Startup Ideas We’d Like to Fund
Paul Graham ( an excerpt of the original post written for ycombinator.com )
July 2008

When we read Y Combinator applications there are always ideas we’re hoping to see. In the past we’ve never said publicly what they are. If we say we’re looking for x, we’ll get applications proposing x, certainly. But then it actually becomes harder to judge them: is this group proposing x because they were already thinking about it, or because they know that’s what we want to hear?

We don’t like to sit on these ideas, though, because we really want people to work on them. So we’re trying something new: we’re going to list some of the ideas we’ve been waiting to see, but only describe them in general terms. It may be that recipes for ideas are the most useful form anyway, because imaginative people will take them in directions we didn’t anticipate.

Please don’t feel that if you want to apply to Y Combinator, you have to work on one of these types of ideas. If we’ve learned nothing else from doing YC, it’s how little we know. Many of the best startups we’ve funded, like Loopt, proposed things we’d never considered.

1. A cure for the disease of which the RIAA is a symptom. Something is broken when Sony and Universal are suing children. Actually, at least two things are broken: the software that file sharers use, and the record labels’ business model. The current situation can’t be the final answer. And what happened with music is now happening with movies. When the dust settles in 20 years, what will this world look like? What components of it could you start building now?

The answer may be far afield. The answer for the music industry, for example, is probably to give up insisting on payment for recorded music and focus on licensing and live shows. But what happens to movies? Do they morph into games?

2. Simplified browsing. There are a lot of cases where you’d trade some of the power of a web browser for greater simplicity. Grandparents and small children don’t want the full web; they want to communicate and share pictures and look things up. What viable ideas lie undiscovered in the space between a digital photo frame and a computer running Firefox? If you built one now, who else would use it besides grandparents and small children?

3. New news. As Marc Andreessen points out, newspapers are in trouble. The problem is not merely that they’ve been slow to adapt to the web. It’s more serious than that: their problems are due to deep structural flaws that are exposed now that they have competitors. When the only sources of news were the wire services and a few big papers, it was enough to keep writing stories about how the president met with someone and they each said conventional things written in advance by their staffs. Readers were never that interested, but they were willing to consider this news when there were no alternatives.

News will morph significantly in the more competitive environment of the web. So called “blogs” (because the old media call everything published online a “blog”) like PerezHilton and TechCrunch are one sign of the future. News sites like Reddit and Digg are another. But these are just the beginning.

4. Outsourced IT. In most companies the IT department is an expensive bottleneck. Getting them to make you a simple web form could take months. Enter Wufoo. Now if the marketing department wants to put a form on the web, they can do it themselves in 5 minutes. You can take practically anything users still depend on IT departments for and base a startup on it, and you will have the enormous force of their present dissatisfaction pushing you forward.

5. Enterprise software 2.0. Enterprise software companies sell bad software for huge amounts of money. They get away with it for a variety of reasons that link together to form a sort of protective wall. But the software world is changing. I suspect that if you study different parts of the enterprise software business (not just what the software does, but more importantly, how it’s sold) you’ll find parts that could be picked off by startups.

One way to start is to make things for smaller companies, because they can’t afford the overpriced stuff made for big ones. They’re also easier to sell to.

6. More variants of CRM. This is a form of enterprise software, but I’m mentioning it explicitly because it seems like this area has such potential. CRM (”Customer Relationship Management”) means all sorts of different things, but a lot of the current embodiments don’t seem much more than mailing list managers. It should be possible to make interactions with customers much higher-res.

7. Something your company needs that doesn’t exist. Many of the best startups happened when someone needed something in their work, found it didn’t exist, and quit to build it. This is vaguer than most of the other recipes here, but it may be the most valuable. You’re working on something you know customers want, because you were the customer. And if it was something you needed at work, other people will too, and they’ll be willing to pay for it.

So if you’re working for a big company and you want to strike out on your own, here’s a recipe for an idea. Start this sentence: “We’d pay a lot if someone would just build a …” Whatever you say next is probably a good product idea.

8. Dating. Current dating sites are not the last word. Better ones will appear. But anyone who wants to start a dating startup has to answer two questions: in addition to the usual question about how you’re going to approach dating differently, you have to answer the even more important question of how to overcome the huge chicken and egg problem every dating site faces. A site like Reddit is interesting when there are only 20 users. But no one wants to use a dating site with only 20 users—which of course becomes a self-perpetuating problem. So if you want to do a dating startup, don’t focus on the novel take on dating that you’re going to offer. That’s the easy half. Focus on novel ways to get around the chicken and egg problem.

9. Photo/video sharing services. A lot of the most popular sites on the web are for photo sharing. But the sites classified as social networks are also largely about photo sharing. As much as people like to share words (IM and email and blogging are “word sharing” apps), they probably like to share pictures more. It’s less work and the results are usually more interesting. I think there is huge growth still to come. There may ultimately be 30 different subtypes of image/video sharing service, half of which remain to be discovered.

10. Auctions. Online auctions have more potential than most people currently realize. Auctions seem boring now because EBay is doing a bad job, but is still powerful enough that they have a de facto monopoly. Result: stagnation. But I suspect EBay could now be attacked on its home territory, and that this territory would, in the hands of a successful invader, turn out to be more valuable than it currently appears. As with dating, however, a startup that wants to do this has to expend more effort on their strategy for cracking the monopoly than on how their auction site will work.

11. Web Office apps. We’re interested in funding anyone competing with Microsoft desktop software. Obviously this is a rich market, considering how much Microsoft makes from it. A startup that made a tenth as much would be very happy. And a startup that takes on such a project will be helped along by Microsoft itself, who between their increasingly bureaucratic culture and their desire to protect existing desktop revenues will probably do a bad job of building web-based Office variants themselves. Before you try to start a startup doing this, however, you should be prepared to explain why existing web-based Office alternatives haven’t taken the world by storm, and how you’re going to beat that.

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Tags: 10 Start up ideas that need funding, start-up funding ideas, startup ideas we'd like to fund, what to look for when funding a start-up