The Drake equation provides an estimation of the probability of extraterrestrial life existence. Note that XKCD has a joke about it here, the point being that attempting to quantify the probability is pushing the logic too far.
The value of the Drake equation is in identifying the relevant parameters so that if any of these parameter is demonstrated to be zero, then extraterrestrial life can be for sure excluded. If it is not null, there is a very high probability that we are not alone in the universe even if the probability is extremely small. See my note on Murphy's Law to understand why.
Transposing this to startups, it would be very tempting to elaborate an equivalent equation to estimate a startup success probability.
Following Y Combinator news, I found today an interesting post that summarizes the fundamental questions provided in the marketing book "Selling the Invisible" by Beckwith helping to identify the profile of a startup. A book I will surely read.
My impression so far is that these questions are identifying the key parameters of a possible Startup equation, the equivalent of the Drake equation. I refactored them here below:
1. who are you ?
2. what do you do ?
3. who do you serve ?
4. who are your competitors ?
5. what makes you the best ?
6. how do you monetize ?
There are probably other parameters. Though I think these are the most important one because they tell you if the business is sound. Take care to examine these questions with a very broad view and open mind. Be also very accurate and objective.
For instance, regarding monetizing, I would strongly recommend reading the article "Free! Why $0.00 Is the Future of Business" of Wired to make sure you address this question with a modern view. As I understand it, the fundamental logic here is to identify indirect monetizing sources.
When answering the question "what do you do" make sure to explore beyond the basic facts. If your activity is to provide a service, you are also involved in a trust relationship with your users. What do you do on this aspect ? Don't miss these because they could be the "killing" difference with the competitors.
Here is a short anecdote on this last point. I'm buying my computer stuff through Internet from one big French company. One day, there was a problem and I contacted them to resolve the issue. At one point during the email discussion I said that what they sell was in fact trust and not computer goods.
I recognize that I pushed it a bit far but apparently it seeded some thoughts because in the next month they added various insurance offers for buyers. A kind of premium fee for priority help in case of trouble. You know, something that turns a client into a VIP. So they basically added a panel of virtual anti-anxiety pills to their catalog !
Keep thus a very broad view on what and how to monetize.
2 Comments
Philipp Schumann
3/1/2008 06:55:40 pm
So where's the equation already? ;)
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Christophe Meessen
3/3/2008 02:45:12 am
I didn't provide it because I don't want to show up in one of XKCD jokes ;-)
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AuthorChristophe Meessen is a computer science engineer working in France. Any suggestions to make DIS more useful ? Tell me by using the contact page. Categories
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