Dragonfly Partner: How to Create an Outstanding Web3 Idea?
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Dragonfly Partner: How to Create an Outstanding Web3 Idea?
Are you struggling to find good ideas for Web3 products?
Navigating Web3 tides with focused insightsAuthor: Maestro
Compiled by: TechFlow
Are you struggling to find good ideas for Web3 products? In the University of California, Berkeley's WEB3 MOOC course, Dragonfly partner Haseeb recently delivered a lecture on how to find a great idea in the Web3 space.
We watched this two-hour video and summarized it for you.
The most critical part of every startup is the idea. To determine whether an idea is good or bad, you must pitch it to many people, gather feedback, and iterate on it. The idea defines the market you will build and the type of problem you're trying to solve.
How to Find a Good Idea?
There are two approaches:
- Top-down ideation
- Bottom-up ideation
Top-Down Ideation
What is the biggest problem in the industry?
Top-down ideation involves taking a bird’s-eye view of the Web3 industry and identifying the most compelling areas to build solutions.
What is the TAM for each problem?
TAM refers to the total revenue you can generate by solving that problem. But how do you calculate TAM?
Example
Calculate the TAM for $ETH staking = Total amount ($ETH to be staked) x (APY rate) x (product’s commission percentage). TAM helps determine whether you’re building for an extremely niche market with minimal revenue potential.
Note:
TAM is not useful for ventures aiming to drastically change user behavior at scale. For example, calculating TAM before founding Airbnb would have been pointless—very few people were willing to stay in strangers’ homes back then, but that has changed today.
How crowded is the space?
In top-down ideation, assess how competitive the field is. If many startups and founders are targeting the same problem, that sector is likely more saturated than others.
Have there been recent innovations or breakthroughs enabling technological improvements or shifting market structures?
Before entering, clarify whether recent innovations have made previously impossible things now feasible.
Bottom-Up Ideation
What domain are you most familiar with?
Bottom-up ideation doesn’t ask what the industry needs, but rather what you know best and where your strengths lie. If you lack expertise in any area, take time to learn!
Starting a company requires deep domain knowledge. So, identify the field where you have abundant knowledge, experience, and connections!
What is the biggest pain point?
In top-down thinking, you identify the largest problem most people are willing to pay for. In bottom-up thinking, you must ask yourself: What is the biggest pain point in this field—for you personally?
Then, you must determine whether you can build a product in this space that you yourself would use. However, you also need to assess whether you have the expertise and network to actually build it.
Thus, bottom-up thinking requires commitment, skills, knowledge, and networks—all leveraged in a focused way to address meaningful markets and significant problems while capitalizing on your strengths.
Characteristics of a Good Idea
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Solves a large, clear, articulable problem.
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Defensible—has moats.
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Easy to explain.
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Clear customer/user base.
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Can articulate why now is the right time.
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Strong value capture (i.e., high profitability).
1. Solves a Large and Clear Problem
Address a problem that matters to many people. Solving small problems turns your product into a feature within someone else’s offering or results in insignificant innovation, unlikely to attract customers.
However, if you cannot clearly define the problem, you may not actually be solving anything. You can evaluate your idea/product from these angles:
- Why would users adopt this product?
- Is this a “nice-to-have” or a “must-have”?
- Does it directly save costs for individuals/companies?
2. Does It Have Moats?
Good ideas are defensible. Defensibility means the problem you’re solving cannot easily be solved by others, ensuring competitors can’t quickly enter and capture your market share.
The most common way to build moats is through network effects. The more people use your product, the better it becomes, making it harder for smaller alternatives to compete.
3. Easy to Explain
If your idea is brilliant but hard to explain, then either you’re working on something inherently complex or you don’t fully understand your own problem. Most often, it’s the latter...
4. Clear Customer/User Base
Your idea must target a well-defined group of customers/users. Without clearly defining who will use your product, it’s difficult to establish a go-to-market strategy or figure out how to reach them.
5. "Why Now?"
You must be able to explain why your product should exist now. This implies answering: "Why hasn't this solution existed before?"
If it's a clearly defined problem, someone may have already tried to build it. So the “why now?” question really asks: Why hasn’t someone else built it before you?
Most of the time, the answer might be that someone did try to build it earlier but failed because there was no demand. Is there demand now? You should clearly articulate why this idea makes sense only now and what’s different. For example: Why now? Because there’s been a major shift in market structure, creating clear demand for this product in this new landscape.
6. Strong Value Capture
A good idea has a strong business model and high profit margins. Strong value capture means you not only solve a big problem but also retain a significant portion of the value created through your business.
However, don’t overly stress about value capture in the beginning. At the outset, the priority is solving a big problem. If you solve a big problem, you’ll automatically create substantial value.
This is a fundamental rule for all startups: the amount of value you capture is proportional to the value you create. If you don’t create value, you cannot capture value.
Example:
The music industry is one with very low value capture today. People love music, and in the 90s, they had to buy CD-ROMs to listen. At that time, the music industry captured massive value and enjoyed high profits.
Since the rise of online file sharing (Spotify and iTunes), listening to music has become nearly free. While music still creates enormous value (people love listening), it no longer captures much of that value.
Finally, Common Ideation Mistakes
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Building for non-existent customers (too early).
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Solving yesterday’s problems instead of tomorrow’s.
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Blockchain for X (X = oil, bananas, etc.).
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Building in unfriendly regulatory jurisdictions.
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Building products for crypto KOLs.
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