The Startup Readiness Level
Is your startup ready to level up?
When helping startups, it is very difficult to judge how far a startup has progressed, especially when you base your judgement only on a shiny pitch deck and the (imaginary) numbers on their 5-year business plan. What is needed is an evidence based, measurable progression towards a viable startup, with clear next steps and milestones.
The Startup Readiness Level (inspired by Steve Blank’s Investment Readiness Level — but from the point of view of the startup rather than an investor) was created as a yardstick to make that possible.
It’s not clear there’s a correlation between giving a great PowerPoint presentation and a two minute demo and building a successful business model.
— Steve Blank
Startups don’t all follow the same, predictable route, but they do need to reach similar stages. That’s what the Startup Readiness Level is all about.
The Startup Readiness Level was inspired by Steve Blank’s Investment Readiness Level. (To read the blogpost by Steve Blank that describes the Investment Readiness Level, follow this link.) Sure, investment can be super important for startups, but it’s not the only thing that startups work towards. Investment Readiness is simply a part of the story. To look at the journey a startup takes from the startup’s perspective, you have to include the rest of that story.
With the Startup Readiness Level as a guide, it is possible to look at evidence-based entrepreneurship. It is possible to track the progress of a startup through different stages towards success.
The Startup Readiness Level
Every startup starts at level zero, and works its way to level 10 by achieving a key result.
- Define the Idea
Do you know why you want to start your journey, and what you want to achieve, and with whom? What are your design criteria? What is your vision? Key metric: did you find at least ten people that your idea and vision resonated with?
2. Understand the Problem
Do you really understand what problem is you want to solve? Do you really know the people that experience the problem every day? What does it cost them? How many people have this problem? Key metric: did you find at least ten people that experience this problem on a regular bases and that care about the problem being solved?
3. Explore Potential Solutions
Did you explore multiple solutions to see what aspects of a solution are important to your customers? Key metric: did you run at least three experiments with at least ten people each testing three different possible solutions to see which one and what aspects of it your target audience resonates with the most?
4. Validate Product / Solution
Can you find customers that prefer your solution to their problem over any other solution? Key metric: did you find at least ten people that were prepared to give a commitment to show they want to own your potential solution? Were they each willing to supply names for at least two of their friends that also should know about this?
5. Build and Validate Lo-Fi MVP
Can you find early traction, where early adopter customers are ready to pay for your solution? Key metric: did you manage to reach 100 actual customers to sell your product to? Do they love it? Were you able to serve them and keep them happy and engaged?
6. Validate Product / Market Fit
Can you scale up your customer base, and find customers in sufficient quantity to make your business work? Key metric: Would >70% of your customer base really hate not being able to use your product?
7. Validate Revenue Model
Can you make money? Do customers like your revenue model? Key metric: are you able to increase your profitability while at the same time showing sustained growth?
8. Validate Value Delivery
Can you deliver at scale? Key metric: are you able to keep your growth rate up, keep your customers happy, and also improve quality and reduce cost on the value delivery side?
9. Validate Growth
Can you acquire more customers in more markets? Does Customer Life Time Value exceed Cost of Customer Acquisition? Key metric: are you able to reach other markets successfully?
10. Do the Unicorn
🍾 🦄 🚀 !!!
Every level is a stage that needs to be cleared before going to the next one. Sometimes, you can get stuck on a level for a while, before figuring out how to clear it, like in a difficult video game. But keep working at it and trying new things until you get past the hurdle. The Startup Readiness Level helps you figure out where you stand, and how to move forward.
Remember, if you’re a startup, you’re playing an unfair game.
If you’re a fresh startup you’re playing an unfair game. You need to be smarter than the rest. You need to be right, and you need to prove you’re right. No more discussions about whose opinion is better, when those opinions are not backed up with data. Without data, it’s all talk.
It’s time to play Moneyball.
— Steve Blank
Do you want to know what your Startup Level is and what you need to do to move to the next step?
