It’s an empirical fact that most startups fail. In fact, the more innovative your startup idea, the higher are its chances of failure. According to the Bureau of Labor Statistics, two out of ten new businesses fail in the first year of operation and six out of ten don’t reach their tenth anniversary. However, if you count only innovative startups, according to the Startup Genome project, the number of failed new enterprises rises to the jaw-dropping 11 out of 12.
This statistic makes it quite clear that it’s imperative to try to figure out if you have the right startup idea before fully committing yourself and your resources to it in order to minimize the chances you are wasting your time and effort on something that’s doomed from its very inception.
The problem is that if you plan to do something truly new and untested, no expert in the world would be able to tell you if it’s going to work or not. Consequently, it’s up to you to do the work and validate your idea as quickly and efficiently as possible.
The so-called validation experiments are so crucial for early-stage startups that they are becoming industry-standard. Few modern startup investors would pay attention to your app ideas unless you have some form of empirical evidence you are moving in the right direction towards product-market fit.
Your goal is simple - to determine if the problem you are solving exists in reality and if the solution you are planning to implement is viable. And the most convincing evidence for both is money changing hands - revenue.
The key is to do this with the minimum possible amount of resources, effort, and time. Typically, you would need to create a testable prototype and try to generate sales. Even a functional prototype for an innovative idea, however, could be quite costly, and there is a lot you can do to validate your startup idea before you write a single line of code. Follow these four steps.
- The first step is to define your offering and present it. You can create a landing page or a presentation if you’re going to sell in person.
- Step two is to find your MVS – your minimum viable segment. The people who have the exact problem you are trying to solve and who can generally be reached in a similar way. You need to be able to sell the same solution to a large-enough market segment. Tailoring your solution to the needs of each customer is not scalable – you are a startup, not a consultancy, and startups need to be scalable.
- The third step is to try to run presales. Reach out to people in your MVS, post in social media groups or forums where these people are likely to be, even run small scale well-targeted ad campaigns to evaluate interest. If presales are not at all possible, try to collect your potential customers' emails with the promise that you’re going to contact them once you have a working prototype. However, keep in mind that people are more likely to give you their email rather than their money (especially if you are talking to them in person).
If you are selling in person, it might be a good idea to ask some customer interview questions before trying to sell your solution.
- The final step is to interview your customers in order to gather feedback. If your results are not what you expected, either iterate on your offering or your MVS depending on the feedback and repeat the whole process until you have enough evidence that your solution solves a problem customers need and happily pay for.
While going through this process, make sure to challenge your assumptions. Don’t try to influence your customers too much – don’t push a solution without validating a need for it. Instead, act more like a scientist trying to find out the truth by formulating and testing hypotheses.
Equally importantly – try not to get attached to your initial idea. The goal of the experiment is to challenge it and reshape it into something more suited to reality.
In summary, before you commit to building your brand new innovative startup, validate your idea by:
- Defining your offering
- Defining your minimum viable customer segment
- Running presales
- Gathering feedback and evaluating your results
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February 21, 2021 at 08:30AM
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How Do You Know You Have The Right Startup Idea? - Forbes
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