking of good startup ideas that he talks about in one of his famous essays, and I link to it in the show notes. He says there are 3 criteria for finding great startup ideas. The first criteria is that it solves a problem that the founder has or they understand and care about. And this is important because you want to make sure the problem actually exists. And the second criteria, he says, for a great startup idea are those that founders are able to build the solution for. So it's not just a problem that they have, they are able to build the solution. And the third is it's an idea that few others realize is worth doing. And this is a concept that I want to double-click on because I would argue it is the most important for building great businesses and thinking of great startup ideas. Few others realize it is worth solving this problem. And that leads us to Edge City. Paul Graham has this great visual framework to understand what this means in practice. So it's this idea of you found a problem and it is a problem that is really painful for a few people, but very few because most people do not realize it's that painful of a problem. And the way that Paul Graham describes it is if you had a graph, so if you had an x-axis and a y-axis, the x-axis represents how many people want what you're making, basically how big the market is. So if you're all the way on the left of the x-axis, it's very few people want what you're making. If you're all the way to the right of the x-axis, a ton of people want what you're making. And then the y-axis represents how badly people want it. And normally you go up with the y-axis. I want you to visualize flipping it over. So if you are at the top of the y-axis, people don't really badly want your product. As you move down the Y-axis, the further down you go, the more passionate people are about your product because it really solves a really painful problem for them. And you'll see why I have the graph described in this way, or this is why Paul Graham described it in this way. Something like Amazon is an ocean, and I referred to an ocean before because you have billions of people that really want their product, which makes it very wide on the graph, and billions of people want it really badly, which makes it really deep on the Y-axis. So what you can envision now is on this chart, basically So you're all the way over on the x-axis because tons of people want it, and you're all the way down on the y-axis because they want it really badly. So if you were to basically just draw out from the center of the graph, from like the intersection of the y and the x-axis down to the point of how badly people want it, and you go all the way to where on the x-axis you get to like how many people want it, which is all the way to the right, basically you have this very deep circle, which is like an ocean. And so when you launch a new business, you are most likely not going to have an ocean. Because if that large of an opportunity existed, the odds are that businesses would have already built into this space and closed up the opportunity. And so then that means you either have one of two options. You have a puddle or a well. And I mentioned a puddle earlier. A puddle is the sitcom idea, which I described before, something that a lot of people would tell you they're interested in. And Paul Graham uses the example of a social network for dogs, uh, which doesn't sound obviously bad, but when push comes to shove, it's not actually solving a painful problem and people don't want it that badly. And so what a puddle What a puddle looks like is, you know, you're far out on the x-axis because you think a lot of people want it, but on the y-axis, in terms of how badly people want it, you're not that far down, right? You're at the very top of the y-axis, which means it's a very shallow circle and it looks like a puddle. The reason a puddle is such a bad business idea is because it sounds exciting because you think a lot of people want it. So you're going to build into this idea for a long time, but then you're going to realize People, even though it's a large market, this large market doesn't want it that badly, which means you have to default in the early days of building a business to a well. And a well is where most great startup ideas start. A well sits very low on the x-axis because few people are interested in what you're making, meaning on the x-axis, you're all the way to the left, but it is super deep on the y-axis because those few people would do anything to have your product, right? And so again, if you visualize this, you're far on the left side of the x-axis, but you're very low on the y-axis. So potentially on the y-axis, in terms of how deep this goes, it's just as deep as, say, an Amazon, which was an ocean, but it's very narrow. So you almost like if you were to draw this out, it would look more like a well. So now the question is, how do you find wells? How do you find ideas that solve really painful problems for a small group of people? We're going to take a quick break, but more from Founders Journal when we get back. Enter Edge City. Justin Maris describes Edge City as this idea of living psychologically on the edge of what's normal, surrounded by others who are into weird, edgy stuff as well. And so let me give you a few examples. People who are using ChatGPT every day today are living in Edge City. People who got into keto in 2015 before it peaked in 2019 were living in Edge City. When my co-founder Austin and I were creating a newsletter business that was solely based on a newsletter in 2015, we were living in Edge City, and I heard Justin talk about this idea, and I was fascinated. And he talked about how he lived in Edge City before he founded all of his businesses, and it's how he found his business ideas. Basically, his health-obsessed friends were talking about all of these trends that weren't yet trends several years prior. So in 2015, they were talking about bone broth. That's what led to him launching Kettle and Fire Which is, you know, an 8 or 9-figure bone broth brand. In 2017, they were talking about keto, which is what led him to starting Perfect Keto. In 2019, they were talking about drinking less, which is what led him to launch a nonalcoholic wine brand in Shirley. The whole idea is he has spent his time around people on the fringes of health and wellness talking about topics a number of years before they entered the zeitgeist. And after hearing all of this, all I could think about was, how do I spend as much time as humanly possible living in Edge City? And I have a few ideas, and I think the best way to talk through it is use an example of just a space that I'm very interested in. Let's say I want to dive deeper into mental health and specifically opportunities to reverse the decline of mental health in this country. Here are a few things that I would do to find Edge City as fast as I can. First, I would go to the source. I would read academic papers and research by the people in the industry that are literally finding the facts that determine what is real and what problems exist in this space. Another reason I think it's honestly such an advantage to read primary sources like this is not just to find the facts, but also because the more work you have to put into reading something or consuming something, the better the odds that other people decided not to do it because people are generally lazy. And so if you're willing to put in more work, the odds are you're going to learn things that other people weren't willing to put in the work to learn. The second thing I would do is I would obsessively study the people who live in Edge City of mental health. Now, the obvious question here is, how do you find those people? How do you know who is currently living in Edge City of mental health? And it's hard to know exactly, but I generally think outside of the people like researchers or scientists that are finding the facts in the industry, it is the people who are publicly thinking or building on the edges. And so I would look for people that have written books or long-form essays, things that take a lot of time, effort, and thought. And I would look for these people who have written books or long-form essays in the last few years about the mental health industry. And I would look for people that have built companies in this industry, but specifically people that have built companies around products that feel very strange to me. Like when I look at what they're building, it feels on the edge. It feels like they're doing something new that I haven't seen a lot of times. Like clearly they know something that I don't know. And once I find those people, I will do 2 things. I will read and listen to everything that they have written or said. And second, I will read and listen to any content that they reference in their writing or their speaking. Basically, I will end up consuming the inputs that are informing the writing or the views of the people I consider to be on edge city. And this will give me the starting point to then start having my own views around the space of mental health or my own opinions around the space. Or at least I'll have enough learning such that I will have thoughts that I want to share online. And then this is the beautiful power of the internet, is once I share these ideas around mental health that I believe live in Edge City, because I consume content from people that live in Edge City, I will then attract more people that are living in the future of the industry. And I love this quote by Chris Dixon, who's a partner at Andreessen Horowitz. He's, you know, was one of, I would say, like the pioneering thinkers in Web3 and crypto. In different words, he put this concept of Edge City best. He said, what the smartest people do on the weekend is what everyone else will do during the week in 10 years. So that is my breakdown of finding good startup ideas and how to find good ideas that few people think are worth pursuing by living in Edge City. As always, thank you so much for listening to Founders Journal. If you enjoyed this episode or you enjoyed the show, please share the podcast with those in your life that you think would enjoy it. It is the number one way that we grow, and I can't wait to catch you all next episode.