Here are the key questions to help you come up with the next big startup idea.

Is there a real pain point in your experience that people are having that is not being addressed today?

The best startup ideas address some real pain points or needs that you notice in your work environment or personal life. There’s a saying in the startup world - “People buy aspirins not vitamins”. Most successful products in the market today achieve their success because they address significant pain points or needs.

After leaving Expedia, Rich Barton (founder of Zillow) was planning to buy a house. Being a data jock, he wanted to get the current market data about home prices so that he could accurately make an effective offer for the home he was interested in. However, the data about home prices was locked away in proprietary Multiple Listing Services (MLSs) around the nation. This led to the founding of Zillow and the now famous Zestimate number that provides home buyers and sellers with accurate information on the current home prices.

What new technology wave can you ride that will help you address the pain point in a new way and leapfrog your competition?

It is good to start with a real pain point, but you will not be successful if there are already many incumbents addressing the pain point effectively. Typically, the best opportunities arise when a new technology platform emerges that upends the market. Typically, the incumbents are slow to react to the new technology giving you a shot at building a solution that leverages the new technology to solve the pain point in a unique fashion.

Before the advent of wireless data, Palm Pilots were all the rage but they required users to sync their devices with their PC every so often. When wireless networks became available, Palm came out with a clunky Palm 7 device with limited email and web browsing capabilities. Blackberry, on the other hand, delivered real time secure email to your device along with wireless syncing of your calendar. No wonder, Palm lost its market leadership position to Blackberry which became the dominant wireless data device in the 2000s.

Are you addressing a market that is at least a billion dollars or more and growing rapidly?

Most VCs will not invest in your startup unless your Total Addressable Market (TAM) is at least a billion dollars or more and growing rapidly. Their assumption is that you might get 10% of the market in 5 to 7 years which would result in a company that has a $100 million in revenues. At a 10x multiple, this implies that your company would be valued at $1 billion or more. Typically, VCs own 25% of a company making their stake worth $250 million. Assuming the VC firm invested $25 million over multiple rounds, they would get a 10x cash on cash return which is the type of return they like to see.

Can you acquire your customers inexpensively?

Most founders are technologists who know how to build great products. However, they don’t quite know how to build a solid Go-to-Market plan and acquire customers inexpensively. The most successful companies are viral in nature and have built in network effects that propel the growth of product. The term “Viral Marketing” was invented by Tim Draper (a famous investor in Hotmail) after he suggested that every Hotmail email include a short blurb that said “Get your free email at www.hotmail.com.” This single action propelled Hotmail to huge growth leading eventually to the acquisition by Microsoft for around $400 million.

Can you build an unfair competitive advantage or moat for your business?

Being first to market is not sufficient anymore. Google was not the first search engine, but it quickly overtook other search engines in the market like Yahoo, Alta Vista and others because they had better search results, and the incumbents had no real competitive moat to protect their user base. The best startup opportunities are ones with network effects or proprietary data. Marketplaces are great examples of startup opportunities with strong network effects. Once a marketplace establishes critical mass, the network effects kick in resulting in a winner takes all or most situations. In the AI world, having access to proprietary data sets can be a significant advantage as you can build better predictions with your model versus your competitors who may not have access to that data.

These are five of the most important questions that you need to answer to build a truly great startup. But having a great idea by itself isn’t sufficient. You need to recruit a strong team that has the necessary experience and can execute on the idea effectively. You need to achieve strong initial results that will allow you to demonstrate enough traction to allow you to raise the necessary funding to establish a solid foundation for growth and market leadership.