Idea Validation Process: Overview and Introduction

Before we spend a dime on building anything, we’re first going to learn how to assess the feasibility and viability of our startup idea to see whether we should forge ahead with confidence, pivot, or go back to the drawing board altogether.

This should always be the first step for every Founder who is considering pursuing a startup idea. Broadly, this process is called idea validation.

Intro to the Business Idea Validation Process

As a Founder, chances are you’ve experienced the “eureka” moment — that feeling of capturing lightning in a bottle when you suddenly strike upon an idea that has you running to tell your friends, family members, and baffled strangers you encounter on the street (but probably not your target audience).

Nine times out of ten, the “eureka” moment is immediately followed by an overwhelming urge to jump straight into the building process because you know in your heart of hearts how incredibly awesome your idea is, and you’re hellbent on getting it into the wild as fast as humanly possible so everyone else can see how awesome it is, too.

Then, before you know it, you find yourself months later, having spent many a sleepless night and tens of thousands of dollars building a product that, come to find out, nobody really wants. This is how tens of thousands of startups fail each year.

The reality is — the difference between a good business idea, and a bad idea is that the good idea went through an idea validation process and was modified. And that can make all the difference between what might have been a "great idea" that failed, and a successful startup with its idea validated fully.

The validation process insists that we collect feedback from our target market, through customer interviews, market research, a minimum viable product, and a landing page — taking what was an "interesting idea" towards a final product as we test assumptions through proper validation.

Okay, now what?

You validate your idea, that's what!

Putting the Horse BEFORE The Cart

For all too many Founders, their startup idea ultimately winds up dying on the vine simply because they didn’t take the time to pause, step back, and look at the key indicators that tell them whether or not that specific version of their startup idea is worth doing, or if any version of their startup idea is likely to find product market fit.

It’s the startup equivalent of putting the cart before the horse. As far as critical mistakes go, it's one of the most common among startup founders.

The good news, we’re going to do it the other way around, using a process to validate your idea.

That’s where idea validation comes in. Validation is the process of proving your most critical assumptions true or false and directing your business model, value proposition, and eventually your MVP (minimum viable product).

Overview of the 4 Phases of Idea Validation

Much like how NASA devotes tons of cycles to mapping out every possible trajectory, gravity field, and asteroid movement before launching an unmanned vehicle into orbit, we’re going to show you how to arm yourself with the right information, evidence, and feedback you need to walk away with the best possible understanding of how to proceed (or not proceed) with your startup idea.

But unlike rocket science, we’re going to break up the idea validation process into super digestible steps that you can tackle one at a time and actually get done across a series of articles broken into 4 concise phases that each align with an idea validation stage.

PHASE 1: Create a research plan (included below in this article)

Creating a diligent idea validation research plan will help you identify and understand the problem you’re tackling and any solutions that may already exist to serve your target audience.

PHASE 2: Get expert validation

Connecting with experienced, relevant leaders in your industry will help bring clarity and insight into the feasibility of your initial idea, product concept, business model, and unique value proposition. Connecting with experts often leads to the formation of an idea validation board. Especially at the early stage of the business idea

After all, these are the folks who have been there and done it before. It's unlikely that the idea will be entirely novel or foreign to them. In fact, if it is, that might be an indication that they aren't the right experts to help with your idea validation process or participate on your idea validation board.

PHASE 3 Engage in customer discovery within your target audience

Directly engaging in constructive conversations with your ideal customers will help you better comprehend how your solution fits into your market and prove or disprove any assumptions you have about your early adopters, and real users and what assumptions you'll need to further test with your minimum viable product.

PHASE 4 Craft your elevator pitch/value proposition

We’ll cover the best ways to boil down the biggest value propositions of your idea and show you how to mold them into a succinct elevator pitch that covers all the critical pieces of information potential investors look for.

The Goal

Proper idea validation is all about putting in the necessary legwork at the beginning to ultimately save you a ton of time, effort, and money in the long run towards that first-paying customer.

Once you’ve crossed the finish line, you’ll have checked off a few important idea validation goals along the way:

1 - Understand who’s operating in your market and how to properly evaluate the market need.

2- Refine your idea based on feedback from industry experts and first customers.

3 - Articulate your business idea in a way that sparks interest.

Let's jump directly into Phase 1: creating an idea validation research plan.

Phase 1: Create a Research Plan for Idea Validation

Intro

Good research is the secret weapon of startup concepts, potentially shaving months or even years off of a new product launch. In this phase, we’re going to focus on building a super-efficient Research Plan specifically designed for evaluating new startup concepts quickly.

A Research Plan consists of a series of checks and validation exercises that you can run through to make sure you’ve got a good feel for the market you’re heading into.

The last thing you want is to be pitching a “revolutionary new startup idea” to an investor only to have them tell you it’s been done 20 times before with existing apps.

You also don’t want to give up on your startup idea just because you saw a Google Ad with a similar-sounding company. We’ll give you the tools to figure out who’s out there and how to evaluate them properly. Just because other startup founders are working on something similar, doesn't mean you have a bad product idea. In fact, how many startups are working on similar product ideas can be a useful tool in estimating how much interest there is from

Your Research Plan consists of 3 steps:

ONE Set research goals

To avoid going into a black hole of research exercises, you’ll want to focus on specific questions that will help you determine the feasibility of your idea.

TWO Tap reliable research sources

There are a number of well-known sources for getting quick answers. We’ll point you to those that are the best fit for your product.

THREE Evaluate your findings

Once you’ve collected your research we’ll walk through a checklist of how to evaluate your findings.

Take your time on these. While we want to be “quick and efficient,” we also want to be as accurate as possible throughout the whole process. Even a small discovery at this stage could save an enormous amount of time and expense in the near future.

Key Takeaway

Start with a well-defined problem your solution aims to solve and conduct an analysis of your market, potential audience, and competitive landscape.

Step 1: Set your Research Goals

We don’t want to spend the rest of our lives researching so we’re going to focus on three important questions in our research:

1. What problem does my startup or idea solve, and how painful is that problem?

2. Who is affected by the problem and to what extent?

3. Who is already trying to solve the problem and what are their strengths and weaknesses?

What problem does my startup idea solve, and how painful is that problem?

Take a look around at the products and services you are currently using and surrounded by. Why are they there? Well, it’s because a successful business solves a problem or fills a need you would otherwise be experiencing.

This is how all great inventions and startup business ideas are born – from a problem or need. From electricity to the telephone, to the Internet, and more recently to Google and Facebook, great businesses are built on big problems.

Consider this the first question on your startup litmus test: “What problem does my startup or idea solve, and how painful is that problem?” Think critically about this question, as an honest assessment may save hours, days, weeks, months, or years of your time.

Here are some examples of companies and the problems they solve.

5-hour Energy

Whether it’s lack of sleep, long days, or hard work, people run low on energy over the course of the day.

Spanx

Pantyhose traditionally covered the entire foot, including toes, which is not ideal for some shoe types. If the hose is cut, it rolls up the leg.

Amazon

Buying books was constrained to finding a bookstore, having the correct book in stock, and traveling to that bookstore.

Who is affected by the problem and to what extent?

Your market research should focus on who is affected by the problem and to what extent, you are essentially figuring out exactly what the size of the market is for your solution.

Market validation and market size are two of the most important aspects of vetting a startup idea and must be calculated carefully to estimate how many potential customers exist within your target audience.

TAM (Total Addressable Market)

Start with your Total Addressable Market (TAM) by defining the industry you are operating in. Then you segment that industry number down to the segment within the industry you are working in, keeping in mind competitors’ numbers for benchmarking comparisons.

Don't use vague %s as target market goals.

Too often entrepreneurs simply get an industry number and say the dreaded, “If we capture just 1% of this market…” This strategy is lazy and could cost you later on. Do your homework and avoid the blanket 1% top-down approach.

Moving along to the competition

Now that you’ve determined that you have a market worth pursuing, it’s time to figure out who you’ll be competing with.

Who is already trying to solve the problem and what are their strengths and weaknesses?

If you’ve identified a problem that is experienced by a lot of people, odds are someone else has too. Find out who else is approaching the problem and how.

Even though there may be other companies trying to solve the same problem as you, they may be going about it in a completely different way. Competition can be a roadblock, but it can also be a good indication that you’ve found a problem worth trying to solve.

SWOT the competition.

Once you’ve identified some of the key players, the next step is to perform a SWOT analysis of those competitors. Identify the Strengths, Weaknesses, Opportunities, and Threats associated with each one.

You may think your idea is unique and no one has ever thought to solve the particular problem you are working on, but that doesn’t mean you are off the hook here. Identify what people are currently doing to address the problem.

It may not be a solution that perfectly addresses the problem like you aim to, but customers' willingness to change existing behavior can be difficult to create if it adequately addresses their needs or the perceived cost in time or money, or attention is greater than the benefit in doing so.

Whatever solution customers are currently using to alleviate the pain caused by the problem is competition for you and should be approached as such. Status quo is a powerful force.

Your unique value proposition is key in gaining real interest and taking customers from the incumbents.

Your idea should be based on differentiating yourself from the existing solutions that do a better job of solving the market need for target users, through the business model, or the pricing model.

FOOD FOR THOUGHT

The Dropbox founders once approached Google for investment. Google’s Chris Sacca said Google was already working on a similar, cloud-based software and that the Dropbox founders shouldn’t bother. In fact, he claimed Google would “crush them.”

The Dropbox team pushed forward regardless because they felt like they had a different, unique, and better solution. They are a billion-dollar company now and won over a substantial market share.

There are always competitors and just because someone else is doing something similar to what you want to do, doesn’t mean you should stop or be discouraged. It simply means that you will have to do it better than them.

Markets are often large and accessible for multiple players to survive.

Step 2: Tap Reliable Research Sources

Knowing what to look for is one thing, but you also need to know where to look, and having the right tools can make all the difference.

Answers to these questions are likely to have surfaced in a handful of major search indexes, databases, and online communities.

Chances are you’ve found a few answers in these searches already, but for the sake of being thorough, we’re going to do a more comprehensive search to be sure we didn’t miss anything.

Industry-Specific Searches

While a Google search may uncover many of the potential competitors you’d want to discover, that’s usually just the first pass.

The second pass is to dig into industry-specific sources where your competitors are likely to be selling similar products, from marketplaces to crowdfunding sites to industry associations.

• Yelp and Google Maps for local

• Amazon and Google Shopping for products

• Kickstarter, Indiegogo, and Amazon Launchpad for concept (before market) products

• Pinterest and Etsy for handcrafted

Funded Companies

Once you’ve figured out who some of the competition for your idea is, you’ll want to size them up.

One quick way to do that is to see if they are listed as a funded company. While getting angel or venture funding doesn’t mean the company is a certain success, it does mean it was vetted through professional channels to have made it through a funding process.

As such, you’ll want to know which of your competitors may be more qualified and in some cases, this may lead to some discovery of tangential competitors.

Knowing what other startup founders in your space are up to is an important validation goal as you hone your idea.

• Crunchbase

• Inc 500

Step 3: Evaluate your Findings

Once you’ve compiled all of your research, we’ll want to put a really critical eye on what we’ve found. Evaluating your research is actually harder than the research itself because it requires you to “zoom out” and be very pragmatic about the competitive landscape and how your idea fits within it.

Is the problem painful enough to be worth solving?

It’s harder to sell a vitamin than it is to sell a painkiller. You have to convince someone they need a vitamin, whereas consumers are well aware they must buy a painkiller when they need it.

The more of a “painkiller” than a “vitamin” your concept is, the more likely you are to have a niche customer base you can engage with. Figure out if your solution is a vitamin or a painkiller.

Startup founders can often find themselves working on an idea that sounds plausible, but does not provide a solution to a problem people care about in a meaningful way.

Y Combinator founder and investor Paul Graham says that often, these startups are born from individuals who are simply “trying to think of startup ideas” and not looking for problems.

Graham calls these ideas “made-up” or “sitcom” startup ideas, as they sound like something a writer for a television sitcom would come up with when creating a script for a character that had a business idea. The idea seems possible, even though in reality it is bad and no one would use or buy it.

“The verb you want to be using with respect to startup ideas is not ‘think up’ but ‘notice.’ At YC we call ideas that grow naturally out of the founders' own experiences ‘organic’ startup ideas. The most successful startups almost all begin this way.”

-Paul Graham, Founder / YCombinator

Is our market opportunity big enough to build a meaningful business?

Sometimes an opportunity exists, but it's not quite big enough to build a meaningful business out of. If there are three other pizza places in the neighborhood you want to open up your pizza shop, you may still be the best, but there are still a fixed number of people buying pizza, and splitting your income across three other incumbents could still be challenging.

Some businesses are not huge opportunities. Some entrepreneurs are happy with starting lifestyle businesses that they can own and operate while providing a comfortable income. If that is you, that is just fine!

You can keep that in mind as you define your own metric of success. Everyone’s business size goals are different so we’ll evaluate whether the market looks big enough to move forward.

Can you beat the competition?

Compiling a good competitive analysis will allow you to properly stack up your potential features with what’s currently in market. You may find that some of the features you had in mind are simply “table stakes” that everyone has to have, and in order for you to win customers, you’ll have to double down on a very specific feature.

These decisions will become paramount when you enter the next phase when determining feasibility.

Summary

A well-defined research plan forces us to remove the rose-colored glasses and look at our concept from a critical lens, giving us a much better idea of whether or not our idea aligns with what we originally assumed about how it might fit into our market.

Now that we’ve compiled our research, it’s time to actually put it to use by asking ourselves, is the problem I’m solving painful enough? Is my market big enough? Do I have what it takes to outshine my competitors?

In the next phase, we’ll take these insights a step further by using them to actively guide our conversations with industry experts and bring further clarity to our startup idea.