5 Proven Methods For Validating Startups
5 Steps every entrepreneur should take before committing to building a product/service.
Entrepreneurs see gardens in deserts and that’s what sets them apart, however, a successful entrepreneur also sees the feasibility of irrigation and viability of growth conditions of the plants beyond the mere desirability of the idea. You cannot afford to avoid validation. Avoiding validation is like jumping off the plane without checking if the parachute works or not?
CB insights – the intelligence platform Article – The top 20 reasons Startup Fail shows ‘No market need’ to be the primary contributing factor for startup failure. This article is a research analysis of 101 failed high potential startups.
Why do entrepreneurs overlook this?
I have seen scores of startups that I have come across, start with a point of reference, they see others are building it and soon conclude that they have the raw passion and the skills to build a similar product. Others focus on a nascent idea and believe the notion “If we build it, the customers would come”. They buy into the innovator’s delusion. Still a few others just want to make the easiest money and look for ‘easy money’ ideas. Only a small fraction focusses on investing their initial time and effort in validating the idea.
Crossing the Chasm:
Most entrepreneurs are focused on building the product and believe in a great launch. They believe launching is everything, however, what gets missed is the clear data that customers are willing to pay for the product/service.
One of the biggest questions as a founder is knowing “What to build?”. Customer validation is not a choice because it seems dull, boring and a long exercise. However, by circumventing this process, startups circumvent learning from customers and thereby are on a highway to failure.
How to start? Make a list of experts in the field and reach out to them (only a few will respond but it’s a great start). Make a quick questionnaire and start reaching out to your circle of influence and get their opinion. Just open your mind to the mindset of validation before traction.
Here are 5 things every entrepreneur should do before building a product/creating a service:
1. Interview potential customers:
Make a list of your target segments, create personas (Age, Sex, Income levels, biggest needs/wants, geography, hobbies, education….) and start to see who matches them and reach out to them and ask them open-ended questions. Give them a small gift card/buy them a coffee for their generous feedback. Create focus groups, invite them to a community hall, pitch your ideas and ask them for raw feedback.
Their data is just a starting point, you can totally bank on it and live by it. It helps you just understand that there is a need and this need is either a high or a low need.
2. Research the market:
Based on your discussions with potential customers, extend the questions for research. To create data correlations, buy research reports produced by CB Insight, Gartner or other Market Research companies. Make your questions a lot more qualitative.
Now create a survey and shoot it to over 500 potential customers, send them an email or run a simple ad on Facebook/LinkedIn, make sure you incentivize it by running a contest. These survey results will give you a basis for you to think of a clear hypothesis and what you want to validate with your prototype
3. Prototype and Pivot:
Build a ‘workable’ prototype if a product or run a service prototype in the real world, use mockups (Sketch, InVisoin), templates or every presentation (PowerPoint, Prezi) tools to showcase how the final product will work and behave. If it’s a service, then make a clear presentation detailing the process.
Once you have created your prototype, reach out to the potential target customers you spoke to before and ask them “will they buy this product if it was priced at XXXX but discounted to them for 60% as they are, they are the patron customers?”. If 30% respond Yes, Kudos you are on the right path. If the responses are otherwise, pivot and present to a new set of potential customers.
Once your prototype is a hit, select a small percentage of beta testers who will keep giving you ongoing feedback on the product/service. This will help you gain a clear direction. Listen intently to their requests and make changes. If they can’t live without your product by the end of the exercise, then your product is a runaway success. Incentivize and reward them.
4. Track your competitors:
While you are doing the above, also ensure you take the time to use your competitor product to see how their product/service works. Go a little deeper to understand their operating model, pricing strategy and how they make money. See if there is a gap or if the system is broken, those are things your product should address. If you feel you are a pioneer, ask your potential customers what alternatives they presently use. Track them.
5. Run a crowdfunding campaign:
Platforms like Kickstarter or IndieGoGo are brilliant because it gives you deep insights about how people are interacting with your product, greater still is they are willing to pay for the concept that will turn into a product. This is also good because it keeps you focused, people also ask you questions and if many ask the same question, you know that’s something you cannot afford to miss as a feature or service.
While the idea of building a startup can be very appealing, validation is the only way to understand if the appeal extends to your customers? Be customer-centric, take time to validate, for it is foundational. Being data-driven, feedback-focused and open to listening and pivoting, holding ideas too close to your heart in the early stage is not helpful. Build a startup that can disrupt and meet a real need.