- Startup Funding 101: How to Get Started with Adeo Ressi - October 22nd, 2014
- Onevest Startup Fundraising 101 Webinar - August 13th
- Before You Start
- The Anatomy of a Fundable Startup, by Naval Ravikant
- How to Quickly Validate your Start-Up Idea
- The Ultimate Guide List for Startups applying to Y Combinator
- Do You Really Even Need VC?
- Prospecting Investors
- The new reality of venture capital
- What I Would Look for When Choosing a VC – Knowing What I Know Now?
- Inside The Jobs Act: Equity Crowdfunding
- 5 Key Points To Know About Equity Crowdfunding
- Top 10 Benefits Of Crowdfunding
- Pitching to Investors
- ‘The money is out there’: How to craft your your pitch for angel investors
- Take Your Fundraising Pitch from Mediocre to Memorable with These Storytelling Tips
- The only way to raise money: Make them believe
- Creating Offers
- Due Diligence — Getting Funded
- How To Close Investors
- Next Steps
- Have an On-Going Dialogue with VCs
- Hungry for More?
- GA & Onevest Present: From Founding to Funding - Building a Team and Raising Capital
- How to Fund a Startup
- The Startup Master List of Resources (1,000+ resources)
How to Quickly Validate your Start-Up Idea
You know that feeling, when out of nowhere, you get that idea – THE idea.The idea that you’ve been waiting for,
The idea that is going to change it all
The BIG idea.
It’s like a light bulb the size of the sun lights up over your head.
“High end fitness training for middle-age professionals in the O.C. Area!”
“Premium Customer management App for mortgage brokers!”
“Affordable, food delivery service for college students!”
What’s the next step?
You jump online to do some research, hoping and praying that nobody has gotten to the idea before you.
After a few hours of searching, you realized that the idea may really be viable
“Not finding any competition! This may really be it!”
“But hold on a minute, am I being delusional and over optimistic?”
“Am I MISSING something?”
“What if this idea is really actually something that nobody wants?”
“What if this is something that every aspiring entrepreneur has thought of, tried and failed at already”
“Maybe it’s best if I get a second opinion.”
So what do we do?
Of course, we get on to reddit, forums, FaceBook to get some feedback!
“Yeah my friend actually gave an idea that’s almost identical to this a go, needless to say, he didn’t make it very far. Sorry to break the news to ya.”
“That seems like a pretty cool idea, I’m not sure how profitable it will be and what scaling up would look like, but you should give it a go! Keep us posted!”
“What kind of research have you done? I’ve seem something similar to this for another niche, but it has potential…”
You ponder on the idea for a few more days, spend a few more hours seeking for opinions.
You try to find businesses out there that are doing something similar.
You get some more mixed feedback..
A few more days go by.
The light-bulb is now flickering over your head.
The idea is getting stale, and you know it.
See, this is not a “feeling” I’m unfamiliar.
That overwhelm of uncertainty.
It’s a “sticking point” that is familiar to ALL aspiring (or even seasoned) entrepreneurs.
after investing years of time, and thousands of dollars in to dozens failed business ideas, I finally was able to come out on top at the end.
By no means am I a “business guru” or anything, but I have figured out a few ways to virtually guarantee initial success of a startup idea.
There are a few very methodical ways for you to break through this “sticking point” and have certainty about your idea.
With what I’m about to show you, you can find out once and for all if the big idea is either viable or a dud. The part of it all is that you can do this quickly – without spending thousands of dollars and months setting up shop.
It goes without saying that there are countless factors to starting a business, but these strategies will show you whether or not your product or service is something that can generate revenue – something people will buy.
Let me explain how this works, and I’ll also give you a few step-by-step action plans you can follow for validating your idea.
So what am I talking about here?
Well, let me create a scenario for you to illustrate a point first of all.
Say that you’re home one day, just hanging out.
Suddenly, you hear a knock on your door.
“Who can it possibly be?”
You answer the door to find a guy at your door step, looking stressed and frantic.
“Hey, I parked my car just in front of your house there for a second while I was looking for directions on my GPS, but then my battery died!
Look, I need to get to the airport ASAP or else I’m going to miss my flight! It’s the only flight out of here for the next week and I have to get on it!
Here, I have $3,000 cash, I just need to buy the extra car jumper battery off of you – like, in the next 10 minutes, please.”
Okay, so let me ask you,
What would you do at this point?
Would you tell them that you’ll think about it?
Go on the Entrepreneur subreddit and post a question to see if other people think it’s a good deal?
Would you call up your neighbor to see if they’re also selling car batteries, maybe they’re a competitor?
Research to see the margins you have for the sale?
No, of course not,
You’ll run in to your garage and get that spare battery,
if you don’t own a car, you’ll run out the back door, knock on your neighbor’s and buy their battery.
If your neighbors don’t have spare batteries, you’ll call up your friend who owns a car and offer them $500 to have them show up at your house with it in 5 minutes!
You’ll do whatever it takes right?
$2,500 for 30 minutes of work!
I know it’s a bit of a ridiculous illustration, however the point is that if there is burning demand, it will be fulfilled!
If there’s a burning demand knocking on your door, you’ll go fulfill that demand.
How does this apply to validating a business?
Why haven’t you started your business yet?
it’s because you haven’t confirmed the demand right?
if 10 people knock on your door, with cash in hand looking to buy your prospective product or service, are you going to go start that business?
Yes, you will.
So how do you find out if people want what you’re offering before spending money and time getting your business all set up to handle orders?
You find customers, sell them on your product or service, before setting up shop.
This is known as dry-testing.
This is probably not a new concept to you, but since you’re still reading, you probably haven’t figured out how to put this concept to use.
I also know that we learn best through examples, because this way we can actually SEE how it works.
So, I’m going illustrate a few different prospective scenarios of dry-test in action.
These are 4 models of dry-testing that you can model over for your own business validation.
Model # 1 – Advertise and track response
This one is probably the most popular in the business world and probably easiest to “conceptualize.”
How does it work?
Pretend you have an idea of after-midnight food delivery service for college students. Pretend that you’re in the University of Washington area. You’d imagine that University students are busy studying at night, and they need a way to cut down time on feeding themselves and they’re looking to do so without eating junk.
You’re not sure how much they would pay for a simple, healthy meal to be delivered to their door after midnight though. Frankly, you’re not even completely sure it’s something these students care about at all.
So we need to now see if we can get their attention. And if we can get their attention, we need to find out if they’ll be willing to pay you for the after mid-night food delivery service.
two parts to this:
1. We all know that university students are not really studying for 8 hours straight. At least 40% of the time is spent on Facebook right? So the obvious thing we can do is to run a simple, targeted Facebook Pay Per Click Advertisement campaign for these students during their “hungry” hours.
2. From there, we can send them to a basic order page and see if they try to order
And that’s it.
How does this work, technically speaking?
The Facebook Ad campaign can look like this:
- Advertising audience profile for just University of Washington Students
- Picking the age group to 20-24
- Setting the advertising window of 12pm-2am
With headline can write something like this:
“Hungry from Studying?
Delicious meal at your door within 15 minutes!”
Or something similar to this.
Remember, you’re just testing for demand right now. You don’t have to get caught up with all the details.
What about the order page?
It can be a 1 page website that outlines the prospective service with a 3 item menu attached.
“University of Washington – Healthy, Cheap Food Delivery After Mid-Night. Right to your door for under $8″
“3 combos to choose from (Insert prospective favorite study food for students + Prospective pricing to test)”
Have an order button that links to a page that says something like
“sorry, business under construction, here are some alternative services”
And you can recommend a few local delivery spots that are serving late.
By setting up analytics and tracking click-through to the “order page”, you can quickly find out if this is something people will pay for.
If all this website set-up stuff is going over your head, you can literally just set up a simple Facebook page that states the offer in the page description, and link the page to a dummy e-mail for people to order.
If you get order e-mails, then simply reply back with the same “out of service, but here are some suggestions” message.
This entire process can literally take you 2 hours to set up.
Compare this to doing weeks, or months of research, asking questions and all this other “stuff”, you can find out whether or not if your idea is viable by tomorrow.
Model # 2 – Go straight to the customer
What if you want to expedite all of this?
There is another way if you are part of your target audience.
You have the option of going straight to the customer and asking for the sale.
How does this work?
Let’s use the after midnight food delivery idea again.
At around 11:30 on a week-night, preferably during mid-term, you can send out 10 e-mails (or text) to 10 of your friends that are on campus with the following content:
I know everyone’s busy studying and all but you can’t be focused when your stomach is growling
I’m going in to the city to get some late night snack in about an hour,
I can pick up something for you, saves you an hour or so for studying (benefits)
It’s $6 (or whatever amount) a piece plus $X commission for gas and my time
Here are the 3 combos you get to choose,
I need an answer by midnight! (create some urgency)”
Again, you’re just testing for interest and demand.
However in this case you’re directly asking for the sale.
From there, you see what happens.
If nobody replies, then you’ve successfully unvalidated your idea within 30 minutes. No website set up, business cards, posting on reddits or any of the time-consuming tasks.
If people DO respond, then you just go fulfill those orders.
This validates that people ARE willing to pay for this service!
Simple as that.
Conceptually this is pretty simple,
Create an offer, go to your audience and ask for the sale!
How can you apply this concept to validating your idea?
Model # 3 – Provide value first and test response
Not a fan of “selling” to your friends?
Not good at “sales”?
Well, there is a more “elegant” way to dry-test.
This is personally one of my favorite ways for validating a product idea and it’s one that I use even until this day!
This model works by providing up-front value first and then piquing people’s interest to see if they’re willing to buy what you have to offer.
Bringing back the midnight food delivery idea,
what you can do in this case is identify the one place online that your target audience pays their attention.
For example, it can be University of Washington Forum (I don’t actually know if this forum exists). Or it can be an online bulletin board for these students.
What you can do is do a quick half-hour research on all the after midnight food spots in the city that are fairly priced.You would ideally want to condense the list down to a few spots that share some of the student favorites.
You can from there do a 3, 4 sentence write-up about each restaurant based on Yelp or Google reviews.
From there, you can post it on to the bulletin board and headline it:
“Top 5 after-midnight, cheap-eats spots in the UOW area for the study munchies”
Or something like that, you get the idea.
In other words, you’re creating something of value that would attract your target customer’s attention.
Aggregate high-value content to save target audience time, in return, you get their attention.
At the end of this “article” you can put a call to action of your service -
“Too lazy to head in to town? Shoot me a text and I’ll deliver for a small compensation
Text Bob the UWO Munchie Man at 206-555-5555″
Like before, if you get a “catch” then go fulfill the order yourself.
This is an elegant dry-test model because you’re capturing people’s attention by educating them with something of value, and then you’re ethically promoting a service that they may find value in.
“But if I did this, wouldn’t I be giving my potential customers away to my potential competitors?”
See, you don’t have to really worry about that, because if these people don’t want to pay you a fee
then it means:
a) your idea was never viable in the first place
b) they were never going to buy from you in the first place
Provide something of value – most likely some sort of information that your prospective customers are looking for, and then offer your product or service as a soft-sell to see how they respond.
Model # 4 – Survey and pitch
This last model I’m going to talk about is a little different.
This model fits very well with internet based products or services – Info-products or apps.
Conceptually, how this model works is that you will survey an existing audience to find out problems they are experiencing.
From there, you pitch them on a prospective product or service that solves the problem and see if they will pay.
What does this look like in action?
Say that you have a blog that you’ve been writing for a while. The general topic is social skills and confidence building. Pretend that you’ve overcome some challenges in the past on the topic. Now you write about it, gives tips and talk about different confidence building concepts.
You’ve been building a subscriber base for a while now – a list of 400ish people.
One day you had the idea of creating an information product for your audience.
Maybe they these guys want to learn social skills for talking to the opoosite sex.
Is my audience looking to improve their confidence for their career, their work?
Time to survey!
You write out an e-mail broadcast to your list of 400ish with something like this:
Thank you for reading my blog and being on my newsletter,
As a blogger, I’m always looking for questions to answer and new things to create content over.
It will help me a ton if you can take 5 minutes and hit reply for this e-mail and let me know 2 of your top questions on the topic of social skills and confidence building.
How to start conversations with strangers?
Social skills for job interview?
Talking to that guy or girl at the bar?
What is it?
Just let me know,
thanks, and hear from you soon.”
From there, you sit back and let the questions come in.
You then tally it up and pick the top subject, refine it in to an offer and feed it back to your audience to see if they bite.
I’ve been working on a new project:
‘Definitive guide to starting a conversation with anyone confidently and never run out of things to say’
It’s a course that teaches the steps by steps to helping people
- Start conversations with strangers with no fear or anxiety
- Keep the conversation going without feeling awkward or “forced”
- Become a more approachable and likable person to talk to
The course will open to a small group of people on (4 weeks from today)
I’m looking to get some beta-testers on and get some feedback before it goes live.
Would you be interested in being a beta-tester in 4 weeks?
You will get a 50% discount in exchange for your feedback on it. It will be $X.
Just let me know if you want a spot on the beta-tester list.
If so, you can make the payment at (PAYPAL LINK), and you’ll be notified when the course is ready.
Hear from you soon.”
From there, you sit back and see what happens.
If your PayPal account stay empty, then congrats, you’ve saved yourself weeks of work in creating something nobody wants.
If you get people sending you money, then you go and create the product!
This is also a very elegant model for validating your idea.
Conceptually all these models are the same – make sales before creating the business!
The application may be a little different for your case, but just keep the overall concept in mind.