I'm looking for ideas for a new startup. Venture Capital is pretty hard to get here in Europe, so I'm not counting on any serious backing. It looks like bootstrapping is the way to go. This means that the choices are limited to either a subscription-based service or pay-for-download software: I can't really afford to work on this otherwise.
So I've been thinking about what kind of product to build. However, I realized that most people I know don't really pay for software. People just use free software and when the free software is no good... then well, bittorrent is an easy alternative.
And all of the YC startups on wikipedia (Biographicon, Anywhere.FM, Appjet, Parakey, Virtualmin, Weebly, Xobni, Justin.tv, YouOS, Loopt, reddit, Scribd) don't charge for their service. Everything's free. I don't want to compete with free.
37signals is profitable with their subscription-based software... but they're the exception that proves the rule. Their marketing and branding puts them in a unique position.
DHH advocated (during some YC event) that a good audience is a subset of the fortune 5.000.000. Small businesses, unlike regular consumers, are willing to spend money on software. But it looks like there's a _lot_ of software for small companies already, be it for accounting or CRM... competition is going to be really tough. My brainstorming session didn't amount to much here.
So what should I do?
And as a question to you all: have you ever built a product that people liked, but were not willing to pay a dime for?
I'd say don't even think about how you're going to make money at the initial stages of brainstorming. Look for a legitimate problem and solve it, make sure the people you're solving the issue for see value in the solution your providing, and on your journey to solving the problem you can then start positioning your company as far as what business model route you want to take.
That attitude is just going to lead to you rejecting a lot of good ideas because they'd be offered as free services, or you settling with a crappier idea just so you can start heading down the business model path you want to take, and you worrying more about the business than the problem is going to show in your product.