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How to Judge a New Venture in 15 Seconds Flat

I ask one question to determine whether a new company has a future. The 15-second answer tells me all I need to know

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When entrepreneurs ask us to evaluate business ideas, we always respond first with the same question: “What problem will your new venture solve?”  Their one-or two-sentence answers---10 or 15 seconds at the most---are often enough to predict the future. 

 Too frequently, entrepreneurs quickly get sidetracked talking about things like the amazing technology they hope to use, the fantastic team members they’ll be working with, or the resources they hope to leverage.  But, if they answer like that chances are they’re set up for failure.  Why?  Because a new venture---any venture---needs focus.  It needs a purpose.  It has to solve an important customer problem and in some small way, improve the world.  Otherwise, what’s the point? 

Think of some of the most successful companies in the world. For the truly great ones, you can probably describe their reason for existing very quickly, and articulate the customer pain they solve.  For example, Apple’s reason for existing isn’t to build computers and devices.  It’s to solve a customer problem---lack of control over technology. 

Starbucks doesn’t exist simply to brew a good cup of coffee. It also exists to solve a problem and ease a pain---most acutely the cravings that come with caffeine withdrawal.  Abercrombie and Fitch generated nearly $3.5 billion in revenue in 2010.  Did they do it by selling clothes?  In anything but the strictest definition, no.  The company solves an intangible customer problem---a longing for a certain lifestyle and look. 

 Is customer pain sufficient to guarantee success? Of course not.  An entrepreneur needs to develop a product, construct a compelling value proposition, gather resources and people, and figure out marketing and pricing, to say nothing of the challenges of leadership.  But a relentless focus on customer pain gives a visionary founder a lot more cushion to work through the inevitable difficulties. 

 So, as an entrepreneur, we advise that you start by looking for trouble.  Brainstorm things that people find disturbing, frustrating, urgent, or uncomfortable. Then, switch gears and develop cures.  Focus on healing.  Figure out how to make the pain go away and build a new venture around it, and articulate it to advisors and stakeholders.

Jon Burgstone was CEO and co-founder of SupplierMarket, acquired by Ariba for $1.1B. He now teaches at the University of California, Berkeley, where he is the Founding Faculty Chair at the Center for Entrepreneurship & Technology. With Bill Murphy, Jr., he is co-author of Breakthrough Entrepreneurship. @jburgstone

Bill Murphy, Jr.: Bill Murphy Jr. writes about entrepreneurship and national security. He reported from Iraq for The Washington Post and worked as the primary assistant to Bob Woodward on the books State of Denial and The Secret Man. With Jon Burgstone, he is the co-author of Breakthrough Entrepreneurship.

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