A VC in Vacationland

Image by Linda Nowakowski via Flickr

A major issue I often see in start-up business plans is what I call the "great idea syndrome" .  Someone has a great idea, but the projected success may be questionable for a number of reasons. It is rare that I see a really stupid business idea, but I have seen some.  The majority of business plans I do see fall into three categories:

1. Great idea,  few potential (or fad) customers— I do see quite a number of these.  I try and be polite as possible.  Solving only a few people's problems does usually not yield significant revenues to make a long term successful software business. Similarly, coming up with a great idea that is easily eclipsed or copied by competitors, or is likely to be a passing fad, is not interesting or fundable.
2. Great idea, too many customers–Entrepreneurs often define business models that can serve a wide range of customers, like SMB's.  The real question is how to profitably pay for the huge number of features needed to satisfy all aspects of that market.
3. Great idea, clearly defined customers–this is what I like to invest in.

So how do you avoid the "solution looking for a problem" business plan? Matt Blumberg, CEO of Return Path and fellow Blogger, put it best in a recent posting. 

"The key to get past this hurdle in the development of a business is to force
yourself to articulate one or more very clear, crisp definitions of "it solves
THIS problem for THIS person who is willing to pay THIS amount of money to have
the problem solved."  Even if you end up with two or three of these statements
to then go concept test in the market, at least you will be able to shape your
product and messaging development towards getting into the revenue jetstream
somewhere, to quote my friend David Kidder from Clickable."

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