How to Test and Validate Startup Ideas:
Thinking of pursuing your next idea? Read this definitive guide first.
“I have idea X, what do I do next?”
One of the first steps to launching a successful startup is building your Minimal Viable Product. In essence, a Minimal Viable Product (MVP) is all about verifying the fact that there is a market where your potential company can call home and bring in paying customers. It’s about finding your early adopters and seeing exactly they are willing to pay for.
So, the minimum viable product is that product which has just those features (and no more) that allows you to ship a product that resonates with early adopters; some of whom will pay you money or give you feedback.
However, most entrepreneurs don’t think too much about about the the process of how they go about making a MVP and the extent in which that they are truly verifying that their idea is solving a problem that people are willing to pay for. In turn, an entrepreneur might end up with an approach that is riddled with false feedback from their customers, or confirmation biases.
People lie to themselves in order to make sure that we can hear what we want to hear. It’s human. It happens a lot more than people might think, and in pretty different functions. Google “list of cognitive biases” for more on this.
But, when verifying whether an idea is a good fit to be a venture, I’ve found that there are some clearly flawed approaches, some approaches are situationally pragmatic, and some that are almost always ideal if you have the skills and resources to do so. Regardless there seems to be one big pattern: talk to your market.
The hierarchy of the ways you can validate ideas through MVP’s (and other strategies) can be categorized as: Flawed, Situational, and Ideal. Below are a few examples in each:
1. Flawed Testing Methods
Surveying
Surveying and asking friends about your idea usually entails making some sort of mockup and asking leading questions or getting flawed feedback due to survey bias. You might think “who would intentionally do this?”, and it’s more than you might believe. People are often afraid to give and recieve honest feedback. This is because many first-time entrepreneurs fall in love with whatever idea they cooked up and are subconsciously looking for any excuse to go ahead with it. If you’re asking your friends about an idea that you have, they’re more likely to say yes to whatever you ask. You’re also likely to interpret any data you get to fit your assumption the best you can.
Building a Full Product
Instantly building out a full idea might sound like a great course of action if you’re a talented rails engineer that can whip something up quick, but you’re building a product without any real validation backing it. It’s a dangerous place to be in, and one that plagued the late 90s/early 2000's with tech startup failures.
We now know the “build it and they will come” philosophy is not a good way to live by. It’s a good way to die by. The idea of “building something people want” is one to listen to. The engineers in the room that aren’t familiar with the lean startup movement will often go after this approach and tell you “you just don’t understand.”
2. Situational Testing Methods
Audience Buildup
Pre-building an audience either through a blog or an email subscription service. This is a great if you’re looking to build a company in a particular industry or niche down the road, and want to build up a reputation or better understand your market. This is also a powerful tool if you need Klout, or are a non-technical founder looking for proof of concept.
This also gives you an amazing opportunity to go and interact with a market and become an expert of their pains and frustrations — which is the best indicator of what they might be willing to pay for.
Talking to a ton of Potential Customers
Regardless of your approach, you need to be talking to customers. But, doing heavy market research and then building a product can be tricky because, if not done right, many will never get around to building out a full MVP.
If you consider yourself the CEO type, you may continuously be chasing ‘the next big thing” and find yourself with 3 or 4 attempts to make something, but never end up following through because you’re distracted by the next big problem you discovered.
It’s also important to focus on whether people will pay for something, rather than just discovering problems. If you’re going to be doing a ton of customer interviews as your MVP, use it as an opportunity to make some sort of “consulting” offer at the end of your talk with them. Chances are you’ll hear something that they find annoying and are willing to pay for.
Instantly building a Simple Product (v. 0.01)
Prototyping ASAP is not a terrible idea if you already have a strong understanding of your market and have already had heavy market research experiences. Most people though, especially first-time founders, make the assumption that they know what people want.
This means building a product for whatever problem it is that you discovered (NO ‘ideas’) due to your experiences/expertise. The problem with this is that ego usually gets in the way, and you build the solution that you want to see, not necessarily what thousand of others want. Most of the time, this is a pretty dangerous approach in the sense that it encourages founders to continue to build something without constant feedback. That being said, if you can get customers interacting with a product quickly and you’re making changes based on their feedback, you’re on a strong track.
Crowdsourcing
Kickstarter and other crowdsourcing sites allow for users to pre-purchase your product and provide a great way to raise money for initial orders. The key problem with treating this as a MVP, though, is the extremely long iteration cycle it sets you in, meaning you’re locked into the same prototype for a month or longer. MVP’s are suppose to be constantly updated and most crowdsourcing platforms work against that.
There are some types of markets that this works well in — Pebble is the arguable the best example of this approach to date and most of the other great examples are also hardware. This approach is great for that because it allows you to get the funding needed to produce a physcial product that you may not have been able to otherwise.
3. Ideal Testing Methods
Landing Pages
Landing pages are ideal if you ask for money. Though you can’t collect money if you aren’t going to deliver a product to someone , you can still ask. How? It’s simple: list all the items as “sold out” once they click buy, but build a list of those who are willing to. If you can deliver to that audience in a short enough period of time (ideally less than 2 weeks), then you’re in business. This is more of a proof of concept than anything else, but it’s a powerful one.
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.
Hollow MVP’s
A “hollow product” looks and feels like a full product on it’s surface, but it’s being faked on the back end. This approach is great for the a non-technical founder looking for a robust proof of concept. Here are some great 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).
Rapid Feedback/Development
If you’re a technical founder then this is what you should be doing (most likely). The key with this approach is getting a good understanding of what a problem people in your market have and build a product that focuses on getting on your early adopters to pay you. It’s a challenge (though an important one) to find the balance between working product versus what is a desirable product.
Minimum Desirable Product is the simplest experience necessary to prove out a high-value, satisfying product experience for users.
— Andrew Chen
Concierge MVP
Starting a product as a Service first is actually how Netflix got started.
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.
Immediately after, they started renting their movie collection to their friends, and Netflix was born. This might seem obvious, but if you ask most entrepreneurs how they would start their own Netflix today, you would get a very detailed, and technical answer. Start doing things by hand until you can’t scale any larger. Do things that don’t scale, and then scale.
Profit and Pivot
This approach builds up the knowledge and expertise through selling something that they know there is a pre-established, and strong market for the desired industry at hand. Through that, an entrepreneur builds an audience, and if they brand themselves right, they should be able to test idea X pretty easily. From there, they can pivot to selling X over whatever it is they were selling before.
Mitch is building resumeruby.com and writes about startups, technology, and life.
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Published in Startups, Wanderlust, and Life Hacking
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