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MenuHow do you validate your startup idea?
I have an idea for a startup that I want to pursue. It's rooted in a problem I really want to solve, but I want to make sure before diving in, and devoting time to it, that it's viable.
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The one and only thing you should do to validate your idea is...
Pre-sell the solution.
TAKE MONEY. Real actual money.
The only way to tell if something is viable is to take money from people who will buy it.
Don't be fooled by people who say you can't do this. Apple does this all the time. The people you are looking for are called "early adopters".
This is how I validated my business (www.referralriver.com)
I talked to my target market (people I thought I could help and who I also thought could buy or actually had money to buy). At the end of the conversation I asked if they would pre-purchase the solution before it was made.
Many didn't but some did. After I had enough people that purchased I could determine that yes this is a valid idea and worth pursuing.
My general rule: Pre-sell to at least 10 people. If your solution/service/ or product has a lifetime value (LTV) of less than $1,000 then you need more than 10 pre-sales to validate. I happen to be in software so that's a subscription model so for that industry any solution that costs less than $50 per month per user is very difficult to build and be successful at, so a minimum of 10 pre-sales of at least $50 per month per user would validate an idea for me.
Before finding this one I went through maybe 10 other ideas and decided not to pursue them (mostly because no one would pay for the solution before it was built!)
Don't ask "hey would this be useful?" or "would you pay for this if it existed?"
Ask for the sale now.
If people don't pre-purchase this "idea"...then it's crap. Sorry, but guess what?! That's great news. You get to move on instead of wasting your time, money, and resources building something that no one will buy.
If you want to know more, or if you find this useful, book a time with me. Happy to help.
Please upvote this answer if you found it useful.
The most sure fire way of vetting an idea like this is to talk to the folks you imagine using this product or service.
For example, if your service helps widget buyers find and purchase the finest widgets of the world; strike up a conversation with those buyers and talk to them about the struggles and frustration they have with buying widgets.
Then introduce your idea, "Would [my service] help you find better widgets? What would make you say, "WOW! This is what I need.""
Good luck! I'm happy to help you further with this process. I'm working with a number of entrepreneurs right now who are in various stages of vetting their own ideas for services.
-Shaun
You're smart to want to research the idea first. Start by validating that the problem is actually a problem people want to solve. Like Shaun said that takes getting out and talking to people. I'd recommend not asking "would my idea make your life easier?" People are overly nice and they love to say "Yes, of course." Also, try strangers over friends for the same reason. My most recent startup came from standing in a grocery store aisle and talking to random people about the choices they were making and why.
If you validate a problem, then you move on to brainstorming the possible solutions - very important to ignore solutions until you know the problem. Don't try to find a problem for the solution you have in mind.
Once you have the problem and the solution, then you can develop a quick MVP and see if it gets traction/buyers.
If you can hit all those steps, you might have something worth pursuing. The process takes a month or two, but that's a lot better way to start than building something and trying to force it on people. I've tried that - didn't work.
Feel free to reach out with any questions. Good luck!
You need feedback from the people you think would be interested in it. To get that you have several options:
1) Ask friends/family in your theorized target persona if they'd be interested.
2) Post on online communities asking the same thing (e.g. appropriate sub-Reddits).
3) Go in person to the workplaces of your target persona. Bring donuts, or coffee or something around lunchtime, introduce yourself and ask nicely and casually if you could ask them some questions (i.e. if they would be interested in xyz, why/why not, any suggestions, etc.)
4) Make a quick 'landing page' on Weebly or Squarespace, and then do cheap advertising on Google, Facebook, etc. to draw people to it. Make sure you set up analytics first (e.g. Google Analytics)
5) Be creative and think of some other way
If you'd like more specific advice tailored to your actual idea I'd be happy to help out,
best,
Lee
Some great tips already listed here. I'll add one additional tip that cuts through everything that is simply sell your product. If you can't sell it to at least one business (if a B2B) or to 10 consumers (if a B2C) then you won't be able to sell it to thousands. I'm in the business of helping validate ideas and selling is the best measure. Best of luck and if I can be of help, please connect via my site http://TryHypothesis.com
This is a common question that I've seen and answered before. You are not alone!
A simple way to validate any startup idea is to put together a landing page and drive some traffic to it. Unbounce is a great tool for building landing pages.
Spend a few hundred dollars on Google Adwords to drive relevant traffic to your page to see if you can generate leads for your service. When you generate some leads, get on the phone with them and pitch your business. If they are interested, you can let them know you will be launching soon and you will notify them. If they aren't interested, it will help indicate if your idea is something that people want.
For a few hundred bucks, and using a simple landing page, you can generate sufficient data to help you understand if you are heading in the right direction.
Another tool I like to use is Survata. With just $100 you can get 100 objective survey responses from your target audience.
I also wrote a blog post about how to validate your idea. You can check it out here:
The strength of any Idea can be determined in five stages
If it is algorithm related then the idea is to speak to the subject matter expert
If it is in common sense of trying to understand the market proposition then you need to speak to persons like me
If the idea is related to finding the clients in the niche area of expertise then you need to work on your own with industrial contacts
If the idea is to negotiate a sales pitch then you need to contact a scheduler who can afford services to you
The main determination of the team to build worst Idea can also become a super flourishing disruptive start-up venture.
If you want to talk to me further please contact me through clarity.fm
Thank You
With Regards,
Karnati Kiran
I recently went through a Start Up Weekend event as well as a Venture School program through the University of Iowa. The entire course was on doing exactly what you are asking. They teach the lean start-up and business canvas model of proving a business idea.
The core strategy with proving your business has potential is customer discovery - determining a hypothesis and testing it through interviews (customer discovery). You'll do these interviews with several different hypotheses, concerning every aspect of your business idea - the problem, the potential solution, who are the possible consumers, what will they pay (if they will pay), distribution models, sales tactics, etc. I've provided a few links that present the theory behind the business canvas. It provides a means to be agile in your business development, helping you identify when to pivot or change up your idea to best fit the market needs.
www.slideshare.net/esaife/business-model-canvas-101
https://www.youtube.com/watch?v=QoAOzMTLP5s
https://strategyzer.com/canvas
Good luck! Happy to chat further if you have questions about this concept or how to use it.
Hi
First of all, the fact that you are talking about market validation is great. I've seen so many startups invest time and money, only to find that no ones wants/needs their product, or that they only want a certain aspect of it, or they aren't willing to pay the requested price. So you're already one step ahead.
Answer: the sooner you validate your product, the better! That said, the version you are validating needs to be representative of the end product, or else the validation isn't reliable. So, what you should do is:
1. create a business model canvas (which is what all startups should start with before creating a business plan),
2. Setup a Wix or Wordpress website (this can be done for free / very low costs). On the website, include the price of the product/service, and enable people to order it (yes, even if it doesn't exist!). I am happy to explain how this can be done even though you don't yet have the final product and by still being fair to the people who click the "buy/order" button.
3. Spend a small amount (say $100 - depending on your budget) validating the idea (promoting the product/service that you listed in the previous stage).
This way, after only spending a very small amount, you will be able to know (if you did it right):
a. Do people like your product.
b. Do people want/need your product (not the same as 'a').
c. Are people willing to pay for your product? (this being the most important stage)
d. How much are they willing to pay? (you can check this by having 2-3 landing pages with different prices on each).
2 additional important points:
a) in order to rule out external factors like an unattractive landing page or advertising campaign, and assuming you have the time, create multiple landing 2-3 landing pages with different designs.
b) during the above process, don't forget to check how much it costs you to get each user/customer to click the "buy" button. If for example each click on your promotion/advertisement costs you $2, and only every 10 people who click go on to the "buy" page, that means each sale is costing you $20. Then check what your average profit per sale is, and then you'll know if your service/product is worth pursuing (obviously there are additional factors like return customers, referrals etc, but you will get a good estimated/validation of the idea/business).
I'm happy to help you with this matter further, as this is a critical stage which if done right can save you a lot of time and money.
Best of luck!
Great question. Creating a proof of concept is usually the best step. To do this you often need very little.
I started an SEO company in Singapore 15 years ago from nothing. My first client purchased my services because I CREATED TRUST and I offered a clear VALUE package. I had no team - no office - and no commercial experience in SEO. I did however have confidence, business, and IT skills.
Always remember business is about exchanging VALUE for MONEY.
So make sure you have a CLEAR VALUE proposition and then go try sell it. See what happens. You will learn on your feet and get real market feedback.
And remember - money will only exchange hands if there is TRUST in place backed by VALUE.... the greater the trust and the greater the value, the faster the money will flow.
Related Questions
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I have this social media idea,but no coding skills. How do I get someone to do the coding (cant afford to pay them) and not give away half of my idea?
Dilip was very kind in his response. My answer might be a bit on the "tough love" side. But that's for you to decide. My intention, just for the record, is to help you (and those like you) on your path to success. And that starts with having a viable philosophy about entrepreneurial-ism and business. And I'm going to answer this because I get asked some form / version of this question very frequently from newcomers to entrepreneurial-ism. The scenario goes something like this: "I have a great idea. It's amazing, I love it, and I just KNOW it's gonna make me a ton of money. But I have no money right now so I can't afford to (fill in the blank with things like "to build it / create it / market it / etc" or "to hire the required staff needed to work in my business to sell it / develop it / etc"). And I don't want to tell anyone about my great idea because I'm worried someone will steal it and make MY million / billion dollars. But I can't afford to legally protect it either... So how do I launch without the skills to personally create the product AND no money to hire anyone else to do that either??" The answer is ... You don't. Look - let's be honest. All you have is an idea. Big deal. Really. I'm not saying it's not a good idea. I'm not saying that if properly executed it couldn't make you a million / billion dollars... But an idea is NOT a business. Nor is it an asset. Until you do some (very important) initial work - like creating a business model, doing customer development, creating a MVP, etc - all you really have is a dream. Right now your choices are: 1. Find someone with the skills or the money to develop your idea and sell them on WHY they should invest in you. And yes, this will mean giving up either a portion of the "ownership" or of future income or equity. And the more risk they have to take - the more equity they will want (and quite frankly be entitled to). 2. Learn how to code and build it yourself. MANY entrepreneurs without financial resources are still resourceful. They develop the skills needed to create what they don't have the money to pay someone else to do. 3. Get some cash so you can pay someone to do the coding. You'll probably have to have some knowledge of coding to direct the architecture of your idea. So you will likely still have to become knowledgeable even if its not you personally doing the coding. (This is not meant to be a comprehensive list of options... And I'm sure some of the other experts here on Clarity have others to add - and I hope they do) To wrap up - Here's my final tip to you that I hope you "get"... It's FAR more valuable to have an idea that a very specific hungry crowd is clamoring for right now - One that THEY would love and pay you for right now - Maybe even one they'd pre-order because they just have to have it - Versus YOU being in love with your own idea. [Notice I didn't say "an idea that some as-of-yet-undetermined market would probably love"] I wish you the best of luck moving forward.DB
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What is a better title for a startup head....Founder or CEO? Are there any pros/cons to certain titles?
The previous answers given here are great, but I've copied a trick from legendary investor Monish Pabrai that I've used in previous startups that seems to work wonders -- especially if your company does direct B2B sales. Many Founders/ CEOs are hung up on having the Founder/ CEO/ President title. As others have mentioned, those titles have become somewhat devalued in today's world -- especially if you are in a sales meeting with a large organization. Many purchasing agents at large organizations are bombarded by Founders/ CEOs/ Presidents visiting them all day. This conveys the image that a) your company is relatively small (the CEO of GM never personally sells you a car) and b) you are probably the most knowledgeable person in the organization about your product, but once you land the account the client company will mostly be dealing with newly hired second level staff. Monish recommends that Founder/ CEOs hand out a business card that has the title "Head of Sales" or "VP of Sales". By working in the Head of Sales role, and by your ability to speak knowledgeably about the product, you will convey the message that a) every person in the organization is very knowledgeable about the ins and outs of the product (even the sales guys) and b) you will personally be available to answer the client's questions over the long run. I've used this effectively many times myself.VR
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Whats the best way to find commission sales reps?
This is not my specialty, however, I have been in your position many many times -- maybe this will help. If the product is in-tangible, then look for JV partners on the Internet. Try to find an expert that deals with these JV opportunities (like me). If the product is physical, then look for sales organizations that have networks of sales people across the country. You do the deal with the organization and the independent network of sales people sells your product. It's a sweet setup if you can negotiate a margin that works for everyone. Hope that helps - Cheers - NickNP
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How much equity should I give an engineer who I'm asking to join my company as a co-founder? (He'll be receiving a salary, too, and I'm self-funding)
You will find a lot of different views on equity split. I haven't found a silver bullet. My preference/experience is for: 1. Unequal shares because one person needs to be the ultimate decision maker (even if it's 1% difference). I have found that I have never had to use that card because we are always rational about this (and I think us being rational is driven because we don't want a person to always pull that card cause it's a shitty card to pull) 2. When it comes to how much equity, I like Paul Graham's approach best: if I started the business by myself, I would own 100% of the equity; if xxx joined me, he/she would increase my chances of success by 40% (40% is just an example) at this moment in time. Therefore, I should give him/her 40% of the company (http://paulgraham.com/equity.html) 3. In terms of range, it could go between (15-49%) depending on the level of skill. But anything less than 15%, I would personally not feel like a cofounder 4. Regarding salary and the fact that you will pay him/her, that's tricky but a simple way to think about it: If an outside investor were to invest the equivalent of a salary at this exact moment into the startup, what % of the company would they get? (this may lowball it if you think the valuation is high but then again if you think you could get a high valuation for a company with no MVP, then you should go raise money) One extra thing for you to noodle on: given you are not technical, I would make sure a friend you trust (and who's technical) help you evaluate the skill of your (potential) cofounder. It will help stay calibrated given you really like this person.MR
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How has Uber grown so fast?
Obviously, they do the fundamentals well. Good brand. Good experience. Good word of mouth. Good PR. Etc. Etc. But after my interview with Ryan Graves, the head of Global Operations at Uber (https://www.growthhacker.tv/ryan-graves), it became clear that they are operationally advanced and this is a huge part of their success. I'll explain. Uber isn't just a single startup, it's essentially dozens of startups rolled into one because every time they enter a new city they have to establish themselves from essentially nothing (except whatever brand equity has reached the city ahead of them). This means finding/training drivers, marketing to consumers, and building out local staff to manage operations for that city. This is where Ryan Graves comes in. He has a protocol of everything that must be done, and in what order, and by who, to ensure the best chance of success in a new city. So how has Uber grown so fast? Essentially, they figured out how to grow in one locale and were relentless about refining their launch process to recreate that initial success over and over in new cities. No plan works for every city, and they've had to adapt in many situations, but it is still a driving factor for their success.BT
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