The definition of the next big thing various a lot, I will define it in the following way:
The next big thing is a product that will have hundreds of millions of users, in a business worth billions of dollars.
From the internet history, big things such as Microsoft, Google, Facebook are too big :) For other businesses I want to borrow to discuss today, contains big things such as OpenTable, Yelp, and one startup I just noticed called shyp, and another YC startup Strikingly.
When I started my own startup, one thing I thought about is what makes these product so popular and the business so big. I am also very curious on how good investors such as Paul Graham select and measure these small businesses. I figured out:
A candidate of the next big thing product must resolve people's pain point.
The market size is the size of the group which is feeling the pain, i mean, the real pain.
Think about the product such as Draw Something. You can say it is a big product, however I do not think it is the "next big thing". It makes you feel happy when you play with it, but it does not resolve any of your pain point. I will list out my thoughts on why "next big thing" must resolve pain point in the followings.
Let's define the concept of pain point, and how to measure whether the startup idea is actually solving a real pain point. But before that, lets first define the followings: pain scenario frequency; pain ratio and the pain market.
pain scenario: the situation which could potentially induce pain.
pain scenario frequency: the count of situations which could potentially induce pain.
pain ratio: the count of feeling real pain / pain scenario frequency.
pain market: the customer group that is feeling the pain.
Lets do some rough and estimated calculations on OpenTable, Yelp, shyp and Strinkingly:
OpenTable:
pain scenario: after you made some reservation, you found yourself cannot make it to arrive in time, and then you want to change your reservation.
pain scenario frequency: sometimes.
pain ratio: you need to find the number, and call it yourself, and you will spend 10 minutes talking with restaurant client to figure out a the next best time. This is real pain, therefore the pain ratio could be estimated as 1
pain market: generically applied to most people who eat outside often.
Yelp:
pain scenario: I want to find a restaurant nearby to eat, but has no idea of the surrounding restaurants.
pain scenario frequency: often
pain ratio: have no idea on surrounding restaurant, you feel uncomfortable and you have the uncertainty to eat something really bad. This is real pain, therefore pain ratio can be estimated as 1.
pain market: generically applied to most people.
Shyp:
pain scenario: every time I went to postal office
pain scenario frequency: often
pain ratio: I am in line, I have to prepare my own packaging box, I have to figure out a non-working day and time to drive to postal office. I feel not comfortable and pain. Therefore the pain ratio could be really high.
pain market: generically applied to most people, since most people have the need to send packages.
Strikingly:
pain scenario: people want to build a landing page for my mom, my girlfriend, etc.
pain scenario frequency: sometimes.
pain ratio: I have no knowledge of css, javascript, html. I feel real pain. So the pain ratio is 1.
pain market: people with no coding background who wants to build a landing page, but not generically applied to most people.
From the above calculation, I found one common pattern, they are hitting the real pain point, and more importantly, the pain ratio is high in these products.The market size is big although not in the same scale.
To measure whether a startup is promising, yes, people are saying founders are the most important, which is easy to understand. They should be determinant, and smart. But when comes to the product and the market size, I am guessing what they measure is the followings(the order really matters here):
1, pain ratio number
2, pain market size
3, competitor number
A promising startup must have a high pain ratio number, if not, the product cannot be organically spread out by users. The second thing is that the size of the pain market, the bigger the better, but at least somehow big enough. Third, they will measure the competitor numbers, if there are a ton, then they will pay much more attention on user acquisition.
Therefore, that's why we saw some YC companies do not have any user acquisition, but still get into the program (reason lies on they got 1 and 2, and the competitor number is small); and we saw other YC companies struggled a lot to get users, do the user acquisition such as Strikingly, since there are already a lot of competitors there, and the market size is big enough, but not huge.
To sum up, when you thought about whether you are building the "next big thing", ask yourself the pain ration number and the pain market size first before you say a yes.
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