How to test and validate your startup idea.
Coming up with the right startup idea — and then validating it before you start building it — is key to entrepreneurial success.
For entrepreneurs, the ideation phase can be fun (everyone loves brainstorming!) but at some point you need to test and validate your startup idea. Or maybe you have several startup ideas — how do you choose which one to go all-in on?
In my own career, I learned the hard way that building an unvalidated idea can be a very expensive mistake. Fortunately, today there are incredibly powerful tools and processes available for validating a startup idea.
Here’s the process I’d recommend:
- Start with Mr. Google
You will learn a lot by Googling around for a couple hours. You’ll probably discover competitors you don’t know about (don’t worry, this is a good sign!) and maybe you’ll find discussion threads around something related to your idea. You may also discover previous failed companies with a similar idea. Again, this isn’t necessarily bad, but we’d like to try to understand why they failed. Is the website for a failed company now gone? No problem — you can probably find it using the Wayback Machine and learn how they positioned themselves, what their pricing was, etc.
- Articulate the problem your idea solves.
As Paul Graham, the founder of Y-Combinator says in his great essay “How to Get Startup Ideas”, most successful ventures begin with an entrepreneur who notices a problem worth solving. How would you articulate the problem your startup solves? Note that you’re just describing the problem — not your proposed solution yet! Can you state the problem your startup solves, briefly and clearly?
- Now, make sure demand exists.
The leading case of startup death is lack of market demand. Fortunately, Google search traffic is a pretty good proxy for market demand, and is readily available today. Use free tools such as Google Keyword Planner, Moz, UberSuggest, or Ahrefs to see what search traffic exists for people who may be looking to solve the problem your startup idea addresses. Also, Google Trends is a great source of free information on consumer search trends. Again, we’re looking for evidence that consumers are looking to solve the problem your startup idea solves.
- Your friends are not good for testing your idea on.
All of us tend to socialize ideas with our friends, but for this process you won’t really get meaningful data that way. It’s too small a sample size and they are biased (they like you!). Friends are a great source of personal affirmation but not a very good source of objective data on your startup idea.
- For a B2B idea, LinkedIn is your friend.
Will your target customer be “Vice Presidents of Marketing for mid-size industrial companies in the Northeast region”? Using LinkedIn Sales Navigator you can fit people who fit this exact profile! Reach out to ten of them and ask if you can have a short call to get their insights (make sure you’re clear that you’re not selling them anything). Have a relaxed conversation in which you are trying to understand their world and the problems they have. Do not bias the conversation by telling them all about your specific startup idea! You’re looking for the sorts of insights that come from an organic discussion (read about how to do this right). Now talk to some more people who fit your prospective customer profile. You want to hear at least 20% of them say they have the problem you’ve articulated in Step 2 above.
- For a B2C idea, landing pages are easy and powerful.
Using a tool like Unbounce or Squarespace you can build a “Coming Soon” landing page for your startup idea in about 10 minutes and put an email signup box on it. Now spend $50 on Facebook/Instagram ads that click-through to your landing page. From this modest investment you’ll be able to (1) Find out what your cost-per-click will be for this startup; (2) See the demographics of the people who click on the ad; (3) Discover the conversion ratio of people who arrive on your landing page and also give you their email address; and (4) Send emails to those people asking more about why they are interested in your idea. To get all that for $50 is pretty remarkable — so why wouldn’t you do it?
- Now, ready for the next level?
Use Mturk to send surveys to 10,000 people. Put your proposed product on Product Hunt and see how many upvotes you get. Do pre-sales on Kickstarter (this is how Peloton proved demand). Run some more Facebook/IG ads and maybe some A/B testing of the headlines. The idea is to learn as much as you can possibly learn before you start actually building the product.
The bottom line is that most startups fail due to lack of market demand. Investors know this, and they tend to avoid investing in startups with unproven demand. Every passionate entrepreneur is sure their idea will be an awesome success, but the really great entrepreneurs combine passion with data by spending the time to test and validate their startup ideas. Startups don’t usually fail because of competition, but they do fail because founders don’t spend enough time validating their ideas and learning about customers.