How do you validate an idea? How do you know if it’s a good startup idea?
We recommend this short set of questions originally taken from firstround.com. There are many such templates on the web, but we’ve selected this short and simple one to get you started, as this is likely to be the most appropriate for Iași/Romania startups, which are usually in their early stages. This might actually be the first time you’re asking yourself these questions.
You should start a powerpoint/keynote/google slides document, write each question as a title on a slide and answer it. Keep working and improving this document as you find new things and as you get new feedback. If a possible partner, accelerator or investor, such as us, asks you to provide a brief description of your startup, you can just send this document.
Don’t put too much detail. One slide per question with a reasonably large font is enough. You may have a lot of detail behind, and that’s great, be prepared to get it or explain it if anyone asks for it, but keep this deck short and simple. People will initially give you 5 minutes or less, so give them a document that conveys the main idea in that amount of time. Confuse them with detail and you’ll lose them. Trust me, if they’re interested, they’ll ask for the detail.
Let’s get started.
Slide 0: What are you planning to do?
Brief and clear description of what your product/service will do for your clients. Netflix offers on demand movies and shows, streamed over the internet, to any device, any time, for a fixed monthly fee. Spotify gives you access to pretty much all the music for an affordable fixed monthly fee. A Visa card allows you to pay, with no fees, at any Visa card supporting merchant, which is pretty much anyone. bestjobs.eu publishes companies’ job ads for candidates to find and apply.
What does your product or service do?
Question 1: What is the problem you’re solving?
What is the thing that your problem/service will solve for your clients? What are they missing, what’s bothering them now?
Question 2: Who has it?
Who is your client? Refrain from saying “my product is for everyone”. Sure, you’re not going to refuse selling it, but it’s like saying that iPhone X’s are for everyone. Not they’re not. Yes, once in a while a Buddhist monk may get an iPhone X, but saying that iPhone X’s are for Buddhist monks would be silly, wouldn’t it? iPhone X’s are for a specific demography in terms of location, discretionary income, age, online behavior etc. Identify as precisely as you can who your customer is and be as narrow as you can. Who is going to love your product, who is going to depend on it, rave about it and tell all their friends about it?
Question 3: What are the associated costs of the problem?
What do the clients lose by having this problem? Do they lose money? How much money, and why? Do they lose time? Are they stressed because of it? Do they lose opportunities? What kind of opportunities? Is their social status impacted?
Question 4: What are the existing solutions and their shortfalls?
For example, if you’d be inventing Uber, the existing solution would be Taxis and their shortfalls would be price, availability, the quality of the cars, the bad experience and the inconsistent service. Of course, these may differ from place to place. Taxis in Copenhagen may not have the same problems as taxis in Mumbai, and this comes back to precisely identifying your customer. In this example, is he or she from Copenhagen or Mumbai? Yes, you may want to be everywhere at some point, but where will you start?
Question 5: What has changed to enable a new solution?
Why now? Why hasn’t anyone done this 2 years ago? Why not wait 2 more years? What’s different now? Is there a new technology available that will make this possible? Have consumer preferences changed? Why is today the right time for this idea?
Question 6: How does it work?
Describe in precise and clear terms how it works. How does the client find it (googles it, sees it in the streets, sees a friend use it). How do they buy it? How do they use it? What changes for them when they use it? What’s new and better in their life because of using your solution?
Question 7: What is the qualitative/quantitative proof that yours is a superior solution?
Have you talked to prospective users? How many? How many of them are not your family and friends?
Has anyone else done this in another country/market and did they have success?
Question 8: How much does it cost?
To build, but more importantly, how will you price it, how much will it cost your client to get it and use it?
Question 9: What is the TAM (Total Addressable Market)?
If you were to own 100% of your market, how large would that market be, measured by revenue?