How to Validate Your Startup Idea
Do you have an idea for a new business or startup? The first thing you should do is validate your idea to avoid failure. How should you do this, and why is this important? This article will explore that in the following order:
- Why do startups fail?
- Why validate your startup idea?
- How to validate you startup idea
1. Why Do Startups Fail?
According to a recent CB Insights study, the most common reason is no market need. Said another way, the reason almost half of startups fail is not enough people want to buy their product.
Common reasons startups fail:
- No market need (42%)
- Ran out of cash (29%)
- Not the right team (23%)
- Outcompeted (19%)
- Pricing / cost (18%)
- Poor user experience (17%)
- No business model (17%)
Note: most startups surveyed indicated multiple reasons - above list adds up to over 100%
2. Why Validate Your Startup Idea?
Put simply, validating your startup idea helps you ensure that your startup is less likely to fail for any of the above reasons; this saves your team time and money. Further, validating your idea can be done relatively quickly at little or no cost.
3. How to Validate Your Startup Idea
There are several common ways to validate your idea:
A) Google AdWords (low effort / accuracy)
B) Check if competitors exist (low effort / accuracy)
C) Check if a community exists (low effort / accuracy)
D) Market research (low effort / accuracy)
E) Create a landing page (medium effort / accuracy)
F) Create an explainer video (medium effort / accuracy)
G) Wizard of Oz (medium effort / accuracy)
H) Sell your idea to 10 people (medium effort, high accuracy)
The above are all different ways to quickly test whether your idea might solve a customer pain point for an appropriate market size (i.e. amount of potential customers). Said another way, they help you test whether your idea could become a successful business. Let's explore the above ways in more detail below.
A) Google AdWords (low effort / accuracy)
A quick and dirty way to validate an idea is to check whether people are searching Google for associated keywords. If lots of people are searching Google for phrases pertaining to your product, you might be on to something.
B) Check if competitors exist (low effort / accuracy)
Another easy way to begin validating your idea is to check whether any competitors exist in the space. If no similar products exist, it might be an indication that there is no market need. It might also indicate that your idea is too early (i.e. people aren't ready for it yet).
C) Check if a community exists (low effort / accuracy)
Do conferences, groups, or online forums exist in the space? If so, are they talking about the problem you are trying to solve?
D) Market research (low effort / accuracy)
Check relevant books, journals, newspapers, blogs, podcasts, etc. Are they discussing the problem your idea solves? If not, create a short survey and send it to 100 of your target customers.
E) Create a landing page (medium effort / accuracy)
A great way to see if potential customers are willing to buy (or sign up for) your product is to create a landing page describing your product. If visitors click buy / subscribe, let them know that the product is under development, and ask for their contact information for future product updates.
F) Create an explainer video (medium effort / accuracy)
Creating an explainer video allows you to visually show potential customers what you plan to sell. By posting links to the video in various online communities (e.g. Reddit, Hacker News, Facebook, etc.), you can quickly receive vital feedback.
G) Wizard of Oz (medium effort / accuracy)
The Wizard of Oz consists of building a rudimentary service for customers, and manually doing everything behind the scenes. It's a great minimum viable product (MVP) for non-technical founders with technical ideas. It is also a great way to inexpensively gauge potential demand.
For example, imagine you thought it was a great idea to build an online company that sells and ships hats. Instead of building the company right away, you could build (or pay someone to build) a basic website that listed hats for sale in your neighbourhood. When an order came in, you could physically buy and ship the hat yourself.
H) Sell your idea to 10 people (medium effort, high accuracy)
By far, the best way to validate your idea is to sell it. Given that the most common reason startups fail is no market need, selling your idea to 10 people is the best way you can validate it before you spend the time and resources required to build it.