Step 1 : Test Your Startup Idea

What is market validation? It’s a question I hear a lot, especially when mentoring young entrepreneurs. Market validation is the process of determining whether your product is of interest to a given target market. Market validation involves a series of customer interviews with people in your target market, and it almost always takes place before you’ve made a significant investment in your product/concept. Last month, I gave a talk on lean market validation at the opening night of Startup Weekend at the University of California, Santa Barbara. In attendance were 200 eager students and entrepreneurs who wanted to learn how to build a startup in 54 hours. For many first-timers with great ideas, the process is exciting but also a bit intimidating. The goal for my talk was simple: To layout a few practical tips for entrepreneurs to quickly validate their ideas. I also wanted to help them understand that even first-time entrepreneurs can launch successful products by taking a few easy (and often free) steps. After using lean market validation to launch several software products, including ProductPlan, I’ve discovered that with the right process even inexperienced entrepreneurs can bring amazing products to market with excited buyers on the first day.

Read the Customer Interview Tool Box ➜ Here are my tips for using lean market validation to confirm whether you have a product/market fit with real customers. By simply engaging with real people and asking the right questions, you can confirm if your idea solves a problem, who your potential buyers are, and ultimately whether or not there’s a market for your product.

1. Write Down Your Product Concept Just the simple act of writing forces you to consider things you may have previously glossed over. I’m not talking about writing a “business plan.” (For startups, a business plan isn’t the best use of time and will change as soon as you start talking with prospective customers). I’m talking about answering a few key questions that you can go out and test. These are your assumptions and the sooner you can test them, the less risk you will have when launching your product.

Learn the Anatomy of a Product Launch ➜ You can start with the questions below or use a tool such as the Business Model Canvas to guide your thinking. Write down some basic assumptions that you can go out and test:

1. Who is your customer? If you say “everyone,” you are already setting yourself up for a tough time. Be sure to get specific. For example, if your customer is businesses, answer: What kind of businesses? How big or small is the typical business? In a particular market? What is the title of the buyer?

2. What problems are you solving? So many entrepreneurs think about the product first — they fret about the features, launch the product, and then wonder why their product has trouble getting traction. My suggestion is to start with the problem first. What this means is being explicit about the problems your product solves. By writing down these problems, you can validate whether customers also see them as problems. And more importantly, whether customers think they are problems worth solving.

3. How does your product solve those problems? Only after writing down the problem do you move to the product. From here you tie the value of your product directly back to customer problems. How does solving their problems make their life better? Does it make them more money? Look better?

4. What are the key features of the product? The features need to be more than cool — they need to solve specific problems. The more quantitative (e.g. time saved, money made), the better. I encourage you to think Minimum Viable Product and limit the feature set as much as possible (you need to provide just enough value for some customers to buy).

2. Decide At Startup Weekend, 54 hours go quickly. The same concept holds true for startups in the real-world. Time and resources are scarce. There isn’t time to agonize over details that, in the end, may not matter. For that reason, lean market validation helps successful teams get just enough information and data to make decisions. And then they make them. I like to adhere to the 80% rule — get just enough (valid) information from customer interviews and other sources of data and then make a decision. In the end, you will never get to 100% certainty, and getting close will eat up an inordinate amount of time.

3. Most of What You Write Down are Assumptions Which brings me to my third point: All the writing you do, the discussions (and debating) you have, are assumptions. Teams often take these discussions (and what is in their heads) as fact, when they are simply assumptions that need to be tested. I like to think of the scientific method when reviewing ideas — how can they be tested? I often see teams (at Startup Weekend and at startups) debate minor details and waste valuable time rather than making a guess (a temporary decision), and then getting out into the real world to test whether it’s the right idea. It’s important to just make a guess and get started, because your assumptions may turn out to be wrong, and you’ll have spent valuable time (not to mention the toll on team dynamics) debating something that didn’t matter in the first place.

4. Find the Truth by Getting Out to Test Your Assumptions As soon as you’ve made some basic decisions and written down your assumptions, get out to test them to see if they resonate with potential customers. I encouraged Startup Weekend attendees to get out on the street, but also to save valuable time by getting on the phone if the customer type warrants. Lean market validation relies on customer interviews with potential buyers of your product. You can also test your assumptions by interviewing experts (for example, analysts for the industry, people who have been employed by the industry, consultants, etc.). There are also some great ways to test digital ideas with landing pages and inexpensive ads.

5. Start with Your Network I’m often asked how teams can easily find prospects to speak with. I recommend working with your own network and the networks of friends, mentors, investors, and others to reach potential customers. The downside of interviewing people in your network is they are friendly to your cause. This means that you are introducing some potential bias into your learning. But my attitude is that some bias is better than not interviewing at all and getting closer to the truth.

6. Interview Them When I mention interviewing, I’m not talking about a cursory conversation (or worse, a survey). Start with a list of questions but deviate from the questions as you learn more information. Approach the conversation with a sense of curiosity about the customer’s problem and needs, and you’ll get some really valuable insight.

7. Ask “Why?” “Why?” is by far the most important question you can ask. With it you can get closer to the truth from customers. Unfortunately, this question isn’t used often enough — too many people ask a question, and then take the answer at face value. It’s a missed opportunity to understand motivation and validate what someone would really do. The Five Whys is a great technique for getting to the underlying reason — the real reason — behind a customer’s motivation.

8. Find the Value Proposition I encourage entrepreneurs to focus less on features and more on explaining the value proposition for their product. What does that mean? A value proposition is the expected gains that a customer would receive from using your product. Value can be quantitative, such as time saved or additional revenue earned. Measuring this is usually straightforward. But value can also be qualitative, such as pain relieved or lifestyle benefits your product provides. By thoroughly understanding and documenting this qualitative value through customer interviews, you can set your product apart from the competition. For example, it could be time saved, making more revenue, or maybe some social benefit (like looking good). Whatever it is, these value propositions are directly tied to the problems that you have previously discovered.

9. Liking Your Idea is Not the Same as Buying Your Product Unfortunately, validating a product idea with prospective customers is subjective. There is no black and white answer. In fact, because people are generally nice and want to please you (especially the friendly university students at Startup Weekend), you need to be careful about accepting their answers at face value. When someone tells you enthusiastically “it sounds great,” or “that’s an interesting idea,” your first reaction should be to follow-up with “why?” It’s important to understand that someone liking your idea is not the same as buying the product. Your challenge during your lean market validation process is eliminating as much of these “false positives” as much as possible.

10. Jump Off the Cliff and Have Fun Startup Weekend is a great opportunity for new entrepreneurs to take a chance, pitch their idea in front of strangers, form teams, and make new friends. And many go on to build their startup idea and bring it to market. My advice to the group (and to all entrepreneurs) is to take a risk, jump off the cliff, and have fun with the lean market validation experience.