HOW TO PREDICT IF A NEW BUSINESS IDEA IS ANY GOOD

​Professor Pian Shu tackles one of the most difficult questions in the startup world: How can you tell if a new business will succeed?

​In 2008, entrepreneur Brian Chesky and his two San Francisco roommates made the rounds of Silicon Valley VC firms with what they thought was a great idea: a website and mobile app that would allow homeowners to open their homes to strangers to sleep on their floor while traveling, in exchange for a nightly fee.

Of course, now we know the idea as Airbnb, a $10 billion business with 1.5 million listings around the world. But back then it must have seemed crazy. The liability issues alone seemed insurmountable—to say nothing of the likelihood that people would be willing to give the keys of their houses to total strangers who may or may not be serial killers.

Five VC firms rejected the nascent company’s pitch outright, and another two didn’t even bother to reply. “Investors must have thought, who would ever do this?” says Assistant Professor Pian Shu, a member of the Technology and Operations Management unit at Harvard Business School. “They didn’t know it would turn out to be a multibillion dollar industry.”

Click here to continue reading the article on HBS Working Knowledge.

---