What do oxygen, clothes and jewels have in common? Probably very little. Same do business ideas. However, I love this cathegorisation of startups, based on which class of needs they provide a solution for. I heard this concept during a Startup Grind event in Madrid and I now present it to you.
OXYGEN startups respond to essential and indispensable needs (e.g. food, health, transportation, education) or provide a solution that is simply so much better than the pre-existing one; products and services offering a solution to those problem statements are very likely to be adopted by users and purchased by customers. Competition in this field is fierce. Typically one startup opens the door and then tens of followers try to get some market share. Some examples include Uber, AirBnb etc.
CLOTHES are definitely needed, but they are not critical for survival nor their absence would determine a very uncomfortable experience. So are business ideas providing nice-to-have features and functions to your daily life. We enter here the world of substitutes: when that service/product misses, it’s very likely you’ll find an alternative. E.g. sharing municipality bicycles (if it doesn’t work, you take the metro/bus).
JEWELS should not define “useless” services/products, just for fun, but rather very premium items that you certainly don’t necessarily need, but that give you a significant plus to satisfy your niche-passion or your status-necessities. It goes without saying that they allow startups to charge high fares for that. A very good example is the top-end travel agencies. Margins tend to be here very much double digit.
Why is it important to know which category your business idea belongs to? Because based on how badly your potential customers will urge your solution you can afford concentrating your effort strengthening your core proposition rather than nice-to-have features. The key validation you need now is “how badly your potential customer urge your solution?”