A playbook for Generating Business Ideas

7. Ability to Validate
How confident can I be, or quickly get, that I’m pursuing a viable business? If I
can’t get ten customer development interviews within a week, and begin to
prove there’s a viable business within a few months, I don’t want to do it. I know
that massively limits my upside, but again, my goals are specific.
Does it require product development to get validation (i.e., something like
Snapchat)? Do I have to sit through ten-month sales cycles to know if it can be
sold? Those are risky paths to go down. That’s part of the reason I’ve been
interested in companies solving known and validated problems, or in existing
and validated markets (“second movers”).
8. Cash Flow
An idea’s need for outside financing and ability to generate cash flow are
important considerations for me. If a lot of money is required to start testing the
idea, either because costs are high or because it will take a while to become cash
flow positive, financing will be required either from founders or investors. If you
don’t have any existing relationships to investors, or at least close connections,
that’s another time suck and risk factor. It’s certainly surmountable though if
you have a good team, business, and network.

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Raising money, while glorified in the media, does have downsides. For example,
you can lose some control over your business and you have to give up equity
(and therefore upside). The more cash you need at the start, when your valuation
is the lowest, the more equity you will have to give up.