How to know if your start-up idea is any good

TL;DR — The idea you have should have a good link to related problem of which you have a deep understanding of. Use customer feedback on your minimum viable product to understand what they truly value about your offering. Don’t be afraid to pivot when there’s signals telling you to do so. The first version of a product will look nothing like the 100th or 1000th — keep building.

It’s easier now to start and grow a company than it has ever been. That means more people start them, and those who do get better terms from investors, and the resulting companies become more valuable. It has definitely become a founder’s market. So hence the question becomes, how do you know that your start-up idea has a fighting chance of going from zero to one?

Founder-Problem fit

The fundamental ingredient for me when assessing start-up ideas and founders themselves, is being able to identify a good level of fit between the founder(s) and the problem being solved. Different problems require different types of approaches and ways of thinking to solve them, and so having founders who have attributes and experience that relate to the problem often puts them in an advantageous starting position in their start-up journey. They can usually examine the problem in different contexts and can speak fluently about the problem such that they can educate people with no previous awareness.

Here are some good benchmarks of what I use to assess founder-problem fit:

· Do you have any real working experience in the industry relating to the problem?

· Do you have a large network in within the industry?

· Have you lived and breathed the problem you are solving first-hand and deeply understand the pain points?

· Are you obsessed with the problem you are solving and have been relentless in learning everything about the market?

· Can you articulate the financial weight of the problem at hand?

· Do you understand the current and future landscape of the industry?

· Can you identify with your customer because you have either been your own customer or have conducted extensive research analysing your initial customers?

If a founder performs strongly across these benchmarks, this is a very good sign that they are operating in the right space and the ideas they generate are then typically of a higher quality. Through my own experiences and my work with various founders, there is a clear correlation between experience within relevant industries and the effectiveness with which founders tackle a problem. This is not to discount highly talented individuals who may be able to solve problems that they’ve had little engagement time with, but usually it pays to investigate a problem for a good period of time to make sure you have a good sample size of data to validate whether the problem is actually worth solving.

Understanding how customers behave in relation to the problem, along with what they want to avoid and want to achieve is the next crucial step in the assessing how a start-up idea could solve the problem.

The tool to use to validate your idea — The Value Proposition Canvas

Validating product or service ideas is a fundamental part of assessing whether a start-up has any legs from the beginning. Doing so also mitigates the level of risk being undertaken. All start-up ideas in the beginning are hypotheses to some extent; validating them with real insights can light up the pathway for developing your ideas into minimum viable products

To help founders do this, I have personally used the following tool to great effect across a number of start-up use cases. The Value Proposition Canvas (VPC) is a great tool to help founders map, design, test, build and manage customer value propositions for their given products or services. Essentially, it gives you a great insight into whether the offering has problem-solution fit.

The VPC is comprised of two main sections — on the right is the Customer Segment Profile and on the left is the Value Proposition Map. The VPC enables you to do the following:

· Give an insight and understanding into the customer’s functional jobs, pains and gains.

· Give an understanding of how our product or service helps the customer; and apply it to multiple products/services.

· Create alignment by understanding how your offering creates gain and relieves pain for your target customer.

· Regularly readdress the tool to constantly test your assumptions through data analysis.

Firstly, you begin populating the customer segment profile with the jobs to be done, pains and gains that they experience in their context. The value map is then populated with the products and services you can provide to them, subsequently mapping out how they create gain and relieve pain for that customer. For start-ups that are adopting or creating a new technology and looking to find the right customer, there is also the possibility of starting with the value map first to identify the key gain creators and pain relievers of your technology, which you can then align with early customers who may resonate with those value propositions.

If you can validate your populated VPC with a good sample size of your target customer segment, gathering evidence that their pains and gains are exactly as you’ve identified and that your value propositions can truly help them, this provides sufficient early indication that your start-up idea is solving problems that matter and it is worth building out the solution.

The easy mistake from here would be to abandon the customer and go off and build out the offering as you see it.

Don’t do this rookie mistake. Keep your users at the core of your design cycles. There should be a tight focus on user needs. From this point onwards, create a series of experiments, or MVP tests if you will, is the next step in putting something tangible in front of those users in the hope that the value propositions you’ve validated with them are captured and provided through your test or experiment.

I highly recommend new founders in most cases to embrace the lean start-up method. Principles and frameworks such as iterative development and user centred design, which are super useful in speeding up the transition from idea to legitimate business.

Don’t be afraid to pivot — combine data and intuition to your advantage

Upon conducting a number of MVP tests, it is vitally important to synthesise the data that is generated. How many customers paid for your product? How long did they use the product for? Would they buy again? What features were well used/not used at all? How many steps did it take to convince someone to purchase? In what context does your user perceive and interact with your product? Does the user’s activity with your product enable the activation of new users?

Generating data which provide visibility into questions such as the above will enable you to see the forest from the trees. It will be easier to discovery the patterns in customer usage which may indicate the need for change. If your core feature is not being used at all, but a minor feature is seeing more activity than expected, there’s something to be said for that. If customers are exiting your product and service in similar areas, again this should set off the light bulb in your mind.

This data provides the evidence that a pivot or improvement may be needed. Start-ups in themselves are a journey of continuous improvement. The very first version of your favourite app looks nothing like the version you use fondly today, and similarly the version you engage with next year is likely to be significantly different (and hopefully better) than the one you’re using today. This iterative development is driven by the combination of data and qualitative insight, all in the effort to improve your offerings and provide maximum value.

Too many first-time founders, myself included, have fallen in love with their idea. That’s all well and good, but you have to make sure the idea resonates with customers and solves their problems better than any alternative available today.

If you’re a first-time founder or keen entrepreneurial type, I hope you found value in this article. Please share your thoughts in the comments, your feedback and insight on building your start-up or being an early employee at a start-up is greatly appreciated! Stay tuned to the Entrepreneurship and Business Transformation publication here on Medium, more content on building businesses and thinking better as an entrepreneur will be posted very soon.