Enter the market early and anticipate obvious problems.
You’ve probably heard of the professional social network LinkedIn. But do you know the story behind it? Most people couldn’t tell you how such huge companies get started.
And, contrary to what many people think, the key isn’t to be in the right place at the right time – it’s to be there early.
This is a lesson from Reid Hoffman, the founder of LinkedIn. He’s also invested in several successful start-ups, and his secret is to spot a trend before it even starts. For example, when he invests in start-ups, he looks for companies whose value has yet to be fully recognized – a sure sign that a trend has yet to begin.
When Hoffman was starting LinkedIn, many people thought his idea would fail. Newspapers and headhunters already fulfilled the needs of the employment market, so why was his website necessary? Hoffman’s idea seemed bad because it came so early. This made it harder to find investors, but it also greatly diminished competition.
Another reason LinkedIn became so successful is Hoffman’s ability to anticipate solutions to obvious problems.
If you’ve got a great idea, chances are someone else has probably already tried it – and failed. That means you have to figure out exactly why the idea hasn’t already made it big, and what you can do differently to make it work.
For example, when LinkedIn got started, people were skeptical about the value it could offer its first users; with so few members in the network, what was to be gained? This is a typical problem for many start-ups.
Hoffman had a great solution, though. He developed a function that allowed new users to scan their e-mail address books for LinkedIn matches. They would then be shown a list of who was already on the network, as well as options to invite friends and colleagues to join. This network grew quickly, allowing its users to connect with more and more people.
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