Validate your startup idea by asking 3 simple questions(paraschopra.com)
paraschopra.com
Validate your startup idea by asking 3 simple questions
http://paraschopra.com/blog/entrepreneurship/validate-startup-idea.htm
17 comments
Mirror link: http://webcache.googleusercontent.com/search?sclient=psy-ab&...
"Bandwidth Limit Exceeded"
Google doesn't have it cached. Does anyone have a mirror?
Google doesn't have it cached. Does anyone have a mirror?
It is actually cached: http://webcache.googleusercontent.com/search?q=cache:0eRMUuc...
What I usually do is to find the cached version is (using this as an example) write "site:site:paraschopra.com/blog/entrepreneurship/validate-startup-idea.htm" in Google. The cached version appears in the right when you hover on the ">>" arrow.
What I usually do is to find the cached version is (using this as an example) write "site:site:paraschopra.com/blog/entrepreneurship/validate-startup-idea.htm" in Google. The cached version appears in the right when you hover on the ">>" arrow.
Validate it by making it and putting a price on it. If people are willing to pay actual money for it, the idea is valid. If not, the idea is not.
Question #0 - Will I be able to handle the bandwidth?
I'm guilty sir! It should be up now :)
I'm getting a 509 "bandwidth exceeded". Can anyone copy/paste the content?
Those questions are valid if someone is trying to build the next Facebook. However, I think a person should work on important problems (not necessary hard, but important).
And most importantly to like your work to reach a flow state.
I like PG's analogy for the first two points - think of your product as a rectangle. One side is how much it improves people's lives (value) and the other is how many people use it (market). The bigger the rectangle, the more valuable your startup. For some products which have high social value, increase in one automatically leads to increase in the other.
The last one (having fun) may seem tangential, but in my experience can have a big positive impact on no.1. It's so much easier to keep pushing hard when it's fun.
Edit: See point 4 - http://paulgraham.com/13sentences.html
The last one (having fun) may seem tangential, but in my experience can have a big positive impact on no.1. It's so much easier to keep pushing hard when it's fun.
Edit: See point 4 - http://paulgraham.com/13sentences.html
Side note about the first axis: When you measure how much you're improving people's lives, remember to look at how much you're improving them compared to if people used the best available alternative, not compared to nothing at all.
The main selling points for Tarsnap are that it's secure and easily scriptable; for most people those are far less important than "having backups will prevent data loss", but that last property is something which any good backups would provide, so it's part of the ignored baseline.
The main selling points for Tarsnap are that it's secure and easily scriptable; for most people those are far less important than "having backups will prevent data loss", but that last property is something which any good backups would provide, so it's part of the ignored baseline.
I disagree. You only have to compare your product to what prospective users are currently using. For a lot of products, the most common answers are nothing, email and Excel.
It's hard for technical founders to accept that people may choose your product for reasons other than it's the "best". For the user the only delta that matters is quality of life before and after using your product, even if there are ten better products out there.
It's hard for technical founders to accept that people may choose your product for reasons other than it's the "best". For the user the only delta that matters is quality of life before and after using your product, even if there are ten better products out there.
What you are saying is that market doesn't generally have perfect knowledge about alternatives available. How aware is a market depends on what kind of market it is.
Wow, never thought of this rectangle analogy. It makes so much sense. Value*Addressable_Market = How good a startup idea is.
"How good an idea is" should also take into account your ability to do something with it. A small rectangle that you can dominate may well be better than chasing after something huge where you don't really have a way to attack it.
Whenever someone tells me about their amazing new idea that will completely overhaul an industry or transform a marketplace, I usually have one question for them: What will stop your competitors (established or following) from taking your idea and doing it (or marketing it) better?
Answers I tend to accept are:
* Because I love this product and even if a competitor tries to compete, I'll remain three steps ahead of them at all times
* They won't believe it'll work until it's too late
* There's a lot of technology behind this, and it'd take a year to simply replicate the functionality -- let alone understand what parts of it matter
* The product benefits (at least in part) from being distanced from an established player
* We have a really good patent!
Answers I usually get are:
* Umm...
* Ahh...
* Because we're awesome!
Answers I tend to accept are:
* Because I love this product and even if a competitor tries to compete, I'll remain three steps ahead of them at all times
* They won't believe it'll work until it's too late
* There's a lot of technology behind this, and it'd take a year to simply replicate the functionality -- let alone understand what parts of it matter
* The product benefits (at least in part) from being distanced from an established player
* We have a really good patent!
Answers I usually get are:
* Umm...
* Ahh...
* Because we're awesome!
>> There's a lot of technology behind this, and it'd take a year to simply replicate the functionality -- let alone understand what parts of it matter
Interesting anecdote: I used to have this answer in a startup of mine, it really impressed everyone, except people who were good technologist. Most of them knew that this is code for "I don't really know what I'm doing it, but it's complicated and looks like it kind of works when you ignore half the variables"
The problem was that even I didn't realize this until much later when one day I looked at the tech I produced and thought "What the fuck is wrong with me!? This is much too complex. Why would I ever do this to myself?"
When talking to a tech person, the only answer you should look for is "Y'know, I'm really worried. This tech is so simple, ten year olds could code this in their sleep ...".
tl;dr -> a tech guy who describes their tech as "complex/advanced/superawesome" is out of their depth. It should feel scarily trivial to them.
Interesting anecdote: I used to have this answer in a startup of mine, it really impressed everyone, except people who were good technologist. Most of them knew that this is code for "I don't really know what I'm doing it, but it's complicated and looks like it kind of works when you ignore half the variables"
The problem was that even I didn't realize this until much later when one day I looked at the tech I produced and thought "What the fuck is wrong with me!? This is much too complex. Why would I ever do this to myself?"
When talking to a tech person, the only answer you should look for is "Y'know, I'm really worried. This tech is so simple, ten year olds could code this in their sleep ...".
tl;dr -> a tech guy who describes their tech as "complex/advanced/superawesome" is out of their depth. It should feel scarily trivial to them.
Right, I have never believed that technology per se can be a competitive advantage. If a technically competent company (say Google, LinkedIn, Facebook, etc.) decides to replicate your technology, they can. But the key question here is "if" they decide to. Many companies are usually so consumed by their own problems, that they seldom care about copying your new startup's technology.
But in any case, as a startup you need to have differentiators apart from technology. It can be your maniacal customer support, your ability to persuade bloggers to write about you, your ninja like SEO skills or even your geographical/vertical focus in market.
But in any case, as a startup you need to have differentiators apart from technology. It can be your maniacal customer support, your ability to persuade bloggers to write about you, your ninja like SEO skills or even your geographical/vertical focus in market.
Google is a perfect example of technology being a competitive advantage. The PageRank algorithm is both simple and elegant in its domain, yet the numerical methods to compute it efficiently are much more complicated than your typical social startup's. They had a patent on the technique from day one and the competition took years to catch up.
You can similarly point to the big database companies. Building a good acid compliant SQL database is hard and the big database companies had the market cornered for a very long time.
More recently, we have companies like Palantir which provide very sophisticated algorithms to their clients. Some algorithms are not just complicated from a software point of view, but you also need to understand the math to replicate them. It's not possible to reproduce them over the weekend even for an expert the domain.
The other things you listed are also very important, of course. But technology itself can certainly be a very competitive advantage. You simply don't see that many examples of it because this sort of technology is hard.
You can similarly point to the big database companies. Building a good acid compliant SQL database is hard and the big database companies had the market cornered for a very long time.
More recently, we have companies like Palantir which provide very sophisticated algorithms to their clients. Some algorithms are not just complicated from a software point of view, but you also need to understand the math to replicate them. It's not possible to reproduce them over the weekend even for an expert the domain.
The other things you listed are also very important, of course. But technology itself can certainly be a very competitive advantage. You simply don't see that many examples of it because this sort of technology is hard.
I would say I'm half-way with you Swizec. I often feel the same way about my code. The strange thing I find is how many big companies don't even attempt to make what many would consider simple technology because at the beginning it can always seem so daunting.
This I find keeps people building twitter/groupon/start-up-of-the-day clones, rather than getting started in more complicated projects where they may actually learn something and create something of value.
This I find keeps people building twitter/groupon/start-up-of-the-day clones, rather than getting started in more complicated projects where they may actually learn something and create something of value.
* Because there is more than one competitor. Some may be able to follow, but at least one will opt to buy me instead of follow me.
Great questions - but they are by no means simple.
Well, the answers are definitely not simple but the questions are quite simple in my opinion.
Nothing wrong with asking these questions, but my experience has been that most people do not know how to judge their situations to answer honestly, anyway. I've talked to a number of people in startup-phase over the last year, and always ask variations of these questions, and when one with a hard answer comes up, I typically get something like "you're a downer", "you're too negative", "you don't understand the market", etc. Or variations of "just do XYZ!", where XYZ, realistically, has been tried by dozens of parties before, resulting in them losing loads of money and leaving the market altogether.
Inevitably, we end up reading stories from people here every few months with a spin on "startups are hard. however hard you think it will be, multiply that by 10. etc". And they're right. Whether those people have succeeded or failed, they blog about how hard everything is. We see stories about "I thought XYZ would take me $t and $o weeks, but it was much longer/harder/difficult than I could have imagined".
One might conclude that anyone who actually had real numbers behind how much time and effort an idea would take to bring to market, no one would, and one might be right. But just asking the questions designed to get people to think about these sorts of things generally doesn't help people too much - at least in my experience. Might just be the people I talk to, but many of them seem to be more in love with the idea of "startup!" rather than actually building a business around providing value, especially if that business/value doesn't look/sound/feel exactly like the idea in their head from 6 months earlier (in "lean startup terminology", they're not open to "pivot", probably).
Inevitably, we end up reading stories from people here every few months with a spin on "startups are hard. however hard you think it will be, multiply that by 10. etc". And they're right. Whether those people have succeeded or failed, they blog about how hard everything is. We see stories about "I thought XYZ would take me $t and $o weeks, but it was much longer/harder/difficult than I could have imagined".
One might conclude that anyone who actually had real numbers behind how much time and effort an idea would take to bring to market, no one would, and one might be right. But just asking the questions designed to get people to think about these sorts of things generally doesn't help people too much - at least in my experience. Might just be the people I talk to, but many of them seem to be more in love with the idea of "startup!" rather than actually building a business around providing value, especially if that business/value doesn't look/sound/feel exactly like the idea in their head from 6 months earlier (in "lean startup terminology", they're not open to "pivot", probably).
My experience has been different. If a person is in maniacal love with an idea (not not the business), then of course my entire post is irrelevant. It is only applicable if the person him/herself wants an honest introspection of whether what they are doing is right or not.
A founder puts in a lot of effort into an idea and the gets disappointed when entire world ignores that idea. Instead of getting generally frustrated or feeling disoriented, asking these simple questions can at least provide a direction to the founder.
A founder puts in a lot of effort into an idea and the gets disappointed when entire world ignores that idea. Instead of getting generally frustrated or feeling disoriented, asking these simple questions can at least provide a direction to the founder.
If they've not asked these questions of themselves during the first few weeks, that's fine. If they've not asked themselves these questions in the first 3-6 months of work, there's problems.
Whether or not they've asked these questions can usually be found in some sort of action plan they're working. I don't care if it's 10 words on a whiteboard or a 10 page 'business plan' - it generally shows they've thought about market size, steps to reach the market, potential value, etc.
Someone external to them asking these questions might help reorient their thinking, but if someone's capable of going months long in to something without the capability of doing some of their own introspection, they've got bigger problems than just this particular startup/project.
We may have worked with different people (likely very true), but this has been my own experience. There's 5 startups I've talked to over the last year beyond just a cup of coffee style meetings - multiple meetings, talking financials, markets, plans, code, etc. Only 2 had real plans that they were executing - the other 3 kept digging in their heels insisting I didn't "get it" or similar reactions.
Whether or not they've asked these questions can usually be found in some sort of action plan they're working. I don't care if it's 10 words on a whiteboard or a 10 page 'business plan' - it generally shows they've thought about market size, steps to reach the market, potential value, etc.
Someone external to them asking these questions might help reorient their thinking, but if someone's capable of going months long in to something without the capability of doing some of their own introspection, they've got bigger problems than just this particular startup/project.
We may have worked with different people (likely very true), but this has been my own experience. There's 5 startups I've talked to over the last year beyond just a cup of coffee style meetings - multiple meetings, talking financials, markets, plans, code, etc. Only 2 had real plans that they were executing - the other 3 kept digging in their heels insisting I didn't "get it" or similar reactions.
I like the "value it creates per customer" question. The problem with business plans is, people identify a target market of "everyone with an internet connection, times an arbitrary adoption rate" (1%? 0.1%?).
In reality, your target market is "everyone you can advertise to". That's probably 10k people through social media, and then $1 / customer (wild man guess) per google ads click. You then need more than 0.1% of the target market to sign up to break even.
In reality, your target market is "everyone you can advertise to". That's probably 10k people through social media, and then $1 / customer (wild man guess) per google ads click. You then need more than 0.1% of the target market to sign up to break even.
if you really got 2 out of 5 startups that had some bearings on the idea and pro approach, then I would say you were very lucky!
as we are full sail into that era of dropouts become billionaires, I am getting tons of emails from people who start and ends their idea on "I know how to kill Facebook and everyone will love it".
as we are full sail into that era of dropouts become billionaires, I am getting tons of emails from people who start and ends their idea on "I know how to kill Facebook and everyone will love it".
I think the numbers were a bit high... but out of 5, two are actually making money, have repeatable processes, and have small profit at the end of each month. Whether these will turn in to large scale concerns, I can't say (in at least one case, probably not).
And on top of that, I'm discounting probably another 8-10 "startups" I'd talked to during the last couple of years that - at that stage - weren't much more than a guy hacking on code, or people with an idea. Not to disparage that - follow your dreams - that's fine - but... only one of those struck me as ever being able to get to a point where they could actually make sustainable money.
And on top of that, I'm discounting probably another 8-10 "startups" I'd talked to during the last couple of years that - at that stage - weren't much more than a guy hacking on code, or people with an idea. Not to disparage that - follow your dreams - that's fine - but... only one of those struck me as ever being able to get to a point where they could actually make sustainable money.
I didn't like this, and I'm struggling with how to explain it. After all, these are excellent and insightful questions.
I think the reason is that people are unable to answer these questions -- it's the type of question that can only easily be answered by an outsider, or by somebody two years after their startup idea didn't work. So while the questions themselves may be very good -- perhaps as a way to help your friends -- asking them to yourself doesn't seem very worthwhile.
Especially troubling was the one about loving what you're doing. The more infatuated you are with some idea of yours, the worse off you are. A better question might be whether or not you can stick it out for the years necessary for things to happen. Yes, if you love something that's all great, but reality distortion fields are not so fun to live in when the world is tremendously apathetic to your cause. A character that can work hard and pivot on something they logically feel might work is much more desired, in my opinion, than simple "love what you do". My dog loves fetching sticks. It really doesn't add that much value.
Having said that, you should love the value you provide -- the part about people wanting what you make. But that's just being a good person.
I don't know. I'm sorry to be so critical. The article just didn't sit well with me.
I'm sticking with "Make something people want that scales easily." I can derive questions from that starting point.
I think the reason is that people are unable to answer these questions -- it's the type of question that can only easily be answered by an outsider, or by somebody two years after their startup idea didn't work. So while the questions themselves may be very good -- perhaps as a way to help your friends -- asking them to yourself doesn't seem very worthwhile.
Especially troubling was the one about loving what you're doing. The more infatuated you are with some idea of yours, the worse off you are. A better question might be whether or not you can stick it out for the years necessary for things to happen. Yes, if you love something that's all great, but reality distortion fields are not so fun to live in when the world is tremendously apathetic to your cause. A character that can work hard and pivot on something they logically feel might work is much more desired, in my opinion, than simple "love what you do". My dog loves fetching sticks. It really doesn't add that much value.
Having said that, you should love the value you provide -- the part about people wanting what you make. But that's just being a good person.
I don't know. I'm sorry to be so critical. The article just didn't sit well with me.
I'm sticking with "Make something people want that scales easily." I can derive questions from that starting point.
I raised the same sentiment in my comment (below). First, there isn't 3 questions. It's technically about 6 questions, with a statement thrown in there. Second, the answers are by no means simple. I (possibly like you) was expecting three straight forward questions that were a silver bullet to understanding how to validate my start-up idea.
Thought-provoking perspective, possibly... differentiated from the validation that the lean start-up promises, not really.
Thought-provoking perspective, possibly... differentiated from the validation that the lean start-up promises, not really.
My feeling is that the first question is only answerable by the market. That answer is never certain. You're only as sure as the effort/time/money you put into reaching the market to answer it.
The second question is easier to get an estimate for, but you probably defined your market incorrectly (especially if you're not solving your own problem).
The last one is sticky. It reminds me of BSG. The human capacity for self-deception is without bound...
That said, it's still useful to struggle with these questions periodically. Startups are all about the fight. You'll never have certain answers. Measure, learn, and adjust.
The second question is easier to get an estimate for, but you probably defined your market incorrectly (especially if you're not solving your own problem).
The last one is sticky. It reminds me of BSG. The human capacity for self-deception is without bound...
That said, it's still useful to struggle with these questions periodically. Startups are all about the fight. You'll never have certain answers. Measure, learn, and adjust.
Perhaps you are right that, being a new startup founder, asking these questions to yourself may not help a lot. But I have no easy way to know that. Only someone who is new and is currently evaluating his startup idea can give me that feedback. In fact, I would love to have that kind of feedback.
But from my limited sample size of interaction with 4-5 new founders, I think the framework I laid out helped them get at least some clarity. Maybe that was because I asked them questions, or maybe it was because of questions themselves.
But from my limited sample size of interaction with 4-5 new founders, I think the framework I laid out helped them get at least some clarity. Maybe that was because I asked them questions, or maybe it was because of questions themselves.
I am evaluating my startup idea and the first question work well for me. There is a huge system around us constantly praising cool things, and its easy to get in to a trap of building something that is cool.
Personally, I stick with Color and AirBNB. Color (the original app) was the epitome of cool. They were building something different, were innovative but I found little value in their product. AirBNB (if you take away their immense success) is a generic idea which has done well thanks to fantastic execution. Color and AirBNB are on two extreme ends. I stick with Tim O' Reilly's work on stuff that matters call.
The second question is 'the question'. Whether there is market or not, I will only know after my product is out in open.
Your third question doesn't apply to someone who is in the evaluating idea stage. At this stage, you are leaving everything to jump in to your startup, so you obviously love it.
Personally, I stick with Color and AirBNB. Color (the original app) was the epitome of cool. They were building something different, were innovative but I found little value in their product. AirBNB (if you take away their immense success) is a generic idea which has done well thanks to fantastic execution. Color and AirBNB are on two extreme ends. I stick with Tim O' Reilly's work on stuff that matters call.
The second question is 'the question'. Whether there is market or not, I will only know after my product is out in open.
Your third question doesn't apply to someone who is in the evaluating idea stage. At this stage, you are leaving everything to jump in to your startup, so you obviously love it.
You might be able to tell whether there is a market for your product today.
Does your product have any competitors? Find people who are using your competitors' products. E-mail them this afternoon and see if they're interested in what you're building.
Does your product have any competitors? Find people who are using your competitors' products. E-mail them this afternoon and see if they're interested in what you're building.
These questions are fine and all but they're not the ones to ask if you want to validate your idea. If you want validation you ask other people what they think of the idea, is it useful, would they pay, if they have the problem you're trying to solve. Asking yourself these questions will only get you twisting your answers to be "correct".
Point is, it doesn't matter what you think, it matters what your market thinks. Extra points if you can identify that market.
Point is, it doesn't matter what you think, it matters what your market thinks. Extra points if you can identify that market.
Question 2: Do you think there is big enough market for the service AND the market is easy to reach (without spending bootloads of money)?
Isn't figuring out how to convert your market into customers without going broke the definition of the startup process? I think the answer to this question must be "I don't know, working on it" or you're probably delusional.
Isn't figuring out how to convert your market into customers without going broke the definition of the startup process? I think the answer to this question must be "I don't know, working on it" or you're probably delusional.
My take on startups is little different. I like to believe that customers are already there, you just need to find them. Converting market into customers sounds like you need to "create" and "educate" a market which can be very hard.
Pick something you love to do. If there is market demand for it, you've validated your idea.
Still, there are no guarantees, but it's that easy.
Still, there are no guarantees, but it's that easy.
I see this more as an INvalidation test. Answering yes to those questions doesn't mean anything. Answering no to any of them is a bad sign. However, that's not very insightful.
Apply those questions to companies such as Google, Facebook, eBay, Amazon, etc. and you'll reveal the futility of using three simple questions (or a dozen) to judge the value of a startup or an idea. When doing this you have to mentally rewind to the period in time when they were founded and let go of the knowledge you have about the environment as it exists today.
I think there's only one way:
I think there's only one way:
Startup: Build -> Measure -> Adjust -> Iterate.
Failure: Pivot -> Try again.
Attitude: Never give up.
"Never give up" attitude can be pretty devastating, I would honestly never recommend that to anyone.
Moreover, most startups never become Google or Facebook. They are extreme cases and hence should be seen as such.
Moreover, most startups never become Google or Facebook. They are extreme cases and hence should be seen as such.
"Never give up" doesn't mean that you stay with a failed idea or business. It means that failure doesn't take you down. You learn from the failure and move on. The vast majority of entrepreneurs fail far more often than succeed.
There are rock-solid ways to find out if your idea is viable.
Create indiegogo campaigns send emails to discussion forums and customers. If your idea is needed, people will give you money.
Create websites asking for sale. If people click to purchase, you have a viable idea.
Asking the right question is most the battle, not answering it.
Create indiegogo campaigns send emails to discussion forums and customers. If your idea is needed, people will give you money.
Create websites asking for sale. If people click to purchase, you have a viable idea.
Asking the right question is most the battle, not answering it.