How to validate your tech startup idea
validating your tech startup idea do’s and don’ts
- Find (potential) customers with a pain
- Understand the context around that pain
- Assess if your technology can ease that pain
- Find out what the costs related to the pain
- Assess if your technology has benefits for the potential customer
- Create quick build-measure-learn cycles and go through them often
- Push your tech startup onto your customers
- Ask them what they would like to pay for it
- Spend all your time and money on product development
- Create slow build-measure-learn cycles and go through them only twice per year
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You’re a team of engineers and you’ve developed this great technology. It’s so great, in fact, that you’ve decided to turn it into a tech startup. But before anything, you need to make sure that there is indeed a market for it. You need to validate your business.
So, how do you validate a business? What processes are there to follow, and what pitfalls are there to avoid? As Program Manager at YES!Delft, Robert Jan van Vugt is the person to go to, if you want to know everything about finding your market-product fit. For this Expert Interview, he shared his thoughts and some much sought-after advice.
Finding a market for your technology
Finding a market for a tech idea or product is not nearly the same as finding a technology to solve a customers’ problem. Non-technology businesses often start by solving a problem for the customer.
“Tech ideas, on the other hand, start with the technology. Most entrepreneurs choose the technology based on their own interests and background [mostly engineering], and not on its business feasibility,” Robert Jan says.
The number-one reason for tech startups to fail is their inability to find a market for their technology. So nailing that product-market fit early on is crucial.
Say, you’ve developed a blockchain-related technology whose goal is to solve money transfer problems in Africa. Now, as noble as that may be, it may simply be too ambitious to start with. “Start easier,” Robert Jan advises. “Instead of focusing on Africa right away, start with a market that you have direct access to, and where the pain is just as high. Test your technology, make some sales, and then think of the next step. The number-two reason why startups fail is a lack of cash, so sales are key!
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This smaller market may be your neighborhood, your town or your country. It may not be what you had imagined originally. But with an easy access to this market, you’ll be quick to find out the real business potential of your startup idea. Who is it for, how well does it solve a specific problem, and what are customers willing to pay for it? Go out and talk about it, to find out the answers. Get that down, so you can move on to your next step.
“In that sense, it’s not so much about finding a product-market fit, but rather about finding a market-product fit,” Robert Jan says. Look for a market until you have found one that fits the possible application(s) of your technology – instead of trying to change your product to fit a certain market.
Build, measure, and learn
Hanging on to this previous thought, your fastest way to market is by following a three-step process: build, measure, learn. As a tech company, you are tempted to start with a technology, build on it, measure the response, learn from it, and build again.
However, building hightech prototypes takes both time and money. It’s much more efficient if you build your market instead: work on assumptions, experiments, landing pages – everything to test, measure and learn from. Start building real prototypes only when you are sure about the market-product fit.
“The first step is to find the people with a pain, and talk to them,” Robert Jan says. “Why is this pain there, and (how) can your technology ease it?”
The key to identifying your future customers is to really understand their situation. Grasp the context around it. To what extent are their pains influencing their daily lives? What are they costing them, and what are they willing to spend to minimize them? Be able to match those pains with the gains your product can provide.
Test, measure, learn. Then repeat.
Gathering insights continuously will not only help you learn more about your target audience, but also find out if there is a real need for your technology. In the end, it will also help you understand if your startup idea is indeed scalable towards your dream market.