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How to Build a Billion-Dollar Startup

April 19, 2012
URL: http://www.entrepreneur.com/article/223388

How to Build a Billion Dollar Startup

Editor's note: A version of this article previously appeared at SteveBlank.com.

The quickest way to create a billion-dollar company is to take basic human social needs and figure out how to mediate them online.

(Look at the first wave of the web/mobile/cloud startups that have done just that: Facebook, Twitter, Instagram, Match.com, Pandora, Zynga, WordPress, LinkedIn.)

It's your turn.

Hard-wired
This week I'm in New York teaching a 5-day version of my Lean LaunchPad class at Columbia University. While the class teaches a process to search and validate a business model, it does not offer any hints on how to create a killer startup idea. So after teaching several hundred teams in the last few years, one of my students finally asked this question – “So how do we come up with an idea for the next billion dollar company?”

Is It a Problem or a Need?
I've now come to believe that the value proposition in a business model (value proposition is the fancy name for your product or service) fits into either one of two categories:

Moving Needs to Bits = $1 Billion
Friendship, dating, sex, art, entertainment, communication, confession, networking, gambling, religion – would our hearts still beat and would our lungs still breathe without them? Of course. But these are things that make us human. They are hard-wired into our psyche. We've been doing them for tens of thousands of years.

Ironically, the emergence of the digital world has made us more efficient yet has left us with less time for face-to-face interaction. Yet it's these interactions that define our humanity.

Lessons Learned
Value propositions come in two forms: they solve a problem or they fulfill a human social need

Social Needs are friendship, dating, sex, entertainment, art, communication, blogs, confession, networking, gambling, religion, etc.

They have always been fulfilled face-to-face

They are now moving on-line

The market size for these applications equals the entire human race

These are the ultimate applications

Facebook takes our need for friendship and attempts to recreate that connection on-line.

Twitter allows us to share and communicate in real time.

Zynga allows us to mindlessly entertain ourselves on-line.

Match.com allows us to find a spouse.

At the same time these social applications are moving on-line, digital platforms (tablets and smartphones) are becoming available to hundreds of millions. It's not hard to imagine that in a decade, the majority of people on our planet will have 24/7 access to these applications. For better or worse social applications are the ones that will reach billions of users.

Yet they are all only less than 5-years old.

It cannot be that today we have optimally recreated and moved our all social interactions on-line.

It cannot be that Facebook, Twitter, Instagram, Pandora, Zynga, LinkedIn are the pinnacle of social software.

Others will do better.

Others will discover the other unmet and unfilled social needs that can move on-line.

It could be you.