This is my checklist for evaluating startup ideas. It also helps you define the most important aspects of an early startup business.

I consider a startup an organization that is creating a scalable service or a product in conditions of extreme uncertainty. I wouldn’t recommend this checklist for other types of businesses.

Pitch

Creating a pitch is a forcing function for achieving clarity about an idea. In this case a good pitch contains less than 50 characters, defines well what you’re building (product), and for whom you’re building (customer). You don’t need a how or a why, just what.

To be able to distill an idea into a concise and clear pitch one needs to have a lot of clarity about the idea. It helps you set your initial scope and removes any unnecessary fluff or ambiguity.

Try creating a pitch very early for any kind of idea you’re having. You will notice how hard this will be in case you don’t have enough clarity about what exactly you want to build.

Problem

What problem are you solving? You should always start with a problem and not with a solution. People are not buying products, they are buying a solution to a problem. If you’re selling a drill machine, customers don’t want to buy a drill machine, they want to make a hole. Be sure to know what problem exactly are you solving.

Be aware if you’re a SISP - “Solution In Search of a Problem”. Too often people come up with an interesting product that is not yet applicable to any customer need. So often that SISP was a term coined by the most popular startup incubator YCombinator for flagging startups during evaluation.

Founder usage

Would you pay for this service yourself? If you’re not a potential customer, try to put yourself in their shoes and ask yourself the same question. This is a thought experiment that grounds your thinking and helps you understand if your idea can offer good enough value. A successful founder believes in his or her idea.

Product and customer risk

The very best startup ideas tend to have three things in common: the service is something the founders themselves want (previous point), that they can build (product risk), and that few others realize it’s worth doing (customer risk).

Product risk: Can I build it? Can I grow it? Video games are a pure product risk - customers will play if you can build it.

Customer risk: Do they want it? Will they pay me? Are there lots of them?

Be aware that those are your leap-of-faith assumptions - your biggest weapon and your biggest enemy. Assumptions like these differentiate you from other companies, but they are also the foundation of your business. In an early startup stage, your main goal should be validating those hypotheses (Lean Startup methodology). Pivoting is necessary if hypotheses are proven to be wrong.

Secret

Have you identified a unique opportunity that others don’t see? What is your secret sauce? What is it that you know and others don’t? What is a new insight you have? What important truth do few people agree with you on?

Airbnb’s secret was that they knew that people find it okay to have strangers sleep in their homes.

Earlyvangelists

Earlyvangelists are customers which would seriously miss your product or would be highly impacted if the next day your business would perish. Those are the customers with a critical and immediate problem, and a big enough budget to buy your product.

So who are your earlyvangelists? Who wants your product so much that they’ll use it even when it’s a crappy version made by a two-person startup they’ve never heard of? You should be able to answer that - if not, start looking for early adopters like those.

You should always start with a big share of a small market - and knowing who your earlyvangelists are helps you find that sweet spot. Earlyvangelists should be a beachhead for your market fit, and only afterward you should sequence to bigger markets.

Why now?

Why is now the right time to start your business? What changed? You should almost always have a clear answer to this because successful companies had at least some failed predecessors that had bad timing.

Example: Apple created a tablet already in 1993 but failed. In 2010 they launched a tablet product again, a big success known as an iPad. What changed? First timing was off - one of the main enablers for mainstream tablet adoption was web surfing.

Competition

Who is your competition? What did they miss?

On the upside, more competition means there is more demand, but on the downside, you need to create a product that is differentiated enough. You don’t need to worry about entering a “crowded market” as long as you have a thesis about what everyone else in it is overlooking.

On the other side, building a product in a market where there is barely any competition means there is a high product or customer risk.

You always have competition. At a minimum, there is at least indirect competition. If there is a big market in which people need something urgently, it would’ve already contained some competition.

The Moat

Moat strategies help businesses to be defensible 10 and 20 years into the future. Examples of moat strategies are proprietary technology, exclusive partnerships, protected intellectual property (patents, copyrights) and a lot more.

So how durable is this idea? What is your moat strategy? How fast can a bigger company develop the same solution you’re developing? Notice that there is not an “if” a bigger company can develop the same solution - there are always companies out there that can build similar solutions in the long run.

According to YCombinator, early startups rarely die from homicide, it is mostly a suicide. So don’t focus on moat and competition early on, but your idea needs a potential moat strategy defined from the start.

Founder-market fit

How much knowledge do you as a founder have of the domain you’re building in? Bonus points for this idea if you do. That gives you a lot of leverage, and critical assumptions you’re making come from experience.

People

Do you have the right team?

If you don’t have a co-founder, try to find one as soon as possible. There is a whole range of benefits to it.

Distribution

Do you have a way to not just create but deliver your product?

Value capture

Can you capture enough value? Sometimes a company can create a lot of value but not capture it (make money out of it).

For example, Wikipedia is producing a lot of value, but capturing almost none. Airplane companies earned 37 cents per passenger in 2012, but they were creating $160 billion dollars per year. Google on the other hand created $60 billion in the same year, but it was able to keep 21% of those revenues as profits.

Grand Vision and Growth potential

Is this idea big enough? Can it expand into bigger markets later on?

What is your grand vision all the people would be aligned on and drawn to? Without a grand vision, you and your employees don’t have a grand meaning.

Elon Musk didn’t say it sells space busses for rockets but that he wants to send people to Mars. Rimac didn’t say it sells electric car power trains, but instead, his mission is to produce the next-generation electric supercars. Facebook was renamed Meta because it recognized a need for a new, bigger vision.

To generate a good vision you can do a thought experiment: If my business exists in its ideal form 10 years from now, what does it look like?