How to check startup ideas and validate themLeonid Zverugo
wrote this on Мар 15, 2016
So, you have an idea, what should will you do next?
The first step in launching a succesful startup is to create an MVP (Minimum Viable Product). It means a proof for the fact that there’s a market that your company can name “home” one (basic) and find solvent clients there. I.e. you should find first clients and understand what they are ready to pay for.
So, MVP is a product which has only those characteristics that allow you to offer a product satisfying needs of your first potential customers. And some of them will pay for it and give their comments about it.
— Eric Ries
However, most of the entrepreneurs don’t usually think of the MVP creation process and confirming the fact that their ideas solves problems essential for people who are ready to pay for them. So, an entrepreneur can finally stop on an idea viability of which is proved with doubtful user comments or biased opinions of creators.
People lie to themselves in order to give you a possibility to hear what you want to hear. We are all human beings. It happens more often than we can imagine. Google “the list of cognitive biases” and you’ll get more information.
But in the process of defining whether your idea will be profitable or not, there are several totally wrong approaches to the question: some are too self-confident, others are most of the times ideal, if there are skills and resources present. Despite everything, we can see one tendency everywhere: a dialogue with the market.
Ways of ideas validation according to MVP conception (and other strategies) can be hierarchically divided into the following categories: flawed, situational and ideal methods. There are some examples for each of them below.
Flawed testing methods
When you conduct surveys and ask your friends what they think of your idea, it usually leads to creation of something like a pattern and a list of leading questions or inadequate feedback because of biases. You may think “Who would knowingly mislead me?” But there are more suchlike people than you can think. Sometimes people are just scared to share their true opinion as well as get sincere feedback. It happens because many beginner entrepreneurs fall in love with the idea they’ve created and search for any justifications to continue developing it. If you ask your friends for advice, they will probably approve your any idea. And you are likely to inteprete any data you get in such a way to that they confirm your beliefs.
Realizing ideas on an early startup stage may seem to be a wonderful action method, if you’re a talented engineer and can do something very quickly. But this way you develop a product without being sure about idea validation. It’s a dangerous method which has become a reason of mass failures of startups based on technologies in 90s.
Now we know that “create a product and customers will appear” philosophy isn’t a good helper. It’s likely to be vice versa. You should better follow the idea of “creating something that people need”.
Situational testing methods
Pre-building audience with the help of a blog or an email subscription service is a great method, if you’re going to build a company which belongs to a definite niche or branch or create a reputation or to understand the market better. There’s a powerful tool by Klout, if you need to get data for social networks analysis or you don’t have technical education and want to make sure that audience is interested in the concept.
It will also give a nice possibility to try to interact with market and learn about problems and disappointments of your potential clients, which is the best indicator of what kind of a product they would pay for gladly.
Communication with a great many of potential clients
No matter what approach you’ve chosen, you should communicate with clients. But a thorough market investigation and product creation may lead to ambiguous results, if they aren’t carried out properly (many people don’t even try to create a full-fledged MVP).
If you consider yourself a born leader, it may happen that you will constantly try to chase “one more big goal” and finally you’ll have 3-4 attempts to create something big, but none of them will ever develop into something serious, as you will again be distracted by another major problem.
It’s also very important to concentrate on what people are ready to pay for in spite of searching new problems. If you’re going to conduct tons of client interviews in the context of your MVP-strategy, use the possibility, so that you consult them at the end of your conversation. There’s a chance that you’ll learn about really annoying problems and that clients are ready to pay for a solution to them.
Quick building of a simple product
Creating a prototype as quickly as possible isn’t a bad idea, if you understand your market and have carried out a thorough investigation. Nonetheless, a majority of people (especially beginner entrepreneurs) come to a conclusion that they know what people want.
It means that you create a product which solves a problem that you detected (without “ideas”) basing only on your experience and professionalism. The problem is that we all have egos that speak inside us, and we create solutions that we would like to see instead of the one necessary for thousands of clients. It’s quite a dangerous approach as it pushes founders to create something without constant feedback. Nevertheless, if you can quickly provide an interaction of your clients with your product and make changes on the basis of the feedback you’ve got, you’re on the right way.
Kickstarter and other crowdfunding platforms allow users to pre-purchase a product and provide a great possibility to get money for initial orders. There can be a problem with MVP: as an interaction cycle is quite long, it means that you’re linked to one and the same prototype for a month and even longer. MVP should be updated constantly but the majority of crowdfunding platform hinder it.
There are several product categories for which crowdsourcing works fine. Pebble watch is probably the best result of such an approach and other succesful examples also concern hardware. The approach works great for developing similar gadgets - it helps to get necessary financing for creating a physical product which you won’t get in other places.
Ideal testing methods
Such pages are ideal if you’re looking for financing. Although you can’t collect money, if you aren’t going to give somebody a product, you still can ask for financing. How? Quite easily: display all the items as “sold out” when a person tries to buy them and simultaneously make a list of those who are ready to buy them. If you can start shipping the product to your audience during a short period of time (you’d better to do it in 2 weeks), then you’re in. It’s a powerful and the best proof for correctness of your concept than anything else.
Be prepared to listen when people give off subtle signals. Read between the lines. Ask for money because it’s the best way to get useful information, not because you want money.
Such a product may seem a full product but with a “hollow” back-end. Such an approach is great for non-technical founders searching for a robust proof of concept. Here are some examples:
ZeroCater, a Y Combinator company, started with just a big spreadsheet trying to connect companies with restaurants that would cater. Groupon started with just a WordPress blog and manually sending PDFs with the first vouchers. Grouper, another Y Combinator company, also started with just a spreadsheet trying to match groups of people on dates. Via Vinicius Cacanti.
If you’re a founder of a technological startup, it’s what you should likely do. The key thing here is to understand deeply problems of the people who make up your audience and create a product which concentrates on getting on your early adopters to pay you. It’s essential to find a balance between a desired product and a working one.
Minimum Desirable Product is the simplest experience necessary to prove out a high-value, satisfying product experience for users.
— Andrew Chen
Starting a product as a service is what Netflix started from.
Netflix started in California by two men by the names of Reed Hastings and Marc Randolph. Hastings had to pay a huge late fee for a movie he rented and it was then that it came to him the idea of the mail order rental movies with no late fees.
Then they started renting movies to their friends. That’s how Netflix was born. It may seem evident, but if you ask the majority of entrepreneurs how would they start their own Netflix today, you’ll get very detailed technological answers. Start doing something by hands until you can widen your business. Do things that don’t scale, and then scale.
Profit and pivot
This approach builds up the knowledge and experience acquired by selling something created earlier and for which a strong market is available. Due to such a method, an entrepreneur gets audience and can quite easily check his idea on condition of right promotion. After this, a strategy can be changed and you can start selling X no matter what your company was selling earlier.