Basic strategies for validating startup ideas

You know you want to start a startup, but you don’t know what to build. Maybe you have notebooks chock full of ideas but you don’t know which ones are good. Maybe you don’t have any ideas, because it feels like everything exists already.

You’ve googled for tips but discovered that most articles on the internet about validating startup ideas are aimed at startups that seek Venture Capital. Startups with Venture Capital can throw money at problems. They can buy growth, features, and positive press. When you’re a bootstrapped startup you won’t be able to outspend the competition which means you need to be scrappy and strategic. It’s a different game.

Bootstrapping refers to the (physically impossible) trick of pulling yourself up by your bootstraps (etymology). As a startup metaphor it means building a startup without any resources. It’s possible to start a web business from nothing because your only expenses are web hosting, a domain name, and a laptop. You need technical and business skills, but you can learn for free. There are no real barriers to entry. That’s great for society but it also means you’ll have a good deal of competition no matter what you decide you build. Bootstrapping is possible, but it’s not that easy!

We haven’t written much about idea validation so far because it’s so subjective. What do you want to get from the business? Do you primarily want to make your customers happy? Do you want to solve interesting technical challenges? Do you just want to make money? Do you want change the world for the better? Do you want the freedom of working for yourself? Do you just want the excitement? The satisfaction of forging your own path? Everybody has their own priorities and the only thing that matters is that you know what yours are.

Also, everybody has a different skills, abilities, and resources. Do you have a lot of time to get your business of the ground or do you need to launch ASAP? Can you self-fund to a degree, or are you broke? There is a large personal component to this. What may be a good idea for you might be an awful startup idea for me.

I say all this because I want to stress how subjective this all is. There are very few right and wrong answers and we certainly can’t tell you what to build.

That said, I’m not a total relativist. Some startup ideas are brilliant and original and I feel foolish for not having thought of them myself. Other startup ideas are objectively terrible and founders would spare themselves a lot of grief if they thought their business through before they invested a lot of time and money into it.

Essentially, you want to figure out if your startup idea has legs before you commit a ton of time to it. That’s all validation is.

You have two things to validate:
(1) if people want to use your product, and
(2) if it makes sense as a business.

PRODUCT VALIDATION

  • What makes your product unique (USP)?
    • Why should people buy your product and not somebody else’s?
    • You can’t just copy a product and add 1 cool feature.
    • Do users care about your USP?
  • Can you build a prototype in a reasonable amount of time?
    • Can you get away with building just a few core features?
    • The longer it takes to build your first prototype the more confident you need to be that your idea is good.
  • Is the product scope reasonable?
    • You can’t win by simply building more features. That’s a game for VC backed startups.
    • Small products are better suited for bootstrapping.
  • Do you have the necessary technical skills?
    • Do you know where the technical execution risks are?

BUSINESS VALIDATION

  • Can you find enough users?
    • Do these people exist?
    • Do you know how to reach them?
  • Will users buy your product?
    • Do you have free competitors?
    • Is the market very crowded?
    • Do you have successful bootstrapped competitors? If not, why not?
    • Can you explain to users how your product is better?
    • Can the competition easily copy your product?
  • Can you charge enough money?
    • Figure out how many customers you need for your revenue goal
    • What kind of churn can you expect? This twitter thread has some good data.
    • Do you need to compete on price or can you charge a premium?
  • Can you grow by self-funding?
    • Can you automate your sales/onboarding/growth process?
  • Does this business suit your personal strengths?
    • You want to put your strongest skills to good use
    • Will you stay passionate about it in the long run?
  • Any legal liabilities/risks?

Yep, this stuff is prosaic. You need a product and you need customers. Not exactly rocket science, right? And yet, making an effort to think your idea through is vital. The questions are basic but the implications of the questions are subtle and can easily trip you up.

You can figure out roughly how much you can charge for you product by looking up what your competitors charge. When you start out you want to be in the lower end of that range. You don’t want to to be the cheapest product because the cheapest products attract the most price sensitive and difficult to please customers.

Some people will tell you that you can validate a business by slapping a marketing page together and asking some people if they would pay for the product if you build it. It’s just a matter of cold emailing some people (or LinkedIn/Twitter message) and you’ve got your answers. I don’t think it’s that easy. If people are enthusiastic when you describe your startup to them that’s a good sign, but it doesn’t prove much. If you make something for an established market then you already know customers exist provided you make a good product. And if you make something really original you can’t explain what it is — you have to show people. But you have to build it first (or a prototype at least) in order to do that.

You won’t know for sure if people will actually pay for your app unless you put up a credit card form. Words are cheap, after all. But before you get to this point you have to build the product and find users. No real shortcuts here, either. If you’re good at sales maybe you can convince people to give you money for a product that doesn’t exist yet, but that’s not my style.

You can work out how long the first prototype will take by starting with the hard parts. If you can outclass your competitors by solving a hard or hairy (or schleppy) problem that will give you a big edge. You don’t want to spend weeks or months building scaffolding only to discover you don’t know how to make the thing that would make your product great.

You can figure out if your USP makes sense by working on your hero message. The hero message is the big text at the top of your product website that explains what your product does. Try to capture what makes your product unique. For the thymer.com splash page we explain how we’re different: it’s an editor, and we explain in two sentences what it does (tasks and planning) and what the target audience is (makers/creatives). We collect email addresses at the bottom. If we have a few hundred people waiting to try Thymer by the time we got a first version going then we’ll be able to get a ton of valuable feedback that will help us figure out if we’re on the right track.

The bottom line is, the more answers you get to the questions above the more you “de-risk” your startup. Some answers you can get by googling. Other answers you get by talking to prospective users/customers. At some point, though, if you’ve thought hard about your idea and if you haven’t found any critical flaws, just go ahead and commit. Take the time to build a solid prototype and discover if the app works as well in reality as it did in your head.


You can follow us on Twitter @jdvhouten and @wcools and look for #80daystartup

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