How to identify a startup opportunity

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In light of the exponential growth that the Arab world has witnessed over the last few years – the startup ecosystem grew from $10 million USD in 2010 to $72 million USD in 2012 – many would-be entrepreneurs have more opportunities than ever to start their own projects. The success of regional entrepreneurs sparks a sense of competition, and motivates others to think seriously about their own projects. 

Less-than-ideal circumstances also drive potential entrepreneurs to develop their own concepts, either to achieve their long-term goals, or to escape their narrow prospects to achieve independence.

When entrepreneurs take the decision to launch their own startup, most usually go through several important phases, the first and most important of which is coming up with a feasible idea. Some entrepreneurs have ideas running through their heads for years before actually implementing them, while others might find themselves searching for an idea when an opportunity presents itself. Both groups, however, must be able to recognize not only opportunities for new ideas, but also the best ways to implement them.

How to recognize an opportunity

What distinguishes an ordinary idea from an extraordinary one is the possibility of transforming it into a salable product or service. Consequently, not all ideas are opportunities. B. Barringer and R. Ireland write in their book, Entrepreneurship, that most startup ideas emerge in one of the two following ways:

  • Internal Reasons: When the entrepreneur decides to establish a company, he starts looking in the market for opportunities and needs that he can meet by offering a certain product or service.

  • External Reasons: When the entrepreneur notes a gap or a need in the market, he establishes a company that offers solutions and products for people with this need. 

An opportunity should have several specific qualities, such as the right timing, the right product, or an added value that the service offers to consumers to encourage them to purchase it.

The three key approaches to identify the best investment opportunities are:

1. Observing Trends

Study how customers interact with products. For instance, the latest PayPal report points to the fact that mobile transactions in the Arab world are set to increase from 10% to 20% by 2015. Such information shows that there is both a desire and a trend in our markets for mobile shopping, and an entrepreneur might find in this case an opportunity to build a mobile application for purchases from major local stores.

Observing such trends can be done through statistical reports published free of charge based on research done by specialized companies and institutions. Some reports may not be free; these usually contain more valuable and detailed information.

2. Solving a Problem

Recognize problems and develop innovative ways to solve them. Anti-virus software companies are entirely built on this approach. The Wasselni app, for to take a regional example, is a startup project in the Arab world that ameliorates an issue faced by almost everyone: traffic.

3. Gaps in the Marketplace:

Look for very specific segments of customers that other companies do not serve because they prefer to target broader groups. Do you remember how Maktoob offered an Arabic language e-mail interface back in 1998? At that time, big e-mail service providers such as Yahoo! and Hotmail were not paying any attention to the Arab markets. Maktoob successfully took advantage of the opportunity to build one of the biggest web companies in the Arab world. 

These approaches might be helpful for entrepreneurs still in the planning phase, but they can also be useful for entrepreneurs with existing projects looking for opportunities to develop and expand their businesses.

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