A few weeks ago we published an article on where to find startup ideas and discussed the four main sources of inspiration for aspiring entrepreneurs. Yet, while coming up with a startup idea is not as difficult as it may seem at first (especially when you know where to draw inspiration), it is obvious that not all ideas are actually viable. So before pursuing further with your startup idea and getting down to the software development, it’s essential to validate it to be sure that the idea is worth your time and money.
To make certain that your startup idea is worth going ahead with, you need to validate key hypotheses. What are those?
We’ve gathered six main categories that are of huge importance for a startup and identified key questions for potential founders to ask during the validation process.
Those are broad general categories that will require more specificity depending on the idea you have. Still, they help to get the direction in which to head during the validation process. Adjust them to your specific idea and define a few key hypotheses.
One more thing: having answers to the questions mentioned above will help you in the fundraising process if you need external capital.
Basically, there are two ways of research that will help you to test the hypotheses and prove or disprove them.
Secondary research is the one conducted by others. It is typically quite quick to find and this is where most research begins. Either free or paid, it helps to get the gist of the main data that is available on the internet.
While conducting secondary research, you will most likely use analyst reports, equity research papers, open APIs & public data sets as well as customer help & support pages. As for the specific resources, you may use Statista, Pitchbook, Crunchbase, Accenture, investor presentations for public companies, public Zendesk sites, etc.
While secondary research is indeed of great value, it’s usually quite superficial to draw conclusions. But this is where you typically start and discover the Market Size (most likely, top-down calculation of your TAM), Value Proposition, Market Fragmentation, and partly Unit Economics (e.g., AOV — average order value).
Primary research is self-conducted and can require a budget and turnaround time. This type of research is much more specific than the secondary one and should be tailored to your exact area and product. So while it requires more input due to its nature, primary research generally fills the gaps not answered by secondary research.
There are several types of primary research:
Caveat #1: Qualitative customer discovery should include a sufficient number of respondents, otherwise the results will not be representative and may even mislead you. While the concept of “sufficiency” here is quite vague and depends on the product you aim to create, the low starting point is usually 30 people.
Caveat #2: Be careful with your conclusions — people are usually nice and may not tell you about the negative aspects of your potential business. You need to hear the truth so try to interview not only your relatives and close friends (their feedback is the trickiest) but also stranger people. Not only will they be less emotional with you and more likely to tell what they actually think but they also can have a completely different (and, therefore, very useful!) perspective due to different backgrounds.
Caveat #3: You should also remember that you’re building a product and not a feature — so ask comprehensive questions.
A seemingly compelling startup idea may sometimes be completely not viable when founders get down to the execution process. So early validation is essential — it’s critical to kill initial ideas that don’t meet immediate criteria and not waste your time and money on them as even initial software development may be quite costly. Moreover, the very process of validation helps to adjust your initial assumptions and better understand the fundamentals of how your future business should operate.
And final advice from Idealogic: while making assumptions, always expect to be in line with industry averages and not above them — that’s where many startups have failed due to their excessive optimism. We were impressed by the honest confession of Andrew Wilkinson, Flow founder, because it’s a pure example of fighting in a battle you can’t win. Keep your head below clouds, and you will win!