You’ve got a great idea for a startup business, and you can’t wait to start building your product and pitching your ideas to potential investors.
Have you asked yourself if this great idea is worth pursuing?
According to Investopedia, approximately 21.5% of startups fail in the first year, 30% in the second year, 50% in the fifth year, and 70% in their 10th year.
This is a scary figure for any intending startup founder, but you can avoid this scenario by ensuring you validate your idea from the get-go.
Today, you will discover the simple framework that you can be used to validate your startup idea so you know if it’s worth your time and other resources.
What is startup idea validation?
Idea validation is the process involved in gathering relevant evidence around a startup idea through a series of experiments to make fast and informed decisions.
The whole startup idea validation process starts with an idea and ends with a paying customer.
Importance of validating your startup idea
For every startup that fails, there are lessons to be learned. As a founder, you can avoid running your startup into the ground right from the start. And validating your startup idea is surely a good way to begin.
Startup idea validation aims to ensure that your business model has potential. Research by CB Insights shows that the number one reason for startup failure is a lack of demand for the product.
An idea should be validated before investing a significant amount of time and resources in developing it, this is to avoid building and launching a product or concept that no one wants or isn’t willing to pay for.
Every startup idea must either be able to solve a real problem, fulfil its intended purpose or appeal to other incentives.
First understanding and validating the problem and seeing if your idea can solve that problem is typically the smartest approach to validating your startup.
Creating a solution without first validating that it solves the problem will always be a bad idea if you want to minimize your risks.
Ways to validate your startup ideas
Although there are several ways to validate a startup idea, the overall validation process is composed of 4 simple ways:
In the early stages of your startup journey, you must focus on validating your assumptions to make sure the most critical assumptions for your business are true.
For example, you might want to assume and validate your ideal target market and its potential to see if your idea is valuable and appeals to the market you have chosen.`
If, however, your assumptions regarding your target market and idea are valid, you can start testing your product to learn how all the elements work together.
Here’s how to get started with the idea validation process:
1. Define your goal
Startup Idea validation starts with defining your goals. In this stage, you’ll decide what you want to learn and what aspects to validate.
For example, your goal can be any of the following,
- Problem – Is the problem real or worth solving?
- Solution – Is your product/offer/service going to help solve the problem?
- Features – What/How will the core features of your product work?
- Business model – Is your business model viable and scalable?
- Price – Is there enough demand to make your business model work with the price you’ve set? How will your pricing model work in practice?
There are other several questions and goals to be set, this is just to give you an idea of what it looks like.
The purpose of defining your goal is to identify the most critical assumptions related to your specific startup idea.
So make sure you start with the most critical and significant ones.
2. Develop a hypothesis
After defining your goal for idea validation, What is next is to develop a hypothesis based on that goal.
A useful hypothesis should be a testable statement, which often includes a prediction.
Let’s look at Airbnb as an example.
Its main critical assumption (hypothesis) was that homeowners are willing to accommodate and rent out their homes to strangers, and people are willing to stay at a stranger’s house.
For Airbnb, this was their most critical assumption because the entire idea depended on other people willing to share their homes.
The key to creating a hypothesis is to identify and start from the most critical assumption – the one assumption that’s most likely to fail, and would also have a direct impact on the business if it fails.
3. Experiment and revise
Once you have developed a hypothesis, you can start validating that assumption by running a series of experiments.
The aim of running an experiment is to find the fastest and cheapest way to test your assumptions in practice.
An experiment is a test or a series of tests carried out to measure the effectiveness of a hypothesis and reveal whether or not you should proceed with your idea.
In other words, you carry out experiments to learn if your assumptions are true or not.
There are several ways to conduct experiments:
- Build an MVP (Minimum Viable Product)
- Design a Landing page
- Email waitlist
- Build a Physical Prototype
- Conduct Interviews/survey
- And so on
4. Validate and develop
At this stage, you should have confirmed if your assumption is either valid or invalid and discovered If your startup idea has potential and if the most critical assumption is correct.
Having validated the most critical idea assumptions, and using the data you’ve gathered in the validation process, will help when you start developing your ideas.
One important thing to note is that validation isn’t always a guarantee of startup success; because the execution matters a lot.