Dear advisor: I have a startup idea, what Should i do next?
(or) How to validate your idea -- and align incentives -- before spending money to build an MVP
Post was originally published in September 2020 and has been updated in March, May -- August 2021 and September 2022 for relevancy.
Having mentored over 25 (very) early-stage founders, I get asked this question a lot. Here's my industry-agnostic advice for those that are just starting out.
TL;DR: Understand who your customers are, what pain points you're solving for them, and who will pay for it (and how much) -- before developing a mockup/wireframe of your Minimum Viable Product (MVP).
Part I: Identify your target customers
You have an idea for your start-up (!). To help you see if the idea has potential for product market fit, you'll need to iron-out the following (no easy task!):
Who your customers are -- be as specific as possible here.
Note: If you’re developing a 2-sided marketplace, you have two sets of customers: buyers and sellers.
There are over 30 customer pain points. What pain points do your customers have? How are they solving them now?
Note: Really try to understand: "what are their goals? what's standing in their way?" are the pain points really "hair-on-fire" problems?
What is your value proposition?
B2C/D2C: How to you bring value to your customers?
B2B2C: How do you bring value to your customers, and they to their customers -- such that they also get ROI with you?
Note: Really try to understand why they would purchase your product and how soon to they expect your product to solve their problem(s). This is how you'll align incentives between the urgency to buy your product to solve their pain points, along with when they'd get triggered to buy it, at the price points that (counterintuitively?) build rapport (!). It's no easy task!
Example: I pay for Calendly Pro (no affiliation) because of the time it saves my in scheduling my many types of meetings, as well as the Stripe integration I can provide straight on the booking page, so that someone can seamlessly schedule a pitch deck due diligence session, a data strategy assessment, a "pick-my-brain" session, and many more; all without the email back-and forth!
Align incentives between: what you offer, what your customers need, and how much your customers are willing to pay for a solution that solves their pain point.
Here's a framework to help you iron out these questions: JTBD.
Why do this? Amos Shwartzfarb in his book Levers: The Framework for Building Repeatability into Your Business, writes that if you are able to rally narrow-down who you serve, how and why -- every sales call will lead to a sale (!).
Part II: Meet your customers to refine what value you bring
Before you spend any money on developing a solution, talk to your prospective customers to narrow down who they actually are, really understand their needs and value you bring to your customers -- and see if they’d be willing to pay for a solution to their problems. Sometimes it feels like a catch-22, you need customers to find more customers. How do you get started and find your first one?
(Part I) What value do you bring to your customers?
How will you learn from your customers: through 1-1 meetings or through surveys?
If you go the meeting route, here's a Comprehensive Guide to Customer Discovery Interviews, by Dianna Lesage.
If you go the survey route -- another big topic -- here are some recommendations:
Can you provide your customers something valuable during the interview/survey?
e.g. Are there publicly available (or paid) resources you can leverage to provide insight(s) they didn't have?
e.g. If you're considering developing a 2-sided marketplace, what will you offer the supply side to convince them to join before the demand is there?
Is your survey as concise as possible? Asking about existing and past decisions to establish context, and not asking hypotheticals [Gary Livingston]?
Consider offering (paid) studies on social media, especially if cold emails and follow-ups are getting no response
Where will you meet your prospects? Focus on where your customers go:
Industry and vertical conferences (free or $$$)
Meetup groups by vertical, expertise and/or industry (free)
Part III: Iterate on Parts I and II
Following the build-measure-learn cycle, you'll want to build a questionnaire to help you listen to your customers, see if:
measure/identify themes that come up; and
learn if there are themes that come up again and again -- and any words/phrases your customers are using to describe their pain-points.
By using their words to describe your idea, you'll be able to resonate with future customers.
Example from my consulting practice:
When I first started out, I used to say "I help companies use data to make decisions", but that's not my customers' lingo. And "decisions" don't sound like they're very urgent.
Then I started using my customers' words, explaining that "I help companies improve their product market fit by helping companies identify and solve the pain points of the most valuable and loyal customers -- to improve the product and scale the business". (Spoiler alert: we'll still be using data and analytics/AI, but the value proposition to my customer is now more clear -- and more urgent.)
For more advise on how to nail the language that your customers use, see this article by First Round Review
Note: If you're developing a SaaS product, consider offering consulting services or partnerships to prospective customers, to help you prove out and fine-tune the MVP.
Part IV: Determine scope of MVP
Learning from all of the above, what's the 1 smallest thing you can do today (with your Minimum Viable Product or MVP) -- to help solve one aspect of your customers' pain points to entice them to get your product?
Note: AI is non-trivial to get right and is not required for an MVP.
Part V: Mockup and Iterate on Parts I - IV
If you found promising themes around your customer pain-points, consider developing your MVP as interactive mockups/wireframes (over paying for app development before quantifying market need), for the next stage of idea validation -- for demos to your target customers, to help you see what's resonating and what's not, and who would be willing to pay for an MVP/service and how much.
Part VI: Get Support
Join start-up communities, such as 805 start-ups to meet other founders (free)
You may also like:
Dear Advisor: Should I pivot?
Dear Advisor: What metrics should I be thinking about?
Advice on finding product market fit
My advice, systematizing Product Market Fit from the very beginning
Dave Parker's book: Trajectory: Startup: Ideation to Product/Market Fit
Advice on ironing out the idea:
12 Frameworks for Finding Startup Ideas — Advice for Future Founders, by First Round Review
How to do proper market research discussion on Reddit
Zapier's advice on customer understanding to find product market fit
Lessons learned from 300 customer discovery interviews, by Katelyn Bourgoin
The Minimum Viable Testing Process for Evaluating Startup Ideas, by Gagan Biyani for First Round Review
Different types of marketplaces, by Casey Winters
6 things I wish I knew before I bootstrapped my first SaaS startup, by Pierre de Wulf
(Free) Course on Venture Deals and Financing from Kauffman Fellows and Techstars
Starting a Company in a Space You’re Not an Expert in — This Founder Shares 6 Lessons, by First Round Review
4 ways to Kickstarting Supply in Labor Marketplace, by Lenny Rachitsky
The Book of Jargon: Emerging Companies, by Latham Drive