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Jun 1st, 2017 Share: Share on Twitter Share on Facebook Share on LinkedIn

The Two Ways to Build A Company

Lately, I have been thinking quite a bit about the ways to build a company — more specifically the question of how do you find the problem you want to solve?

I see too many companies struggle with finding product/market fit, building solutions for problems which are pretty obviously too small to justify the existence of a company singularly focussed on solving them or creating imaginary problems to fit a hypothesis the founders have. It’s a vexing problem which, I believe, contributes greatly to the abysmal survival rate of startups.

Over the years I have come to believe that there are largely only two ways to build a successful company (this comes with an asterisk — you can, of course, build a company with the sole purpose of being folded into another company, i.e. you build a feature for another company’s solution, but it’s typically a long shot in terms of your odds of being successful):

Either you create a new market or you identify a problem people are willing to pay for.

Both options are devilishly hard to solve for. Creating a new market is what everybody dreams of and is insanely hard to pull off. The rewards are outlandish though — PayPal, eBay, Amazon, AirBnB, Uber… They all created new markets where there were none before.

The other option is easier — but often leads to companies which do seemingly boring stuff (nothing wrong with that!): Identifying problem spaces where people are actually willing to pay for (and do so in amounts which make companies viable) more often than not leads you to B2B solutions. Solve a problem for a business and they gladly pay you for it. Solve a problem for a consumer and you need a lot of paying customers to make it work.

Whatever you do — take a hard, honest look at what you’re doing and ask yourself if you’re either creating a whole new market (in which case the new market needs to be big enough to sustain you) or truly solve a problem people are willing to pay for.

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