Editor’s note: Nadia Eghbal is a Principal at Collaborative Fund. Kate Harrison Brennan is a Rhodes Scholar and founder of Global & Smart, and was an adviser to former Australian Prime Minister Julia Gillard.
When today’s most successful founders are asked why they started their companies, they often give some version of the answer that they were “scratching their own itch.”
Airbnb founders Joe Gebbia and Brian Chesky were renting out their floor space to help cover their rent. Mark Zuckerberg started Facebook to help Harvard students find one another. Nest co-founder Matt Rogers says that the development of their first product “started as our frustration and the more we talked to other people, the more we heard their frustration.”
These stories have morphed into the widely held notion that the best companies are born out of our personal problems, a line repeated by venture capitalists like Paul Graham, who advises founders, “The way to get startup ideas is…to look for problems, preferably problems you have yourself.”
It’s understandable why this advice is so frequently passed around among entrepreneurs. As Paul Graham points out, solving a problem that you yourself have ensures that the problem exists. It guarantees empathy for your user.
This advice is useful for optimizing a startup’s chances of success, but in the context of a tight-knit entrepreneurial community like Silicon Valley, solving your own problems can turn into an echo chamber.
Tight-knit communities can serve as an incubator for product ideas. It’s easier to find people to test and launch with if a founder addresses a problem that they or their friends have. It’s easier to communicate an idea to a demographic that a founder understands, and if that idea resonates, leverage the network effects.
But to believe that the best companies come from solving one’s own problems misinterprets the underlying sentiment of this advice.
Jason Fried, co-founder of Basecamp, has written about the importance of solving one’s own problems as a founder. He and his team were a design firm looking for a better way to communicate with their clients, and spun the resulting product into its own company. However, digging deeper, he explains, “When you solve your own problem, you create a tool that you‘re passionate about. And passion is key.”
Perhaps the point is not to literally solve one’s personal problems, but to solve problems that we are personally passionate about.
How do we know what we’re passionate about? They’re the questions we keep coming back to, the problems we mull over with anyone who will listen, the articles our friends email us, saying “Thought of you!”
As Malcolm Gladwell writes in A Few Thin Slices of Malcolm Gladwell, “When you write a book, you need to have more than an interesting story. You need to have a desire to tell the story. You need to be personally invested in some way. If you‘re going to live with something for two years, three years, the rest of your life, you need to care about it.”
There are plenty of potential customers that founders care deeply about, even though they haven’t necessarily experienced the same frustrations themselves.
Pinterest, for example, was created by Ben Silbermann in his mid-twenties, but the platform’s users are overwhelmingly women. Although the company is based in San Francisco, Pinterest sees a disproportionate number of users from the urban Northeast and rural Midwest. Pinterest was valued by private investors last year at $5 billion.
Etsy was founded by three men in their mid-twenties, but as of November 2013, 88 percent of their sellers are women with a median age of 39. Etsy handles over $1 billion in sales each year; Bloomberg recently reported that it’s on the verge of an initial public offering.
And though the myth persists that eBay was started by Pierre Omidyar to help his fiancé trade Pez dispensers, the reality is Omidyar was not a collector himself: he simply wanted to create a perfect market economy.
As software becomes easier to build, and technology continues to permeate mainstream society, there will be greater interest in applying technology-enabled solutions to a diverse set of demographics. These represent new frontiers of opportunity for founders.
We are already seeing a number of examples among early-stage companies. Even, an alternative to payday loans for the underemployed, recently raised $1.5 million from Keith Rabois of Khosla Ventures, among others. Walker & Company makes health and beauty products for people of color and has raised close to $12 million from investors, including Andreessen Horowitz and Upfront Ventures. And True Link, which came out of Y Combinator in 2013, is addressing the need for fraud protection for seniors with prepaid cards.
The flow of capital toward companies like these suggest a positive course correction on the investor side of the equation. While Pinterest was valued last year by investors at $5 billion, we would do well to remember it was initially ignored by the Valley. Pinterest was, after all, about women, the Midwest and the visual web – all arguably undervalued by venture capitalists at a time when technology (Google, Apple) still trumped the technology-enabled (Airbnb, Uber). As investors begin to recognize the true value of companies like these, and founders pioneer the way, opportunities will increase for founders to redefine value and scale their ideas accordingly.
The advice to create companies that solve one’s own problems is well-intended, but no longer quite relevant in a world where technology is being built for every level of society. Today’s entrepreneurs will instead be told to solve problems that they’re passionate about, which will inevitably lead to companies serving a wider section of society.
Walker & Company and TrueLink are Collaborative Fund portfolio companies.