How to Build a Billion-Dollar Startup

4/19/12Follow @sgblank

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:

  • It solves a problem and gets a job done for a consumer or a company (accounting software, elevators, air-conditioning, electricity, tablet computers, electric toothbrushes, airplanes, email software, etc. )
  • Or it fulfills a fundamental human social need (friendship, dating, sex, entertainment, art, communication, blogs, confession, networking, gambling, religion, etc.)

Moving Needs to Bits = A Billion Dollars

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 ten’s 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.

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 five years old.

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

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

Others will do better.

Others will discover the other unmet and unfilled social needs that can move online.

It could be you.

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

Steve Blank is the co-author of The Startup Owner's Manual and author of the Four Steps to the Epiphany, which details his Customer Development process for minimizing risk and optimizing chances for startup success. A retired serial entrepreneur, Steve teaches at Stanford University Engineering School and at U.C. Berkeley's Haas Business School. He blogs at www.steveblank.com. Follow @sgblank

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