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 + October 2022 for relevancy.
Having mentored over 75 (very) early-stage founders, I get asked this question a lot. Here's my industry-agnostic advice for those that are just starting out.
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!):
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
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 (!).
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. Brainstorm what pain points do your customers have? How are they solving them now -- without you?
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.
What is your market opportunity? Marc Andreessen advises that market size is the key to success, not the team.
Here's a framework to help you iron out these questions: JTBD.
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
Approach 1: 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.
Approach 2: Alternatively, consider developing a "fake front door" test recommended by Gary Livingston as your MVP; please see this blog post by data36 for more details on the pros and cons of this approach.
Part VI: Get Support
Join start-up communities, such as 805 start-ups to meet other founders (free)
Learn from the Reddit start-up community through Reddit and Discord, and get feedback on Fridays.
You've tried the above and are you looking for advice to improve your specific product, including how to align customer and business incentives? Let's talk through it -- and see where you can improve, in a flat-fee 90-minute session.
You may also like:
Dear Advisor: Should I pivot?
Dear Advisor: What metrics should I be thinking about?
Ryan Singer (of Basecamp)'s (free) e-book: "Shape Up: Stop Running in Circles and Ship Work that Matters", which includes chapters on how to scope down your MVP
Advice on finding product market fit
My advice, systematizing Product Market Fit from the very beginning
Dear Advisor: How do I do Product-Led-Growth (PLG) as my Go-to-Market (GTM) strategy for Product market fit (PMF)?
Dave Parker's book: Trajectory: Startup: Ideation to Product/Market Fit
What are the most common pre-seed and seed-stage pitch deck mistakes?
Advice on ironing out the idea:
Katelyn Bourgoin's advice on 5 biggest mistakes in customer discovery interviews
Techstars Toolkit in 20 parts
How to validate your startup idea, by Todd Jackson for Lenny's Newsletter, for examples of how 9 start-ups did just that
More on JTBD framework: interview guide and example statements and templates
12 Frameworks for Finding Startup Ideas — Advice for Future Founders, by First Round Review
The Startup Happiness Formula — This 3X Founder Shares His Approach to Figuring Out What to Build Next, by First Round Review
Customer Discovery Interviews: A Secret of Successful Startups: Questions, Scripts, and Frameworks to Become a Customer-Centered Startup, by Jason Quey
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
Ethical Tech Starts With Addressing Ethical Debt, by Casey Fiesler and Natalie Garrett
Different types of marketplaces, by Casey Winters
Podcast episode of Afford Anything with advice on how to “fail fast” when starting a side hustle
Book: The Founder's Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup
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; alternate link here -- based on the associated book "Venture Deals"
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