I spent ~6 hours studying the YC startup idea module.

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I spent about 6 hours studying the YC Startup Idea Module. Here’s what it taught me.

Y-Combinator has something called startup school. Anyone can sign up and take it for free, and if you find my takeaways interesting I recommend you go through the course as well.

To preface, these are general statements, and there are exceptions to most recommendations they make. This just gives you higher odds of success. They begin by saying, that rather than falling in love with a particular idea, a good founder should fall in love with a problem.

If you fall in love with an idea, you may have a harder time pivoting or iterating to solve the problem at hand, which is all the market wants.

I find in my own experience, an easy mistake people make is trying to solve a problem in a space that is unfamiliar to them. If not immersed, in say, a niche environment, you may come up with common ideas. The people at Y-Combinator call these ‘tarpit ideas’, which are “common ideas that are much harder than they seem”. How to avoid the problem of tar pit ideas?

They say when you come up with an idea, review the history of the space and see who has attempted it before. They recommend talking to people who have worked on a similar, or the same problem before.

Adjacent to this idea of creating common startup ideas, “founder-market fit” is discussed. This aligns with one of the points made in Tuesday's newsletter, wherein successful founders usually worked in the same industry before starting the business. This is not mandatory, however.

You can be an expert in the space from beforehand (more common among successful founders), or you can become an expert after finding an idea (less common, though often necessary when you are younger). They give an anecdote of a group of founders who turned themselves into experts by, in part, talking to people in the industry. Employees, founders, etc. The YC presenter said, “Most founders don't do this because it sounds like too much work”. So, there is opportunity with this.

The concept of ideas spaces was also presented, wherein a certain niche of an industry is chosen, and iteration and pivoting can occur within this idea space. They note it is preferable to choose an idea space that has ‘higher hit rates’. As well, the concept of supply and demand was raised.

It is preferable to choose a space that has a high market demand for a solution, but a low market supply of founders who are working on it, simply because it seems boring or the news cycle isn’t covering it.

This reminds me of a quote by Howard Marks, founder of Oaktree: “To get into the top of the performance distribution, you have to escape from the crowd.”

Derek Thompson, a writer at the Atlantic, in an interview, raises an interesting point related to this. To paraphrase, “Because there are so many papers in science to read, no one has the time to read them all, and as a result, they just focus on the same small number of papers, and write about the same things”.

Aubrey de Grey says he has criticized this behavior and poses the question (paraphrased) “Why would you work on this problem that is so saturated, because if you weren’t working on this problem, it would probably be solved, like, only 5 minutes later?”.To avoid this dilemma, you can still work on saturated problems if you approach them differently.

On the subject of pivoting and iteration, a big part of it is speed. Most people take too long to iterate according to the YC course. Of course, there are exceptions, and the cultural narrative of that fact often does more harm than good. A popular example:

Usually, the successful company iterates and pivots sooner, rather than later, according to YC. This reminds me of a psychological phenomenon called sunk cost fallacy introduced by Richard Thaler. To give you Oxford Languages definition: “the phenomenon whereby a person is reluctant to abandon a strategy or course of action because they have invested heavily in it, even when it is clear that abandonment would be more beneficial”.

How hard would it be to scale?

Another common error addressed is having the startup ‘rely on an external factor out of your control to make the startup take off’.

Of course, every startup relies on external factors, but more specifically this means relying on a specific change in external conditions that is uncertain or unlikely to truly occur.

If your prediction of the external factor proves false, how hard would it be to pivot?

What I found perhaps most salient is the following point. Though you don’t want your feelings toward the idea to be buttressed by short-lived hype, you also don’t want to be on the other end of the spectrum thinking “Man this is pretty lame”, according to YC. Instead, they say it should make you optimistic and happy to wake up in the morning.

Most good startup ideas come about organically while conducting consistent work within a specific domain, rather than sitting down and trying to think of a startup idea without context like this:

(Not to say you shouldn’t stop to reflect and think about how something can become a startup)

Startup School: https://www.startupschool.org/

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