How to find industry problem as young founder

Young founder are you constantly being bog down by rationale of getting 2-3 years experience and the start somehting new.

If you are a young founder and always being given a rational about working in industry and getting insights and then start company of your own , but yet as a founder you are irrational and wants to start now. Here is my journey to find problem in a very closed industry.

Me and my friend wanted to start something new and I got advise from my friend Akash (Cofounder of Clueso) that we need to find a common interest field and then build hypothesis around it and then validate.

We basically started with a very raw idea of building something in fintech and reached out to every single person with finance word in their profile and they should have experience in multiple companies.

My go to message (Very naive) was

💡 Hi <Name>, This is Abhishek from IIT Madras and I am building a venture in fintech space and I wanted to have a 10 mins call with you to understand how you manage your finances . Your time would be a real value add to our venture. Thank you

Then eventually we understood after few calls about what finance industry mostly comprises of

1. Wealth management

2. Credit

3. Insurance

Then we built our hypothesis but soon realize the hypothesis that we had we are not the best team to solve for because we built hypothesis in wealth managrment and that field required trust and portfolio management numbers to bank on and we didn’t had any of those so we dissovled the hypothesis. Then we went to look for adjacent industries like credit and then drawing out value chain. .

We were analyzing credit space by reaching out to people who had credit in their Linkedin profile , Initial calls just makes you aware of industry and help yuo to figure out whom to approach.Then after multiple calls and reading about Indian credit space we were able to draw out a navie value chain. Then moving forward we broke down the value chain into multiple parts and then started hunting for people who address respective parts of the value chain and we used to ask questions to understand their current workflows , challenges and opportunities.

Like for credit: Leadgeneration →underwritting→Load disburssal and documentation →Loan recollection.

Then moving forward we figured out that there can be software tools that might serve very well for credit in banks will not be optimal for microfinancing NBFCs ( Non Banking Financial corporations - The ones who can’t ask for collateral against loans). Segmenting different type of institutions that are involved Banks , NBFCs. Figuring out a way wherein breaking into every key step of the value chain and then analyzing each of them and then again duplicating this value chain in multiple industry segment like for Old banks , Neo Banks , Bigger NBFC’s , rural focused NBFC’s and so on. BCG report was helpfull for categorization and understanding this space.

Horizontally dividing based on value chain and vertically dividing based on which industry segment it serves.

Soon we realized there are a lot of tools in the space right from loan management to underwritting and also underwritting(Risk assessment) is something that bank’s/NBFC’s would want to do inhouse because that is core philosophy and differentiator for banks. And we were not the best person to build some financial model for risk assessment. So after weeks of reading and talking we left this field as well.

💡 We certainly realised till this point of time that we cannot go into core competancy like making financial modelling or making underwriting logics industry veterans are better off doing that.

💡 One more insight that we realised that businesses are build on core competancy and as student we can only compete on level playing grounds and technology which is new and fast evolving provides the opportunity for students to build.

Meanwhile we were very frustrated because we were going all broad but nothing was working and we didn’t had a direction and we started asking questions that are not recommeneded and asked problems directly upfront to people because we lacked hypothesis at this point .

While asking people about the problem that they face in their current professional life or in past corporate job that should have been solved for company that could save company huge amount of resources and time or could help them reach their key north star metric

One problem statement we ended up was “ insurance companies processing claims is very manual and labourious process can we automate it to an extent wherein manual adjudication can be discounted and overall process can be fastracked”.

Also currently the tools and OCR that they were using weren’t good enough to handle hospital bills and they had to train on a lot of bill data and as they were not able to do OCR very well no automation can be bought moving forward.

💡 Few points that help in choosing problem Don’t solve for companies core value propostion like for banking the core value that banks differ is underwritting and they would never want a third party to do it for them or even share data with them eventually third party will be removed.

Look for non-core company problems like better OCR in billing is not core value problem for insurance so its better solved by third party companies.

Taking this insight we went on to look into the company which had this employee who told about problem and approached senior officials and approached on linkedin and after approaching a lot we got a reply and then we got some level of validation from him about the problem statement and meanwhile we weren’t focus on that specific lead but also reached out to different management and then eventually 2nd lead connected us to the apppropriate departement and it took 10+ days and multiple followups.

💡 I also found one theme common across enterprises that these companies are here for long time and they have systems in place for every thing so there is nothing like hair on fire problem that they would say out loud because they are moving already and employees are hesistant to tell company’s internal problem

Moving forward we figured out all companies in Insurance companies in India approached employees in that companies and then after we defined our problem statement we reached out to respective profile like claims department and understood the respective process accross industry and had a very clear understanding about the problem in Industry this took us easily 25 interviews to understand , conclude commonality across all insurance comapny and TPA (Third Party Administrator). Few key things that might help

1.Reach out to higher level executive to understand the business impact and seriousness of the problem for company

2.Reach out to lower employees for understanding the workflow and processes.

3.Keep hunting for other big problems in same industry you may not actively act upon them but if it comes very recurringly across multiple companies then you might have chance to evaluate them and a also good benchmarking technique Harshil (Contineu AI) told me for this is to look in terms of business impact , your compatibility to solve that and if the delta effect (Before and after situation) is big enough you can go ahead and pivot.

To summarize

→ Drawing value chains breaking them apart analyzing each segment for problem statement and then vertically duplicating this accross different industry segments, I feel this is structured approach

→ Think from business stand point why you as young founder is better of building that as compared to them, above insights will help to fixate which Problem statement to attack.

→ Have interviews of on field people and don’t take anyone very seriously , increase your dataset because you will end up interacting at times with extreme personalities that might bog you down and or bloat you up with confidence just because they want to make themselves or you feel good respectively.

Initiating sales part , we weren’t build business will be covered in upcoming blog.

Look for my another blog for getting maximum number of user interviews. Following is image of how I used to maintain my user interviews

Conclusion:

As a young founders we are at step 0 and the only thing that we can do is get more knowledge and problems from industry by taking loads of interviews analyze which one we are most suited to solve for with a very sound mind to make good judgement.

FunFact: I have learned this past month , there will always be competiton in fair market so its just we need to have that confidence and check that wherein we are competant enough to beat‘em up or not.🤘