Validation Metrics

There are a variety of signals useful in validating a startup idea. The most fundamental (and perhaps important) metrics which will continue to be used even after launching a startup is that sense of demand or user interest.

How many people want to use this new product or service? How many people come to the web site? How many newsletter subscribers are there?

These are growth metrics. They are always relevant and always important. However, there are some other validation metrics to pay attention to as well.

Expert Validation

Even if the co-founder(s) are experts in the field, it’s still very important to have industry experts approve of the startup.

Any intelligent investor is going require independent expert validation of any startup they invest in.

It’s very obvious when it comes to technology; will it even work? However, it’s also valuable when it comes to the business practices as well. Is it a viable business or service?

A pitch deck is hopefully flashy and impressive. It should certainly answer these questions, but it’s just a founder’s word. If anyone is going to start writing checks, they’re going to simply need more than that.

Often you’ll be introduced to experts, but don’t be afraid to seek them out. You should be putting your ideas to the test as well. These experts also might so happen to be bloggers.

Newsworthy

Related to the expert validation would be media validation. Of course in 2014, this is getting to be a little broad. While a startup usually doesn’t exactly get written about in TechCrunch right away…It can happen without having to hire expensive PR firms. The big publications aside, there are still plenty of blogs out there and we still write press releases these days of course. The question is; does anyone care to write about it?

If people are interested in writing about a startup then this is only another good signal. Remember, a newsletter sign up takes all of 5 seconds. Writing a blog post takes significantly longer. If a writer took time out of their day to write about a startup — that’s important. No matter how small the readership may be.

Social Media

Aside from a landing page and newsletter, social media accounts are low cost (free actually). Even a small ad budget on them can go a long way too in terms of validation.

One of the biggest mistakes I’ve seen startups make is to wait before having a social media presence. The reasoning I commonly hear is, “We’re not ready yet.” Yes you are. It’s not a light switch.

Marketing and growing an audience takes time and for every 2 people who get a bad impression early on (or who can’t realize things will improve over time), a startup will have 200 people who get a good impression later on.

Why? Yes, precisely. Because that startup would have listened to the why from people early on. A startup starts from the inception of an idea and can only thrive when it has constant feedback. Never delay that feedback. Acting on it is what keeps a company valuable.

Aside from the engagement and feedback, a startup’s audience on social media is just as useful as web site visitors and is valued in much the same manner.

The Ask

Last and perhaps most importantly in the list here is the ask. If the startup is selling something, then this is perhaps the most brutal question one can ask. It has to be asked though. It keeps things honest.

• Would you buy this product/service?
• How much would you pay?
• Would you buy this product/service tomorrow?
• Would you buy this right now?

If the startup is truly selling something so valuable, people will want to buy it immediately.

It’s far too easy for people to say, “Yes, I’d buy that.” and never follow up on it. When people can’t live without something and want it immediately — then you know there’s extreme value.

These questions shouldn’t be avoided or brushed off.

Of course some startups aren’t exactly going to selling anything to the end user. So these questions may need to be adjusted.

The “How much would you pay?” is sort of a bonus question. I added that in there because I’ve always found it a good gauge. Many founders and investors don’t actually care so much about this because it’s likely too early to put a value on the startup’s product or service. It changes over time too, but I still like it for helping me put together some loose projections. Another broad value one may want to look at is industry size (also often found in pitch decks). How much money does this industry make? If a startup was to get 1% of the market share, what would that be?

All of these high level questions are very important in validating a startup. After all, you don’t want to build something that no one wants, cares about, will pay for, or worse yet — there’s no market for.