How I Spent a Month and $1.500 to Validate The Idea

After my previous startup, I’ve promised myself to work only on something that people want.

The only way to avoid the risk of building a product nobody wants is to invest time and money into Problem / Solution validation.


Problem / Solution Fit

We all heard a lot of Product / Market Fit as an ultimate goal of any startup. Many startups are approaching Product / Market fit based on the wisdom of Lean Startup methodology. They build, measure and learn, trying to release early as possible and start to collect the data.

MVP approach is wrong in a way of putting build as first step prevents you think about a problem, instead focusing you on a solution.

Early day startup should be totally focused on a problem, on people who have that problem and how painful problem is.

By any means, a founder has to prove that the problem exists and worth solving before moving forward.

Problem and Value Proposition

The problem I want to solve is customer acquisition. More precisely, lead generation based on social channels of competitors.

The value proposition is very simple. You know your competitors and their social channels. It is possible to detect engaged audience of these channels, build their social profiles and turn such profiles into leads.

I’ve turned that value proposition into MDP (Minimum Desirable Product).

Minimum Desirable Product

The goal of MDP is to qualify the interest in a product and the need for its existence and kickstart customer development before you even have customers.

In my case, MDP is a landing page, with an example of a report we can generate out of competitors Twitter accounts and a sign-up form for early access.

Landing page

That’s it.

Having MDP defined and prepared, I’ve started a journey of Traction and Customer Development.

Traction Development

The book that changed my vision on startups says,

Almost every failed startup has a product. What failed startups don’t have are enough customers.

I took that seriously. From the day 0, I’ve started to develop customer acquisition channels and estimating possible CAC.

My inner circle channels were:

  • Seach Engine Marketing (Google Adwords)
  • Social Ads (Facebook and Twitter)
  • PR

During the four weeks, I was testing each of the channels.

Search Engine Marketing

I’ve set up my campaign, defined keywords, set up ads, budget and start to wait. And you know what, nothing happened. Except the fact my pocket became a bit thinner.

The results were awful.

In two weeks, I’ve spent $375 that generated 273 clicks, with CPC $3.08, only seven conversions, meaning I paid $53,26 per one conversion.

Such high CAC was far away from my business model, so I made a conclusion that SEM is a wrong channel at the moment, and I need to re-focus.

But the root cause, was not SEM and Adwords. It was actually me.

I’ve hired a Google Adwords consultant to run an additional campaign and compare the results with what I already archived.

This time, the results were completely different. That guy managed to do something different, surprisingly different.

In two weeks, his campaign spent $278, generated 194 clicks, with CPC $1.60, 44 conversions, with price $6.69 per one conversion.

Almost $650 for testing one channel, that seems to be a high price for the company that sells nothing yet. But it’s not.

Now I know that CAC from SEM channels could be potentially in boundaries of 6–10$, that makes it inline with LTV I plan to have, and just a gives green light to go on.

IT (Initial Campaign), LKT (Campaign after optimization).

Facebook and Twitter

Social Ads seems to be a very powerful channel. It is, but you have to know how to use it right.

My biggest mistake was, I created too many campaigns, for a different audience with different goals, without good understanding how to measure conversions. Do not repeat this.

I’ve generated hundred of clicks, but with a miserably low conversion.

In total, I’ve spent $730 on marketing both Facebook and Twitter, that gave me 20 signups, means $36.5 for one conversion.

That’s a clear failure, but similar to Google Ads, I just afraid I used the tool wrong and paid a price for it. So far, I put that channel aside thinking about to optimize it in future.

PR

Right after the initial launch, two quite popular Russian resources wrote small overview articles about SocialSearch, which resulted in a quite high traffic and good conversion rates.

My idea was to invest a little more into that channel, which could bring more sign-ups.

It appeared to be harder than I expected. I’ve hired a copywriter to create companies Press Release, and I used PressFarm to approach journalists.

It didn’t work at all. With about 30 letters sent, I received only one “Thanks, but pass” and that’s it.

Good thing, it costs me only $50 to try that.

Summary of Costs for Month

Customer Development

Even though traffic was not huge I still managed to have about ten signups on average per day. It is time to turn invested money into data.

I’ve used the Ask Formula, to create a survey that I proposed to take it in exchange of one-month free of service usage. Surprisingly, it worked really well.

Till today, I’ve got 253 sign-ups and 70 surveys completed. With each completed survey, I’m sending a follow-up letter to understand the problem better.

I was always stressed about this part of a startup, talking to the people. I’m still doing that via email, no phone or Skype calls. That’s probably less efficient but still works.

So far, I’ve learned that people are indeed having the problem I’m trying to solve, they are ready to try and can’t wait to see the data.

I tend not to spoil the exact solution I propose, to listen more to problems and what exactly I can do to solve the problem.

Product Development

I’m not building MVP yet. Why?

I’m still not sure who is my customer and what’s the market. Ideally I have to find one specific niche and try it there. So far, my sign-ups are from very different niches, from retailing to yachts business.

The way I think to go is Concierge MVP. Make a really simple, half-automated service, to serve 5–10 accounts from different niches and learn from it.

Learning is more important than building. But something needs to be built, to make learning happening. And this is what I’m going to do next.


If you liked that article, please consider to recommend it. I’m open for advice and talks, feel free to contact alex@socialsearch.io

Published in #SWLH (Startups, Wanderlust, and Life Hacking)