Validating Your Business Idea: How It Works in the Real World
How do you avoid the typical business school bullshit when validating your business idea? How does it work in the real world? That’s exactly what was covered at PreSeed Academy StartupTalk #23 — here are the key takeaways 💡
It can be quite tempting to skip the profound validation stage of your idea. But did you know that the 5-year survival rate for Danish startups is only 36%? That’s the cold hard fact that gets even colder — it’s the lowest score in the entire European Union 🥶👎
Fast forward a couple of years: No one wants to spend valuable time, hard-earned cash, plus the frustration and stress that comes with being a startup founder, only to discover that the idea you’ve worked on didn’t even have legs to begin with. To change the odds, we got together with the quite successful serial founder Thor Angelo from OrderYoyo and MyMonii, David Ventzel from Accelerace and Business Angel Nicolaj Højer Nielsen.
Why Typical Surveys Don’t Work
If you’re working on an innovative idea that the world hasn’t seen before, the feedback you will get from people will have absolutely zero value. Think about it: What would your feedback have been to the founder of Tik Tok 5 years ago? Did the world really need a new lip-dancing app? Probably not. Today, the app has 800+ million active users worldwide.
“I think there is a world market for maybe five computers”
- Thomas Watson, president of IBM, 1943
Fact is, your future customers won’t recognize the need and most won’t even understand it. Now that doesn’t exactly make validating your brilliant idea any better. So what should you do in order to properly validate your idea?
Use the right qualitative methods.
Advice #1: Start talking and start listening
The second problem with surveys is that the feedback you often get is superficial and sometimes even misleading. And even though it may seem scary, you need to get out into the real world and start talking with pretty much anyone who’ll listen. Testing your pitch and selling your idea over and over (and over) will not only prepare you for the funding game, it will also provide you with high-value feedback - if you’re willing to listen.
Don’t worry about sounding foolish or having a bad idea. Think TikTok sounded worth 800 million users at the time? The important thing here is that you listen carefully and that you’re willing to pivot a million times when perfecting your idea.
Advice #2: Sell it before you have it
Truth is it’s not about having the best or most perfect idea, it just has to be good enough. Over time you can shape it to perfection because what matters (and what VCs invest in) is not the idea, but the people behind it.
Having an A-team onboard is essential, because once you’ve decided to bring an idea to life, they are the ones helping you through the crazy and nerve-wrecking journey of building a startup. And where having a co-founder significantly increases your odds of success, having other stakeholders on board will also make that difference.
It’s not a coincidence that startups pre-selling their products and services close 40 to 50% more leads and retain 80 to 90% more customers: Applying the principles of lean startup methodology and selling your product or service before it even exists will give you the necessary no-bullshit feedback from stakeholders in the development process. And you will avoid what Fortune ranks as the top reason startups fail: “They make products no one wants”.
The method is really powerful and is the standard for tech startups and SaaS businesses.
Advice #3: Hunt customers like a lion
So, now you’re probably thinking that you should chase a shitload of different customers to validate your brilliant business idea and get this going. There are so many potential customers, right? Terrible idea.
The thing is, you’re only two people. So you need to pull the savanna strategy and identify and isolate some customers that you will target more specifically.
However, startups fail when they extrapolate validation from the unrepresentative customers, so make sure you’re on-boarding and investing your efforts on the right people. And be critical: Your friends and family will buy because they want to help you; crazy people will buy because they have some special personal niche interest and skills. Neither will provide you with the feedback you need to shape your new service properly. What you need are beachheads- those desperately in need of what you have.
Focus all your resources on dominating a single spot. Establish the base and develop a perfect market-fit for those customers. Then move to a different spot on the beach and do the same. That is how you validate your idea in real life and and reach product-market fit fast.
PreSeed Academy was developed from a strong desire to make early-stage startups succeed. Building a business is without a doubt challenging. The good news is there are many people who have already done it. That is what PreSeed Academy is all about. See all our events at www.preseedacademy.dk