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MenuWhat's the best way to validate a SaaS idea?
I'm a marketer in talks with a developer and we'd both like to see some type of validation before moving forward with building an MVP. Any recommendations on the best way to do that?
Answers
The best way to build an MVP is to distill the solution to the smaller unit of value to deliver something to a customer.
Start small, time box it and focus on solving the problem at it's core even if it's ghetto (I call the best MVP's ghetto but useful).
Here's an image that represents my thinking on this
https://twitter.com/danmartell/status/516316632126586883
I co-founded a SaaS company and have advised several other SaaS startups. We thoroughly validated our product before writing the 1st line of code. It saved us a ton of cash and time because we made a pivot before development, despite being veteran domain experts of our target market.
I consistently see startups gloss over the validation step and proceed to waste $50k - $100k in development (and re-development) costs validating their product when it can be figured out before the expensive development phase... Take your time and do this RIGHT!
There is not much in the question about what you already have (i.e: target market, research, clickable mockups, etc.) So I am going to assume you just have an idea.
I give an educational talk called “Idea to Revenue: 5 Steps to Validating your Startup Product”. It is quite an involved topic so for the sake of this answer I will give an outline of the ‘How To’ without the examples and ‘Why To’ explanations. Contact me for more details or help with your specific scenario.
----- The 5 Steps -----
#1: Idea - Brainstorming & Research
Research
- Identify competitors (crunchbase, google, app store, etc..)
- Does your idea exist already? (Google Patents)
- Can you do it better, faster, cheaper?
Brainstorm - Identify huge opportunities to disrupt the market
- How are people addressing the problem now?
- What disruptive technologies can solve the problem?
- Where is the competition missing the mark?
- See non-competitive products for more ideas
#2: Plan - Narrowing the Focus of your Product
- Document your Assumptions
- UX hypothesis
- Goals for the product
- Define the MVP
- What features are required to sell the product?
- Connect the functionality to the product goals
- Define metrics for success
- Define customer personas
#3: Sketch - How to Use a Quick Drawing to Determine the Interface
- Create a sitemap of the product
- Use pen/pad to sketch the interface
- Design whole tasks that testers can complete
- Show the connections between the screens (information architecture)
#4: Clickable Mockups - Create a Realistic Demo of How the Product will Look and Work
- To create a realistic interface use the following tools to mockup flat designs for each screen that you sketched (*hint: use real copy)
- Desktop: photoshop/sketch or axure or a similar program
- Mobile: AppCooker or Proto.io or a similar program
- Use Invisionapp.com to connect the flat designs so that the user can click/tap on the buttons and transition from screen to screen. This will give the tester a ‘real enough’ experience to complete tasks and answer questions about its viability
#5: Customer Testing - Getting Real World Feedback
- Use Questionnaires and Interviews
- Collect qualitative and quantitative data to prove or disprove your assumptions for each persona from step #2
- Repeat the Design/Learn feedback loop until the testers can consistently complete the tasks that you have mocked up. Additionally the quantitative data should suggest that the product will solve a significant enough pain point that they will pay for it.
- You can find testers in your network, linkedin, facebook, twitter. Just ask people for their valued feedback on a new and exciting product :)
- I received a 51% response rate on a Linkedin feedback campaign. I am happy to share the how that works and the exact templates if you contact me.
This is a down-and-dirty overview of how to validate your SaaS product. As mentioned above there are more details, examples and explanations but if you follow this outline you will be ahead of the game. Feel free to contact me for further help.
Cheers,
--Ryan
The best way (in my experience) is try to deliver the value but in a old-school way (not software related). Sometimes this is not possible, so you want to try to get as close as possible to what would be your product.
Example: I wanted to know if people would pay for software that would help them curate and manage their social media feed but get it deliver by email (for 40+ audience). I curated Twitter, LinkedIn and other social network where I could get graphs and started and email list. I got feedback that it was very useful and then I ask them if they would pay for it and how much.
My advice is: find the real value that your SaaS will deliver, and try to do it manually in small scale. Then try to get paid for it. If you get customers, then you may build something to serve them.
**sometimes this is hard to do if the problem you are solving is very complex. In this case you should pitch the solution to possible clients and see if there is enough interest for pre-sales or if they commit to a pilot
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As a startup, is it better to find a way to pay for services (i.e. design) or trade equity for it?
Before I get to your question, let me give you a tip: always aim settle questions of payment before the work happens. It is ten times easier to agree on a price beforehand, and having done that doesn't stop you from changing it by mutual agreement later. The problem with paying cash is pretty obvious: you don't have a lot of it. The problems with paying equity are subtler. The first one is that early-stage equity is extremely hard to value. A second is that equity transactions require a lot of paperwork. Third is that entrepreneurs tend to value their equity much higher than other people would; if not, they wouldn't be starting the company. And fourth, people like designers are rarely expert in valuing businesses or the customs of of startup equity valuation. In the past, I've both given and received equity compensation, and it's a lot more of a pain than I expected. In the future, what I think I'd try is convertible debt. That is, I'd talk with the designer and agree on a fair-market wage. E.g. 100 hours x $100/hr = $10k. The next time we take investment, the $10k turns into stock at whatever price we agree with our investors, plus a discount because he was in before the investors. Note, though, that this will increase your legal costs and your deal complexity, so I'd personally only do this for a pretty significant amount of work. And I'd only do it for somebody I trusted and respected enough to have them around for the life of my business.WP
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Does anyone know of a good SaaS financial projection template for excel/apple numbers?
Here is a link to a basic model - http://monetizepros.com/tools/template-library/subscription-revenue-model-spreadsheet/ Depending on the purpose of the model you could get much much more elaborate or simpler. This base model will help you to understand size of the prize. But if you want to develop an end to end profitability model (Revenue, Gross Margin, Selling & General Administrative Costs, Taxes) I would suggest working with financial analyst. You biggest drivers (inputs) on a SaaS model will be CAC (Customer Acquisition Cost, Average Selling Price / Monthly Plan Cost, Customer Churn(How many people cancel their plans month to month), & Cost to serve If you can nail down them with solid backup data on your assumption that will make thing a lot simpler. Let me know if you need any help. I spent 7 years at a Fortune 100 company as a Sr. Financial Analyst.BD
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What legal precautions can I take to make sure nobody steals my startup idea?
I've discussed ideas with hundreds of startups, I've been involved in about a dozen startups, my business is at $1M+ revenue. The bad news is, there is no good way to protect ideas. The good news is, in the vast majority of cases you don't really need to. If you're talking to people about your idea, you could ask them to sign an NDA ("Non Disclosure Agreement"), but NDAs are notoriously hard to enforce, and a lot of experienced startup people wouldn't sign them. For example, if you asked me to sign an NDA before we discussed your Idea, I'd tell you "thanks, but no thanks". This is probably the right place though to give the FriendDA an honorable mention: http://friendda.org/. Generally, I'd like to encourage you to share your Ideas freely. Even though telling people an idea is not completely without risk, generally the rewards from open discussions greatly outweigh the risks. Most startups fail because they build something nobody wants. Talking to people early, especially people who are the intended users/customers for your idea can be a great way to protect yourself from that risk, which is considerably higher than the risk of someone taking off with your idea. Another general note, is that while ideas matter, I would generally advise you to get into startup for which you can generate a lot of value beyond the idea. One indicator for a good match between a founder and a startup is the answer to the question: "why is that founder uniquely positioned to execute the idea well". The best way to protect yourself from competition is to build a product that other people would have a hard time building, even if they had 'the idea'. These are usually startups which contain lots of hard challenges on the way from the idea to the business, and if you can convincingly explain why you can probably solve those challenges while others would have a hard time, you're on the right path. If you have any further questions, I'd be happy to set up a call. Good luck.DK
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