validate startup idea

How to validate your startup idea

Coming up with an idea for a product or service is not the hardest thing for startups and entrepreneurs. Building a product isn’t even the hardest. Truly, the hardest part is “making it work”, or in other words, getting people to like and want to buy your product, and beating the competition at the same time.

The markets today are as competitive as never before and naturally everyone wants a piece of a pie. One day you may think of a brilliant startup idea and surely you’d want to check if it already exists at all, or if it exists in your country/region, or if it exists in your industry/niche.

And firstly, you should know that it most likely does exist! But that’s not the point (more on that in a moment). You shouldn’t let that fact discourage you. Secondly, if you’re wondering how to verify a startup idea – spoiler alert – there’s no 100% right way to do it. There are some tools and tips, which we’ll list, but the only real validation you can get is to grow a business/a startup for 1 or 2 years and see if you can make it profitable.

On a bright side, there is always room for new opportunities. Fifteen years ago, there was no Uber and all seemed fine. But the idea behind Uber brought a revolution to transportation, and now we can’t imagine it otherwise. The story of Dropbox also has become viral among marketers and investors. When pitching his startup idea, Dropbox founder Drew Houston was asked why should anyone invest in his company when there are dozens of similar ones already. He asked in return if anyone is actually using those companies’ services. And the answer was no.

“It’s an asset to not know everything about everything… A lot of really great, innovative things have happened when people just didn’t know it wasn’t supposed to be possible.” – Drew Houston

So there’s always space to improve things, to make people’s lives better, easier, more comfortable. Ideas are just ideas, just guesses, any startup idea possibly exists out there in the world. But it’s execution/implementation that matters most, not the idea itself. Make your product or service better than others, learn from others’ mistakes.

Enough with this reasoning – let’s not get off our course. So how do you verify a startup idea? Let’s begin with things that you have to verify.

What you need to verify

With billions of people, there is no shortage of ideas, but when we’re talking about startup ideas, the important thing is that it has to bring profit. That’s the goal, and for that, your idea has to be helpful, it has to tackle some problem, no matter how small or big. Your only real validation is going to be money earned.

So, at the very beginning, you should determine these points:

  1. A problem to address
  2. The solution to it
  3. Target customers to sell the solution to
  4. The price

Now, the things you need to find out.

#1 Who is your competitor?

Or ‘who would be a competitor’ should we say? Because you’re doing it before even starting a business, and that’s the right way, however odd it may sound. Learn competitors’ strategies, their customers, strengths, and weaknesses, think of what and how you could do better.

To help you out, check this about companies:

  • What’s their brand?
  • How many employees and what kind of employees?
  • What’s their budget/investment?
  • Who’s the owner?
  • What’s the annual profit?
  • What’s their business strategy?

About their customers:

  • What customers are targeted?
  • How do they reach those customers?
  • Do they try to gain customer loyalty?
  • How many customers do they have?

About their products/services:

  • What exactly are they selling?
  • The price of a product
  • What’s the key feature that engages customers?
  • How are products delivered?

This should bring some clarity about your startup idea, help you define what would you do differently, and hopefully better. Will it have better features?… faster/better delivery?… or a totally different approach?

Note: If you can’t find competitors, you are doing something wrong.

#2 Research the market.

Yes, it may sound trivial, but Google it. Do not rush – take a few days to research the market and the niche you’re interested in. Find out whether someone is already doing what you have in mind. Are their efforts successful and if not, what did they do wrong? No matter how unique your idea may seem, it’s a mistake not to dig into the market.

how to validate a startup idea - search google

The key then is execution. With thousands of hotels, all with online reservation options, Booking.com managed to offer the undeniable “win-win” service and firmly grasp its niche. If you see your idea standing out from others in a new way, that’s a first positive sign for a startup.

#3 Study the demand.

No actual market demand is the #1 reason why so many startups fail. There are 4 good practices to quickly and quantitatively discover if customers need your product and would be willing to pay for it:

  1. Talk to people face-to-face. In real conversations with real people (friends, workmates, businessmen, investors) you may share your idea and see if your enthusiasm transfers to others or not. Ask what are they using and how satisfied they are. Pitch your idea and see if people understand it and how they react to it.
  2. Conduct surveys. Based on facts learned from conversations, draft more specific surveys to be able to segment responses in the end. Tools like Google Surveys, Survey Monkey, Survata, etc. can be handy. Use 5-point range for answers, from ‘not interested’ to ‘very interested’ when asking about your product and its features. Download all the responses.
  3. Send cold emails. As you don’t know the key people in your area of interest to consult with, send emails to potential customers directly. No spam, individual one-by-one emails offering a meeting to discuss a product or service. Look for specific companies and/or key people – you can use LinkedIn, for example. If there’s no mention of e-mail, Chrome extensions like Hunter, Prospect, Rapportive might help.
  4. Launch targeted ads. Interested or invested is different. With Google AdWords or Facebook ads, you are able to test if customers would actually be ready to buy something.

Where to start: Startup Idea Matrix

Need to brainstorm some startup ideas? A quick suggestion: Startup idea matrix introduced by Google Play chief, Eric Stromberg. He explains, that it “outlines various consumer markets as well as tactics to bring a product to the market”, and suggests to view it as a starting point for creativity.

how to validate a startup idea - startup idea matrix

As you will see, we can really get inspired by how many empty fields are there, meaning open opportunities. The left column shows industries, and in the upper column, there are possible ways to get into the market (from subscription, rentals, original content, to mobile apps, service, hardware, etc.). Famous products are already there, so you may have a direction of thought.

Where to start II: Create a landing page

No need to spend lots of money on a simple web presence. There are cheap services and even free ones that may suffice. Why launch a web page? Again, this is another way to study the market demand or feedback to your idea.

A page with an individual domain name or the landing page tool URL – it doesn’t matter much at this stage. You can use a landing page to reference information to people, to attract traffic, or just to collect email addresses. The main idea is that you’ll have at least some audience. Check our guide to what is MVP and how to build it to find some tips and tools that might help you create your landing page.

Pitch your idea

Pitching your startup idea differs from just sharing it because now you’re trying to sell it as a business concept. This is the next level of startup validation, so to speak. You get to the audience that might be interested in using your product or investing in it.

And don’t be afraid that someone else is going to steal it. By keeping it secret, how are you going to engage the audience? You may find competitors interested in being partners, and even if someone steals your idea, they won’t have the passion for it like you do.
There are 2 ways of pitching.

#1 Offline. The most effective one and down to its very essence – present your idea face-to-face in 3 to 5-minute pitch. You benefit by getting instant feedback, and expert advice if you’re lucky, invoking a discussion about your idea, brainstorming commercial options. The best outcome would be finding investors for your startup idea.

Startup competition meetings are one of the ways to begin. Check these for example:

#2 Online. Faster, flexible and affordable. The options here include: a) B2B marketplaces, b) B2C marketplaces, c) crowdfunding platforms. Marketplaces are essentially online communities with interested participants, where you can present your idea and get not only feedback but direct proposals. Examples: OpportyBizVibeUppler.

With crowdfunding, or fundraising, you share ideas about the early stages, and if it’s decent or innovative, you might actually get money to implement it. You can try some of these crowdfunding sites:

Final words

Have most good business ideas already been thought of? Probably. Has each one of them been tried out or successfully carried out? No. Is there the ultimate way to verify if your startup idea already exists? No. It is never going to be easy, but you can always find business opportunities. Start doing something, invest in your idea and you’ll learn much more practical info. Don’t get discouraged if someone has tried a similar startup and failed. That doesn’t mean the idea is bad by default, but perhaps it wasn’t implemented well.

how-technology-and-the-internet-are-changing-the-face-of-the-startup-ecosystem

How technology and the internet are changing the face of the startup ecosystem

The long-term financial potential and social effect of upcoming technology are among the little inevitability in the years to come. Technology firms continue to rise to a more significant percentage of the global economy. They have surpassed gas and oil organizations to become the most prominent public firms in the universe, the private industry is overflowing with billion-dollar unicorn estimations never seen before in the past, and numerous non-technological businesses are either perishing in the hands of technology or merging with them. 

The first five information technology waves of the internet, defense, social media, personal computer, and integrated circuits have significantly transformed society. However, the waves which are coming in the next two decades will make the current situation look like a child`s play. 

Artificial intelligence, virtual reality, artificial intelligence, is to mention a few of the swiftly approaching social transformative technologies yet to come. Each of these technologies indicates a future with an abundant increase in productivity and prosperity. 

A startup ecosystem is an economical procedure for a region, city or country. Fresh startups are developed every year, and they receive funds from investors to grow, and many of them fail. However, in these cases, investors, as well as entrepreneurs, start again. If there is a success, the effort is monetized through the exits, and a considerable part of the funds from these exits goes back to the system. 

Evolution of technology

Economic theories reflect an evolutionary point of view of changes in technology and economic growth. Considering the vision of change as well as the progression of technology, let us see its significant characteristics:

Technology means insecurity and uncertainty

Technology is dynamic. It adjusts and consistently improves. New options and varieties appear regularly. Changes in technology are systemic. Technology does not appear without modifications in the environment. Fresh technology appears at once with the infrastructure to create and distribute them. A vehicle needed highways and petrol pumps. The internet has advanced with the fiber infrastructure. That technology interdependence, on the other hand, means that significant changes are slow and costly.

Based on the idea of an evolutionary technology change, evolutional technology offers better products, and they are used to develop the next generation of products. One can probably expect a runaway technological growth in the future, leading to incomprehensive changes to human civilization. 

Technology`s percentage of the GDP of the world is increasing

The global Information Technology (IT) market, incorporating hardware, services, software as well as telecommunications, is expected to arrive at more than $ 3.8 trillion this year, up from a little over $ 3.7 trillion in 2018. Additional calculations exclude sections which are deflationary like services and create $ 1.6 trillion per year or 2% of global GDP. 

This digit was 1% of the Global GDP in the year 2004 and approximately 0.5% of global GDP in 1992. Therefore technology maintains its exponential pace, and at this pace, it will reach 4% of the global GDP by 2026 and 8% by 2038. 

The world economy is expected to rise to 3% per year and double by 2038 to $150 trillion each year. If technology maintains this pace, reaching the 8% digit, then deflationary technology sections will be doing $12 trillion in revenue in the year 2038, $10.4 trillion being net new revenue presently. 

Adoption of fresh technologies results in a rise in startups

Currently, the adoption line of specific new technologies is practically vertical. Technology and innovation are swiftly introduced into the market and accepted by people. The duration takes for new technology to arrive at mainstream adoption is accelerating exponentially that at one time in the future where new technology can have more than 50 % market penetration in a few years whereas previously it would take decades.

This is a very significant amount of future growth for technology which signifies a bright future for technology ventures, and specifically, technology startups as well as startup ecosystems. This can as well be seen from a different perspective – the valuation of the firms responsible for the disruption.
Currently, we are facing an increased rate of technology adoption and disruption. Apart from this, the rise of new technologies is growing over time. Presently, new disruptive proposals emerge regularly. A considerable part of the technology products which will make up the $ 12 trillion in the world annual GDP 2 decades in the future probably does not exist yet. 

Role of startups in the evolution of technology

Startups offer disruption based on the consistent search of opportunities and needs which have not been met. Some of this technological future will as well come from large firms, but by and big, these huge firms still have not figured out how to continually create disruptive innovation. 

A reliable indication that we are at the center of the passing of the baton between the modern times and the information era in the current milestone arrived at in July 2016, where the world`s five most significant public firms by market capitalization were all technology firms. 

The role of the huge traditional organizations in the innovation landscape is mainly as acquirers; where they develop acquire products applying their ability for efficiency and sale. However, traditional firms also see startups as a way of innovation. Currently, corporate venturing has been systemized and extended. Reputable firms define difficulties for young entrepreneurs and startups, and they attempt to purchase them. 

Startups are better at new disruptive innovation than the huge firms. Both factors introduce huge difficulties in customary firms. The introduction of new technology means the disappearing of organizations and at times of entire sectors.

Big tech organizations have created a more symbiotic relationship with startups. Organizations like Microsoft, Apple, and Amazon, have shown strong competency in the last 5 to 10 years in creating reciprocal relationships with startups by offering platforms and infrastructure for them to build on. Cycles of disruption are accelerating. 

New startups are developed every year, and they receive funds from investors to grow. Most of the startups fail. Although these situations entrepreneurs, as well as investors, try again. It is critical to see investing in the development of startup ecosystems as not merely as a generator of economic prosperity and creation of jobs but also as a hedge towards the societal security in the future. 

 

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