Atticus Cummings MAEBB02 2025/2026
Professor Davide Rovera
A startup is a temporary tool for gaining an understanding of a market and business model.
In the IAAC business Entrepreneurship Seminar we learned about how to explore a potential startup idea, validate the problem, engage and validate customers, quantify a market opportunity, evaluate competition, fund a startup, and scale a venture. Here is a look at the process!
Lets look creating a startup as an iterative process, in a way, very much like iterative architectural design. It has several steps that you should follow (at least loosely in order):
- Find Opportunities
- Evaluate the Opportunities
- Explore the scalability of the venture
- Evaluate product / market fit
- Understand the unit economics of the venture
- Build out the core elements of a successful business model
- Develop a business model
#1 Find a problem
There are problems all around us every day, so finding problems is easy… The trick is finding a problem that people will spend money on a solution for and no one else has already filled up the market. Basically we need a problem that answers yes to two questions: does it cause people pain? And, there is not already an established company solving the problem.
Find ways to programmatically generalate opportunities. It won’t be right the first time so the goal is to get through the idea to failure process as quickly as possible. Do your research on a topic, if you spend 100 hours learning about a specific topic you will know more about it than most people on earth. Do the research and you will find better opportunities that are less likely to fail.
There are several major sources of opportunities where you should look:
- Technology shifts: R&D is constant, we live in the lowest quality world of technology innovation compared with most future worlds, it is safe to assume that technology will continue to shift and change how we live
- Market changes: deregulation or value chain disruption
- societal changes: people change how they live over time, this creates new opportunities
#2 Evaluate the Opportunities
We can classify ideas as top ot bottom of the iceberg ideas. Where top of the iceberg are easy to find ideas that about nice to have products but they often don’t work out financially. On the other hand, bottom of the iceberg ideas are on not-so-obvious topics. These ideas may need some level of specialized knowledge to understand what works and does not work in a current system, this provides you possible departure points.
Focus on the problem space you are working within, rather than the specific problem. Let go of solution at this stage, often designers come to a business project with a specific solution that they want to implement, it is far better to exist within the problem space for a while and let the right problem rise to the surface. The solution will come in time.
Early on optimize for learning, find the fastest and cheapest ways to test if you have identified a specific problem that actually affects people.
It is important at this stage to realize why companies fail. While many leading reasons for a startup failing including running out of cash or a team without the right skills or the right commitment, the biggest reason companies fail is when there is no market need ~ basically they are solving the wrong problem.
Spend the time now to understand the problem very well and you will have a much easier time in the future.
#3 Explore the scalability of the venture
When considering scalability, there is one central axiom: bits scale, atoms don’t.
If you can build something once and sell it for a long time then you can have an exponential cashflow / time-put-in curve, while if you have a product that you make once and sell once that curve will stay linear. A linear cashflow to time relationship is not bad, it can be very profitable if you can charge the right amount, but it is worth considering which kind of venture you will build.
An example of a linear cashflow / time job with high profit is consulting. This can also be a way to go deep on the iceberg with someone else paying you to do research which could eventually lead you to create an exponential profit company.
#4 Evaluate product / market fit
“A startup is a temporary organization designed to find a scalable and repeatable business model.” Steve Blank
To evaluate a opportunity and the product / market fit the important thing is to quickly run experiments.
In the search phase there are two stages, “Customer Discovery” and “Customer Validation.” Once you have discovered customers you should quickly try to validate their interest, based on the results of this validation you should be able to pivot and discover better customers.
The goal should be to quickly run a cycle: LEARN -> make a hypothesis -> BUILD EXPERIMENTS -> giving you a baseline -> MEASURE METRICS -> pivot or persevere
Essentially, success can be measured by how fast you can run this cycle.
In the first rounds of validation you are looking to find pains and gains (unmet needs), current solutions, avalible budgets, and how much time and money is currently used on the current solutions.
Good places to look are
- Google trends
- Subreddits – what are people asking about
- Glimps
- Exploding Topics
- AI tools can be useful if used thoughtfully
- Personal observation
- Customer Validation Interviews: (NOT A SALES INTERVIEW!) ask qualifying questions about people’s past experiences with the problem. In interviews you need to find the right people to interview who care about the problem area, you should identify where on the adoption curve they are so you can understand how their responses will map to other people.
- Looking at competitors, what are they doing and why
Once you can understand the problem and how people relate to it you can turn that problem into a value proposition for specific solutions.
As you are validating, you want to quickly find the “Killer Assumption” i.e. the assumption you are working under that, if false, will unravel your entire project.
Prototyping:
The next key step for customer validation is prototyping. Build a minimum viable product simple, fast, and cheap, then test if people are interested in it. This could be a rendering, a video mock up, a front page of a website or any other easy, fast, and cheap mock up that allows you to get people’s engagement. The most important part of these tests is that there is someway to measure customer activation, i.e. do they click the button that says “buy.” So, make a quick test, a website front that has a “buy” button, but when they click the button it should just tell them that we are working on it or that it’s currently out of stock, but it should also provide a place for them to leave their emails if they want to be notified of when the product becomes available. This way you gain measurable insights and traction from real potential customers.
ultimately you need to know:
- Do they want it?
- Are they willing to pay for it?
- How much will they pay?
- How urgent is the need?
- What is the value perception? It is better to have a higher starting cost rather than fighting for the lowest costs. You can always lower costs later, but it is very hard to raise costs once you have started them low.
#5 Understand the unit economics of the venture
Basically, you should understand what it costs to bring in one customer compared to how much income they bring you.
Begin with an understanding that of all the people who hear about your project only 1% or 0.1% will actually become customers. So, in general the more people who hear about it the more people who will eventually become customers. You should understand how much time and money you put into acquiring a new customer and also what the “lifetime value” of these customers is to the company i.e. how much income you will get from one average customer.
If you charge more for a product then you will need fewer customers to make a profit compared to if you sell a low cost product.
#6 Build out the core elements of a successful business model
To make a basic financial plan you need to understand just a few things:
- How much money do you get each month
- How much are you spending: to produce products, pay people, buy or rent machinery, space, and logistics
- If you have multiple services, what is the in/out for each one per month
You can make a financial plan on any excel or google sheets like platform or use an AI platform to make a interactive dashboard with which to evaluate different scenarios.
#7 Develop a business model
Consider how you will initially fund the venture. There are several standard paths:
- Founders: bootstrapping or moonlighting
- Friends, family, and fools (be careful to not damage relationships)
- Business angels – using their own money and expertise
- Venture Capitalists – using other people’s money to get a high return
- Crowd Funding
- Grants or Loans
When asking for funding it is important to show traction, that people want what you are making. This is where all of the validation that you did earlier helps.
Build a good team:
Generally in startups there are three profiles that a good team should have:
- The Hacker – makes the technology work
- The Hustler – business, makes the money move
- The Designer – design, make sure it serves the user and delivers a smooth experience
Do a realistic assessment of what skills you and your team posses and then go out to find people who fill the other roles.
#8 A note on taking an ethical stand in business
People are looking for the companies that they spend money on to take a stand on issues that are important to them.
It is perhaps not the traditional view of businesses to take a stand on social and environmental issues, but I believe that this is the path for businesses of the future.
