How to Find a Startup Idea and Grow it
The story of how Curalate became a
successful startup out of list of ideas
Curalate is a rapidly growing startup that's raised over $10 million in venture capital and currently has 57 employees. Their amazing trajectory started out with a single idea.
Nick Shiftan and Brendan Lowry gave a talk to the PSLU Startup Bootcamp on how their team tested dozens of ideas before settling on the one they built into Curalate.
How exactly did they do it?
Most successful startups are based around a great team instead of just an idea. Curalate founders, Apu Gupta and Nick, met up for lunch in Palo Alto after emailing back and forth for a few months. Nick was living in Seattle and Apu was in Philly. Their two hour conversation went so well they both dropped everything and jumped at the chance to start a business together. Nick said it was the most impulsive thing he has ever done. They both shared the same vision for a startup and had very complementary skill sets, with no overlap. Apu had a marketing background and had successfully run a large company before. Nick's background was in tech with a focus on machine learning and big data.
First Round Capital gave them $750K in seed funding based on just an idea: Airbnb for storage. It was 2011 and Airbnb had just raised a $112 million B round. It was the perfect timing for this idea and team to get funding.
They set up an office in Philly and started asking around for people to join the startup. It was through a mutual friend that they were introduced to Brendan. He had been working a full-time job, as well as hustling for another startup on the side. He had proved his skills with marketing and social media, and that was just what the team needed needed for growth.
Know what you need
You need to know the requirements of your company and its investors. With VC funding comes very clear goals for growth, and you usually need a market that can support a billion dollar company. They required something better than just a good idea for a lifestyle business. This eliminates a huge percentage of ideas from the beginning. Once you know what your goal is exactly, it's possible to work backwards and find the necessary steps to get there.
Their initial goal was 1,000 active listings in three months. They only got 28, and one of those was Nick's. The value proposition did not work out like Airbnb. Hotel rooms are expensive, storage space is cheap, and people were not interested. That original idea was dead on the vine.
"Thanks for calling a corpse a corpse."
- VC Josh Kopelman
They had a very embarrassing board meeting announcing the results and their conclusion that the idea was a failure. But the investors were supportive of the team. They gave them one month to come up with a better idea.
The three team members created a Google doc and brainstormed up 70+ ideas and to systematically test out. The team compiled a giant spreadsheet and tracked the results of each.
Here's a few examples:
DrinkedIn: Matching up small groups of people for business networking over drinks. They got 130 signups in one day and got news coverage from a local Fox TV station. But scaling this one up didn't seem like a good fit for the team and investors.
Fanfare: A trivia service for sports fans. They got 25,000 impressions and 88 participants based on eight questions tweeted during a Sixers game. It only cost them $7.50 to find out that this idea was doable, but would not become a billion dollar company. And that cost included buying a drink at a sports bar.
Ethinically: Providing a range of different ethnic foods to people. This one seemed like a good idea, but none of them had any experience in the food industry.
Cloudticks: A service to synchronize services between servers in the cloud. This tackled a difficult problem, but didn't have the potential they required.
Get Me Out of Here: A site for impulse travelers. The service would connect people to destinations based on the data they inputted. Both the market size and the profit margins ended up being too small.
Pinsights: Analytics for social media. Pinterest was just taking off, and Apu realized there was a real lack of context for all the products in photos. He wanted to buy a bag he spotted, but couldn't track down where it could be purchased.
They picked out the 10 best ideas and pitched the investors each one. Pinsights (later renamed to Curalate) was #7, and it's the one they all decided to pursue. It was the right time, the right size market and the team had the skills to execute it well.
They created a quick MVP and started testing the idea out by tweeting their stats to companies on Twitter. Brendan put in many long hours trying to connect with people. They had about a 10% response rate, but only a small percentage of those turned into paying customers. Then one day the VP of marketing for Michael Kors quickly responded and wanted to set up a phone call with them.
Their strategy was to first sign up a bunch of major brands, and then negotiate with social media companies for partnerships. It worked. And having Michael Kors vouch for the value of their service enabled them to make more deals.
Premature optimization can kill a startup. Curalate only began hiring people once the product started to take off. And they focused on user experience instead of features. It doesn't matter how capable the software is, if it can't be used efficiently, then it's not going to work. Real world testing and analysis is the best way to avoid costly mistakes and improve your product.
Keys to success
Nick and Brendan broke down their strategy into three key components. These are the things they believe make or break a startup.
#1 - Product/market fit is everything.
Marc Andreessen's definition: “Product/market fit means being in a good market with a product that can satisfy that market.” He says it's “the only thing that matters” and that companies should strive obsessively to achieve it until they do. There is no success without it. Curalate tested their product idea using a landing page with email collect. Once they started getting major brands signing up, it validated the idea.
#2 - Have to cross the "penny gap".
Growing revenue from $1 million to $100 million is not the hardest part of a new venture - it's getting your users to pay anything at all. The biggest gap is between a service that is free and one that costs even a penny. Getting users to go from $1 to $2 per month is much easier than going from free to $1. Revenue growth becomes possible once you jump this gap. Curalate knew they were onto something new customers were eager to pay for the service.
#3 - Do things that don't scale.
Paul Graham wrote an essay with this title that explains in the early stages of a startup you should put all of your energy into customer development, and figure out scaling later. There's no point in having a scalable solution that no one wants. In the early days of Airbnb the founders went out and took high quality photos of NYC listings themselves. And Curalate reached out personally to potential customers via Twitter to get started.
Once Curalate started getting traction with a large number of brands paying for the services, they then began optimizing the sales process and pricing. They started out charging $19/month and when they later brought in sales people it was possible to slowly raise prices and bundle in additional value adds. By iterating the product development based on customer feedback they were able to bring in more customers, and now charge much more.
They just had to validate a good idea for the right market and iterate to success.
Learn more about how to do it
Recommended reading for Ideation and Vision:
- Frighteningly Ambitious Startup Ideas
- How New Ideas Almost Killed Our Startup
- 90% of Feedback is Crap: How to Find the Next Big Startup Idea
- How to Choose Your Startup Idea
- Developing new startup ideas – Chris Dixon
- A Serial Entrepreneur's Guide To Uncovering Awesome Startup Ideas
- Brainstorming for New Startup Ideas: A Framework to Spur Creative Thinking – David Skok
Think ahead of the curve:
And the assignment for this talk:
- If you were getting married, would you pick the first person you meet? Then you shouldn’t just pick your first idea. This assignment will make you step back before stepping back in. Your team will follow this idea through the rest of the bootcamp. This assignment will teach you you how to think big and often, how to think about a market, and how to think about a team.
- You are going to be unsure about a lot of things. Don’t worry. Your role as founders is to make educated guesses with only 10% of the information available to you. Get use to it. You will have to do this a lot.
- Brainstorm 30 ideas amongst your team. Document them in a spreadsheet provided above.
- Analyze an assess all of your ideas in accordance to team and market in the brainstorm tab on the bottom of the spreadsheet.
- Market Opportunity
- List number of competitors
- List name of top 3 competitors and estimate the following:
- Their market share % of TAM (see below)
- Their mind share % of market in the eyes of the consumer
- List at least 1 key differentiator between your idea and the competitor
- Ideal is clear differentiation that provides maximum value, i.e. Search engine: Google collects personal data; DuckDuckGo doesn’t collect personal data. There is a clear differentiation.
- Add TAM (total available market) for each idea.
- If you are an ad company, don't examine the top down market, i.e. Advertising is x billion a year. Look at the bottom up market, i.e. local brick and mortar advertising which we are selling is x billion and growing.
- Team Preparedness
- Current knowledge of market
- Market Opportunity
- Select the top 3 strongest ideas in terms of your combined team and market assessment and put them in the Narrow to three tab on the bottom of the spreadsheet.
- Agree on 1 idea and be prepared to justify this selection in front of the judges and add it to the Choose One tab on the bottom of the spreadsheet.
Concisely present your process in a slide deck of no more than 5 slides
- Slide 1 – List of 30 ideas.
- Slides 2–4 – Present Market & team assessment data for each of you top three. Use 1 slide per idea.
- Slide 5 – The one idea your team selected to pursue
- Idea name
- Positioning statement
- Why your team chose this idea
Thanks to the entire PSLU Startup Bootcamp team for putting this series of events and frameworks together.