A 4-Step Framework to Validate Your Startup Idea

Hey — It's Nico.

In July, I'm publishing some content related to Startup Ideas. This week, a really requested article on How to Validate Your Startup Idea.

It's a long article. In this email, you can find only the key points. If you're interested in the topic, I recommend you to check it on Failory's website.

🙌 Welcome to the 402 founders who joined this week.

This issue is brought to you by Around:

A few months ago, I downloaded Around, looking for ways to improve my Zoom's calls with other startup founders.

I've since stuck to Around for two reasons: 1) it frees up my screen, which allows me to easily read and take notes as I have the call; 2) my background image and noise are always messy and Around helps me avoid founders from noticing this.

Why validate startup ideas? A few years ago we analyzed the causes of failure of +80 failed startups and we found out that 34% of startups fail because they lack Product-Market Fit (source).

In other words, 34% of startups fail because they build a product the market doesn’t strongly need or is willing to pay for. With a good idea validation work, this risk can be eliminated or at least limited.

What are the paths to validate ideas? Many founders run idea validation processes, and yet they end up building products that the market doesn’t want. This happens because their idea validation strategy is contaminated with vanity metrics or false positives.

I’ve studied various paths to validate a startup idea, and I’ve identified only 3 that don’t fall into this trap:

1. Customer interview insights: You find people who have the problem your product solves and might be interested in your solution. You interview 10-30 people and decide if your solution is something your interviewees would be willing to pay for.
2. Waitlists: You create a landing page with a newsletter form and pay attention to: the subscribers’ feedback when you send updates, the response rate on surveys you run, the subscribers’ willingness to do a customer discovery interview (and if applicable, the referrals brought by each subscriber).
3. Pre-Sales: Consists of selling a product or service that hasn’t been built yet. Since customers have to wait to get access to them, the pre-sold products are generally offered at a discounted price or include bonuses.

I describe each of these paths further in the article.

Which one is better? There's a term called "Niceness gap", which refers to the gap in the number of people who tell you they love your product/service and want to buy it and the actual number of people who do it.

When doing customer interviews or exchanging emails with waitlist subscribers, most people will be friendly with you and tell you they like what you’re working on.

But people will be nice up to one point: when they have to put out their wallets to pay for your solution. That’s when they’ll suddenly become honest and tell you they aren’t interested in your product/service or that they “will buy it later.”

Customer interviews and waitlists leave space for the niceness gap. Pre-sales don't. Therefore, pre-sales are stronger idea validation indicators than the other two.

How to pre-sell? I've came up with a 4-step framework that I've been using for several years to validate my startup and product ideas:

1. Define your pre-selling goal: This is what needs to happen to consider your startup idea validated. "If in [Time] from now I've made [Number] pre-sales, I've validated my business idea."
2. Build a Minimum Viable Offer (MVO): This is the simplest offer you can build that’s good enough to make a sale. They can take a lot of different shapes, but the standard is a landing page.
3. Pre-sell your MVO: Promote your MVO across your target customers to achieve your pre-selling goal.
4. Analyze the results: Only if you've achieved your goal in time, your idea is validated and you can move on with it. If that's not the case, there are different ways you can continue explained in the article.

How to get pre-sales? I've identified 10 common strategies:

1. Leverage your audience
2. Build in public
3. Niche communities / forums
4. Publish content
5. Side-project marketing
6. Guest posting & podcast guesting
7. Cold outreach
8. Facebook & Google ADs
9. Niche events
10. Leverage marketplaces

​In the article I provide further details about each one of these, along with an example of how a founder has used it.

Once again, here's the article: A 4-Step Framework to Validate Your Startup Idea.

If you’d like to learn advanced pre-selling strategies and the step-by-step processes of each of the 10 mentioned strategies, you should check “Pre-Sell to Validate”, the course where I teach further this framework to validate your startup ideas.

Use code “VALIDATEYOURIDEA” to get a 25% ;)

As every week, here are 3 recommended resources:

• ​Starting a Startup: Julian Shapiro has published a handbook aimed to help tech startup founders improve their product, growth, recruiting, and fundraising.
• ​60 Ideas to Boost Your Growth: Turbo Boosts are one-off events that temporarily accelerate growth for companies. This article contains 7 of these, along with 60 examples of how startups leveraged them.
• ​The SaaS Metrics That Matter: SaaS are really easy to measure. But only a handful of metrics matter. This article lists the most important growth, retention, sales efficiency, margins, capital efficiency, and engagement metrics.

I hope you enjoyed this week's newsletter!

Cheers,

Nico