From personal experience, I can tell you that when I used to think about starting a new software business, I used to be fixated on building a product that solved a new problem. I thought, in order to be successful, it was important to go after the creation of something that hadn't been done before.
I had no idea how wrong I was.
My eventual successes with Axosoft and TransferBigFiles.com certainly didn't do that: neither Axosoft nor TransferBigFiles.com were solving any unsolved problems. When I launched Axosoft's OnTime V1.0 in 2002, there were already more than a dozen bug tracking software systems on the market. When we monetized TransferBigFiles.com in May of 2010, there must have already been more than one hundred solutions to send large files that are too big to email.
So what makes a successful software startup?
If you look at the most exciting new startups, what you'll find is that the companies generally have a few things in common:
- The problem already has dozens of solutions
- The market is fragmented (no entity owns > 50% market share)
- The market appears to be crowded
Who would want to enter a market with the above characteristics? It seems insane.
How do new startups playing in a crowded space generate so much excitement? Conventional wisdom would indicate that such startups would have a hard time getting the attention of investors and they would have an even harder time in the marketplace.
At last week's Launch Conference, the overall winner of the conference was Room77. What do they do? They help you find hotel rooms. If you're asking yourself "really?" or "are you kidding me?" -- that's the right reaction to have.
Another Launch conference favorite was hipmunk.com. What do they do? They help people find flights. Yeah, really! In an Internet age that's dominated by dozens of prominent travel sites like Travelocity, Hotels.com, Expedia and hundreds of others, the most talked about and prominent up and coming startups are a couple of new travel sites. Hipmunk has generated so much excitement that TechCrunch has written about them 9 times in the past 6 months!
Look at Pen.io, another cool new startup that launched at the Launch conference last week. What do they do? They enable visitors to create simple web pages on the fly. Yeah, really!
So what makes these companies so great? They're not solving unsolved problems, so why is anyone excited about them? Upon visiting any of these sites, you will find one common theme:
A Disruptive User Experience
The user experience on these sites is unlike anything you have seen. They are brain-dead easy to use and the response times of these apps are super fast. You are in and out getting what you want done faster than it was ever before possible. That is a disruptive user experience.
So you might be thinking to yourself "yeah, but these companies are not making a profit and they might be out of business soon," and you might be right. However, these companies have a shot. Startups that are not providing a disruptive user experience don't even have a shot! They will not be written about and even worse, they won't be interesting to users.
Even if you look at well established, very large players in our industry, you'll find the same common theme. Google Search, Gmail, iPod, iPhone, iPad, iTunes, YouTube, Netflix, Facebook and Groupon all have the same thing in common: they came into a crowded, well-established market and they provided a disruptive user experience. The easiest and fastest search, email, media player and so on. They dominated a crowded field by providing a disruptive user experience. Did I mention disruptive user experience?
There are hundreds of such examples. The big ones you know and use every day. But there are tons of companies that get acquired along the way. Like Mint.com which beat Intuit at its own game by creating a disruptively simple user experience for managing personal finance. Intuit, realizing that it was beaten at its own game, finally decided to buy Mint.com for $170 Million. Microsoft, Google and Yahoo have been notorious for buying all sorts of little disruptive companies in the $10-100 Million range. Often times, it's just to shut them down so they don't kill their main business. These companies realize the power of a disruptive user experience.
Creating a successful new startup doesn't have to be about creating a product or service to solve a problem that has never been done before. Instead, create a disruptive user experience for a common problem that has dozens or hundreds of mediocre solutions. Create your product to be the absolute easiest to use. It must provide an ease-of-use experience that causes the user to say "Wow! That was easy." When you wow the user, they end up talking about your product. They tell their friends. You don't need as many marketing dollars. Everything is easier.
Aim to wow with a disruptive user experience. Everything else will fall into place.