Validation of the startup is a process when an idea becomes a business model. As a result, you must gain a solid proof that your concept is really useful for customers. This process allows your vision to go through puberty and become a clear actionable business plan.
To outline this process, I would like to share a few pieces of advice. After that, we will move on to a discussion about startup validation between professionals I have questioned.
What is the startup validation about?
First, define your niche. No need to create "something" for "somebody". Create a solution to some specific needs of people who are in a specific situation and have a specific problem. Solve the problem. Based on that, define the industry to exist within. Then articulate the idea very clearly. It will help you to explain it to your colleagues, friends, investors.
Make a quick check whether are you the only one who tries to solve this particular problem? Are there any competitors already at this point? If you are really sure that you are doing something important, then map most and the least important points. Know your TA. It is equally important to know both what they like and what they don't.
After that, you can conduct market research. Make a complete picture of your target market. Make sure you understand all the pain points of the audience, then learn how exactly your competitors satisfy those points. If you can do that other way - there's a free niche for you.
Yeah, your idea is great. It's not enough though.
I believe that every idea has a right to exist and be implemented. The point is that you should carefully present your idea to the world. Also, you should learn all the details of how to work on its implementation. To do this, I have reached some seasoned startup consultants. Their answers are very useful for me and - I believe - for all those who are trying to understand the topic better.
Here's the list of our stars:
- Deanna Pratt - Sustainable Startup Strategist
- Olivia Kantyka - Founder of Olivia Kantyka Consulting LLC
- Julien Duhautois - CEO & Founder at LineCall LLC
- Kate Bagoy - Founder of Six Figure Freelancers
- Dave Hawley - Early Stage Saas Marketing Consultant at Hands-on Startup Marketing
- Jill Soley - Strategic Product and Marketing Leader, Award-winning Author of "Beyond Product".
And now - to the list of questions:
1. What are the main reasons for a startup to fail validation?
2. Do you think choosing a blue ocean strategy would increase the percent of validated startups? Please prove your point.
3. When consulting a startup that does not validate, how do you inform clients about it? What are the main arguments?
4. Are there any features that would disqualify the startup even before the validation process?
What are the main reasons for a startup to fail validation?
In my experience, the main reason why startups fail validation is because their critical assumptions were incorrect. Attractive data isn’t the same thing as customer investment. Oftentimes this has to do with timing. - Deanna Pratt
• They didn’t define the problem that they’re looking to focus to solve.
• They didn’t do enough research on whether this is a real problem that is big enough that’s worth solving for.
• They didn’t focus on the core features needed to solve that problem.
• They didn’t get a sufficient amount of feedback from their sample group of users.
• They didn’t do enough research on their competitors.
• They didn’t consider their potential financial models. -
Olivia Kantyka
I believe startups will fail validation if they try to build a solution then search for problems it can solve. This is simple to understand with an analogy. It’s counterproductive to craft a key and look for a lock it fits in. And even if the key fits in the lock it may still not open it.
Customers must be at the center of the focus at every step of the way for a startup to succeed. Customers are the market. Find a problem your future customers experience then build a solution around it. Not the other way around. -
Julien Duhautois
This can happen for any number of reasons - from the idea not actually being something the market needs, to a lack of proper clarity around the offer / solution being presented (Ex: the potential clients/ customers don't understand the value of the product or service because the marketing was poorly constructed or the copy was badly written or you forgot to include a tracking method), to not testing the offer in the right way (Ex: you post in Facebook groups and no one responds because your customers are actually on TikTok). -
Kate Bagoy
The main reason start ups fail is due to a lack of funding. This can have it for many reasons but the main reason I see in my business is that the company has decided to go to market before they have proven product market fit, and use demand generation dollars to test the message.
This is by far the most expensive way to test messaging and buyer type. My practice uses a a statistically significance sample size and double blind research so that companies can confirm or deny that they have the “right message,” for the “right buyer,”
Many early stage start up companies spend a lot of their investment capital on demand generation / outbound sales people only to figure out that they had the “wrong message “and “wrong buyer“ in mind. -
Dave Hawley
The most common market validation issue is that founders think they’ve validated their idea when they really haven’t. They want the product. Maybe they also talk to a handful of friends and family who say they think it’s a great idea. And they think they’ve validated it.
The reality is that most founders don’t actually do out and do market research before starting to build. To truly validate your idea, you should be interviewing many people in your target market who you don’t know to gain a deep understanding of their needs and degree of pain before starting to invest in a solution.
Lack of focus is also a core issue. It’s hard to really validate a need and define a solution for a customer when you are trying to solve for a market too broad. -
Jill Soley
Summing up the first section
We can resume that main reason to fail a startup is, actually, that people don't really know WHY are they doing what they're doing? Does the market really need such a product? Does it actually resolve some specific problems? After all, if yes - then is the budget of this project fine? Probably, they make research not correct?
Due to this, they could get incorrect data, collected from the wrong sample group of users. It means, that basic market research was also made incorrect.
One of my colleagues provides us with the cool analogy, that "It’s useless to craft a key and look for a lock it fits in. And even if the key fits in the lock it may still not open it". Startuppers must find the future problem of customers and provides people with the solution.
Another pool of problems is on marketing. In this case, the product could be good, but people don't get it. As one of my contributors says: "you post in Facebook groups and no one responds because your customers are actually on TikTok".
If we talk about marketing, I definitely must add that companies often go to the market too fast and don't fit the product firs. That is the problem too.
Last but not least problem is that founders validate their "great ideas" by asking friends. This is not a validation.
Do you think choosing a blue ocean strategy would increase the percent of validated startups?
I think “blue ocean strategy" is the way to go. Startups want to make a big impact, and the best way to do that is to innovate and create new markets.
Pachama, an emerging San Francisco based startup that uses AI and remote sensing to verify and monitor carbon capture, has already raised $4.1 million to create a marketplace where companies can support carbon offset projects.
Marketplace demand is opening up a lot of opportunities in the sustainability space for startups to make major positive impacts for our industries and environment. -
Deanna Pratt
Not necessarily. Although a blue ocean strategy helps create demand, their new market is not yet defined and a company may arrive too early before users are ready to adopt. There is also the problem when a concept may seem “too new” or may be considered a drastic pivot from what the target market is accustomed to.
For example, take the Amiga computer which was far ahead of its time based on its technological advancements when compared to PCs and Macs. Amiga was marketed as a “multimedia machine” which was a new term back then that their audience didn’t quite understand. It also wasn’t as neatly designed as its Mac competitor. In this scenario, Amiga came in too early before the market was ready and the blue ocean strategy didn’t work in their favor. -
Olivia Kantyka
I changed my mind about 3 times trying to answer this question. Here is where I landed.
I believe there is a fine balance between the high risk of creating your own market (blue ocean) and the ease of entering an existing one (red ocean). One is typically high risk high reward. The other is typically low risk low reward. But what if we can mitigate the high risk of the Blue Ocean strategy by educating Startup founders to validate the market as part of the process? Then I believe the Blue Ocean strategy is more effective because it has become low risk high reward. -
Julien Duhautois
Yes. I don't think there is a blue ocean strategy specifically, but a mindset. When we start companies assuming there is too much competition, we focus on what everyone else is doing instead of focusing on what we can do best for the people we want to serve.
When we adopt the mindset that there is room in any market for a new entrant, we're able to focus on differentiation or even collaboration instead of competition.
Every consumer wants to have options for any purchase - learn who the customers are that will ONLY want your solution, work on how to differentiate your product or service from the rest, and how you connect with the customers you're meant to serve and create raving fans. -
Kate Bagoy
I don’t believe this to be true. There are many successful companies who do the opposite of a “blue ocean” strategy with what I call a “build a better mouse trap strategy”.
This essentially means that there are lots of sass companies who are simply replacing an existing process with a better process and or system.
The benefit of this model is there is budget already allocated for things like ERP, CRM, telephone systems. SaaS companies from Salesforce to Oracle made their way in red ocean. -
Dave Hawley
Summing up the second topic
This is a simple question with simple answers. As you could see, one of my colleagues Julien Duhautois "changed his mind about 3 times trying to answer this question".
Some say that the Blue Ocean strategy will help develop our world because innovators should find new areas to improve. Others say, that such a strategy is no necessary step in developing the market.
Some even say that this way is wrong. They say a better company could just replacing the existing process with a better process.
I believe that...
...we should try to find new areas and new solutions. That's how you can become a great innovator. No doubts, there will be mistakes. But remember Thomas Edison and his tries to create a lamp. That was courage! He had a belief, that his innovation will bring a big value. And he was right.
In other words, if we talk not about ideals, but practical use, it is a very good point to combine education for Startup founders to validate the market as part of the process, and a high reward of Blue Ocean strategy.
Nevertheless, we can look at this problem like it is not a strategy, but a mindset. From this point of view, the founder should remember, that it always enough room for a decent product.
Third question. When consulting a startup that does not validate, how do you inform clients about it? What are the main arguments?
I typically don’t work with startups that haven’t been validated in some way, but I sometimes work with aspiring ecopreneurs on new projects.
It can be difficult to validate without a minimum viable product. In situations where there isn’t one available yet, I turn to keyword research and market analysis. These tools are useful for seeing if there’s already a market available for a product, but oftentimes startups adopting the “blue ocean strategy” are betting on creating entirely new markets.
It’s really up to the startup founder to decide whether or not they want to pivot if their assumptions were incorrect and no fish are biting during validation. -
Deanna Pratt
This is a very general question for a case by case application. My rule of thumb is to acknowledge that it’s ok to fail if you fail fast, and that it’s never too late to pivot.
If your startup doesn’t pass the market validation test, you want to be positive about it. You saved yourself a lot of time, energy and money. You can go back to the drawing board to find what didn’t tick with the market whether it was the price or the solution you offer. Try again until you are out of ideas. -
Julien Duhautois
There are indicators when a client of mine does not have true validation that they have the “right product “for the “right buyer “
These indicators are typically that the sales team is not consistent with messaging, the marketing team is not consistent with its messaging, and customer service is servicing too many use cases.
This shows that the company has allowed the team to “try it out and see what sticks” and each individual contributor is doing what they think is best, however there’s no consistency.
This is a clear indicator that the company has not quite figured out exactly who the right buyer, the right use cases, the right price, or the right product.
When I point this out to clients they are typically open to the idea, however it typically takes data to convince start up executives that their “hunches“ or input from a small sample size is not helping them get to product market fit, predictability in their sales and marketing or scalability of their business. -
Dave Hawley
Summing up the third topic
It is always a risk for both entrepreneurs and consultants to launch a new product. Obviously, it is better to conduct some validation. But there are situations when new things are offering to the market. It this case consultants must do whatever they can to provide entrepreneurs with valid information about the market. And entrepreneurs should realize if there is no market - it is always a risk.
Personally I think, that we need pioneers to create a really powerful market. After a few or, maybe, a few hundreds of such businesses fail - customers will understand the value and the demand will emerge.
The good news from Julien Duhautois is that if your idea fails a validation - you probably save a lot of time and money. Just find a new idea and try it.
After all, there is a very typical situation when a company doesn't know who the right buyer, the right use cases, the right price, or the right product is. Then it tries "to see what sticks".
Fourth question. Are there any features that would disqualify the startup even before the validation process?
I’d be wary of startups that are investing heavily in marketing before validating their product. There’s no point in marketing a product that nobody will pay for. -
Deanna Pratt
It depends on the problem that a startup is looking to solve. The minimum viable product, as defined by Eric Ries,” should be “…that version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort.”
A startup would never be disqualified before the validation process. The process is meant to determine whether there’s enough interest within a target market. After testing a startup’s assumptions and biases, they will be better equipped with valuable information to further define and build out their concept. -
Olivia Kantyka
I do not believe so. If you have an idea you think is good, study the market potential and once validated, build everything else around it. -
Julien Duhautois
Features? Not that I can think of. But poorly thought out plan or poorly concepted marketing materials will lead to failure. Founders need to be clear around the product, service and market before they start validating need.
They need to really know (or strongly suspect) what they are offering, why someone will want to purchase it and why it will work. Just haphazardly throwing an idea into the marketplace is usually a waste of time.-
Kate Bagoy
Summing up the forth topic
It looks like in this question, I have provoked people to answer very directly, and I am thankful for that.
It is nice to see that professionals don't want to disqualification any startup before the validation process. On the other hand, we should take good advice and do not promote the product and/or invest in marketing before the validation, because it could be just a waste.
Again, founders must be clear about what they are going to create. If they can find people that are interested in listening about a startup - it means the process of validations begins. If someone can't find enough people that would like to listen to your idea - that’s an "immediate disqualified".
Summing up the article
I would like to provide you with three main take-outs, that I become from this conversation.
- First of all, you should always belive in your idea. It is not the main problem, do you planning to conduct a Blue Ocean strategy or Red Ocean strategy. Basically, some solutions could be providing the first way and some - second way. And even if you failed, you should try another plan or even another idea.
- Secondly, to avoid failure, it is very necessary to conduct really good research on the potential market and your potential customers' pain points and needs.
This is tricky, you know. You want to create something so hard, that you can't see if this is really interesting for others. You can think that conducting research is a waste of time and money, and it is better to start creating. It's a delusion. By spending some additional time an budget, you will get proof of your idea or the warning that your idea should be revised.
- Last but not list is marketing. As we can see, big trouble comes when companies do not conduct research, but ready to invest in a marketing campaign. Obviously, marketing is necessary to promote new products and/or services. But it is not quite a good idea to promote the thing, when you even don't know, how it will fit the market.
So, let us will be patient and do things step by step.