The number one step in making money from an idea before anyone has heard about it is to, well, find that idea. The key step here is rather underwhelming, somehow even frustrating: you have to get a little bit, if not very lucky.
Oftentimes, the most successful entrepreneurs were lucky enough to be in the right place at the right time, and to have the skills that matched the demand of a growing trend. In other words, they not only found themselves in a place where they could get a glimpse of what the next big thing would be, they also were able to start tinkering with the idea and applying their skills to making that thing mainstream. That’s a lucky homerun not a lot of people hit in life, but as we’ll see in part 2, luck is not all that it takes.
Think ahead of the curve: the lucky way
Computers used to be unintelligible binary machines only used by scientists to get complex work done. If you had floated the idea of bringing computers to homes in the early 60s, people would have thought you were insane. We’re talking about a time when computers needed freezers the size of a bedroom in order to cool off properly. Then Bill Gates came, and computers arrived in American homes. Now everyone has a computer, and all your laptop needs to cool off are 2 tiny fans thinner than a matchbox.
As Malcolm Gladwell explains in his book Outliers, if Bill Gates had not gotten access to some of the best computers as early as 1968 (at his university) when they were nowhere near as mainstream as now, he would probably still be a “a highly intelligent, driven, charming person and a successful professional”, but he would probably not be worth $100 billion.
“We look at the young Bill Gates and marvel that our world allowed that thirteen-year-old to become a fabulously successful entrepreneur. But that’s the wrong lesson. Our world only allowed one thirteen-year-old unlimited access to a time sharing terminal in 1968. If a million teenagers had been given the same opportunity, how many more Microsofts would we have today?” — Malcolm Gladwell, Outliers
This teaches us a key lesson on how to get lucky: you have to stay hungry. The people who change the world and revolutionize industries are interested in things. They always want to learn, they’re not afraid to make mistakes, and they see learning as a game and failures as lessons. It also teaches that if you and I had gotten the same opportunity as Bill Gates, we probably still would have failed, but we’ll get back to that a little later.
The researcher way: get interested
Being in the right place at the right time helps to identify a trend ahead of the curve, but getting interested in things is also a great way to get there. Plus, you can’t control how lucky you get, but you can choose how interested you are, and how much time you spend studying a specific subject, chasing specific ideas. So you might as well start learning.
My CEO created a company around online employee engagement almost a decade before anyone started to care about Zoom, Google Meet, or the remote workforce. 8 years after following his crazy idea along with 2 of his best friends, he sold for $30 million. When I asked him once how he got the idea for his company 8 years before anyone else, this is what he had to say:
“I used to have a very standard desk job in telecoms, and I noticed that outside the office, nobody really engaged, or learned anything. Nobody upgraded their skills or went the extra mile to learn anything at home. It seemed even crazier to me given the fact that technology is changing every industry faster and faster. You can’t afford to not learn about your job anymore, or you’ll get passed by. I saw that the future of work was learning anywhere, anytime, on the go, that people were not going to be able to “rest on their laurels of skills” anymore, keeping the same job for 25 years. I researched the market and I couldn’t really find anything solving that issue. So I started working on it.”
The key word here is “research”. My CEO started his company at 40 years old. He had 2 kids, a family to feed, a mortgage to pay off… He had a much smaller room for error than a 20-something with a laptop in his bedroom. But he still got interested. He researched and analyzed the market, and he took the leap.
It’s one thing to identify a trend, it’s another to make money from it. How do you make money from something you know is going to become huge, but nobody is seeing yet? These days, a huge part of the answer lies in 4 simple letters: SAAS.
Creating a Saas
“Software as a service (SaaS) is a software distribution model in which a cloud provider hosts applications and makes them available to end users over the internet. In this model, an independent software vendor (ISV) may contract a third-party cloud provider to host the application. Or, with larger companies, such as Microsoft, the cloud provider might also be the software vendor.” — techtarget.com
Most problems nowadays can be solved with the help of the internet, and that’s why so many companies are Saas companies.
- Customer relationship management → Salesforce ($204B)
- Work communication better than email → Slack (worth $26.5B)
- Organizing and managing marketing funnels → Hubspot ($25.5B)
- Signing a contract in Asia without leaving your desk in NYC → DocuSign ($10B)
- Storing 1000GB of data on the cloud → Dropbox ($9.5B)
- Task management at a company level → Asana ($4.5B)
- Having 100 coders work on a project across 5 continents → Github ($1B ARR)
In the early 2000s, when some people still thought the internet was a fad, a lot of software was available at a one-time price, with free updates. You’d buy a license in store on a CD-Rom (click here if you’re under 25 years old), follow install instructions… That was the best way to monetize an idea, because online payment solutions were not widespread, memberships were not as common…
But as the online world turned into the mammoth it is today, it became obvious that the best way to monetize expensive solutions that required hundreds of employees, server space, and office space, was to have people pay a small recurring membership fee. It’s much better to sell for $10/month to 1 million people than to sell for $1,000 to 100,000. You’re making $120M per year every year with the former, and only $100M once with the latter.
Monetizing an idea with other ways
While creating a Saas company is one of the best ways to solve any given problem lately, it’s not the only way. But your solution will still most likely involve the internet because it’s become such a big part of our lives. Here are a few examples of niches that originally have nothing to do with the Internet but ended up making a ton of money when taken online:
- Ryan Cohen sold his dog toy website for $3.35 billion
- Ramon Van Meer made $9 million selling a blog about Operas
- Treehugger is a modern sustainability site that sold for $10 million
The service industry is obviously not as digitalized as retail. But even if you open a restaurant, a hotel chain, an airline… You’ll need the internet to advertise your company and maximize your revenue. People book restaurants online, leave reviews on Tripadvisor, make reservations on Booking.com, and buy plane tickets online. Nobody shows up in person at travel agencies anymore.
We’ve now covered the 2 first pillars of thinking ahead of the curve and making a ton of money from it. As we’ve seen, the first one is centered around being lucky and/or interested in things. The second one is centered around the internet and offering subscription-based services. The third one is the hardest to get right.
“If a million teenagers had been given the same opportunity [as Bill Gates], how many more Microsofts would we have today?” — Malcolm Gladwell
In other words, would you have become a billionaire if you had been served the same opportunity as Bill Gates on a silver platter? Would you have created Apple into the success it is today just because you liked to tinker with computers?
The hardest quality to have in any field is excellent execution. You can have the best idea in the world, at the best time in history, in the most perfect location in the world. All the stars might align for you, but if you mess up the execution, you’ll end up in one of 2 scenarios:
- You’ll blow it and miss the bus, and someone from your competition will become the next big thing.
- You’ll be able to minimize the damage and still survive, but your hick-ups will allow your competitors to catch up along the way. What could have been a grand slam win will end up being a close-tight race.
The success story bias
One of the major biases of our ever-connected world is that we tend to always watch, hear or read about success stories. We hear about Microsoft but we don’t hear about all the companies that went bust during the dotcom crash in the early 2000s. Even before that, there were probably a bunch of guys who played around with computers, maybe some could code even better than Bill Gates. But these guys didn’t make it.
In a world where we only hear about the billionaires, the successful companies, and the startups that just closed a $500M funding round, it’s easy to forget that success is not the baseline. Most companies fail and go nowhere. Then, these people either give up and go back to “normal life”, or they keep trying until they hit gold. Depending on how many times they’ve tried and how successful they become, you may end up reading their story with a catchy headline like “This Guy Launched 8 Failed Companies Before Making $1 Billion”. Then you’ll think to yourself: “Well, if this guy did it so can I. All I have to do is keep trying, and eventually I’ll strike gold like him.” Except statistically, you won’t.
Look, this article is not here to discourage you, or to make you think you’ll never become a successful entrepreneur. Gates, Jobs, Musk… These guys had to hear they were crazy and wouldn’t make it for most of their life. We’re all part of the statistics, so they were not supposed to make it either.
This article is here to make you realize that “keep pushing”, “try again”, and “think ahead” are not the most important components of success. The most important component is to be excellent at executing, because you can have the best idea in the world, it will go nowhere if you don’t have the vision and the skills to make it big.
So think ahead, yes.
Find a way to monetize your idea, yes.
But most importantly, be excellent at executing, because otherwise, the 2 first points are irrelevant.
Thanks for reading, enjoy the journey you’re on.