Your own frustration as a starting point, plus some nerve
Personal frustration is a good source of ideas because it comes with a first customer. The nerve to compete is the harder half.
Use your own experiences and pain points to identify an opportunity. Be arrogant thinking you can do it better than others.
Chris Hughes has seen both halves of this advice at close range. He was one of the roommates who started Facebook at Harvard, built the online organizing operation for Barack Obama’s 2008 campaign, and a few weeks ago launched Jumo, a site for connecting people with causes. Each of those projects entered a field where larger players already existed.
The first sentence is the more familiar one. An idea drawn from the founder’s own irritation arrives with a first customer built in. Aaron Patzer started Mint after years of fighting with personal finance software that made him type in every transaction. Drew Houston started Dropbox after forgetting a USB drive once too often. Neither had to guess whether the problem was real, and both could judge early versions by asking whether the product solved it for them.
The limit is that a founder’s pain may be rare. Programmers, designers and people in large cities with fast internet connections are overrepresented among founders, and a problem that bothers them can be invisible to nearly everyone else. The founder is a sample of one. The pain point is where to start looking, and talking to other people with the same problem is how to find out whether it is a market.
The second sentence is the more provocative. Arrogance, here, means refusing to be intimidated by the companies already in the field. Many in the industry treated web search as a settled business when Google started. Online payments had large incumbents when PayPal began. Some unreasonable confidence is needed to start at all, because the rational estimate of success for any single startup is low. What made that confidence useful in both cases was that it was specific: a belief about exactly what the incumbents did badly, whether cluttered and poorly ranked results or payments that were slow and hard to set up. Useful arrogance names the flaw it intends to fix.
Where the word turns costly is when the arrogance points inward. Confidence toward competitors is useful. Confidence that customers are wrong, or that the first design cannot be improved, is how founders stop listening. The founders who do best tend to combine the two attitudes: certain that the incumbents can be beaten, doubtful that their own current version is the way to do it.