Welcome to your guide on evaluating the market for your startup idea. This guide will help you determine if your business idea is worth pursuing, and how to evaluate the demand for it. We’ll run through the following:- A quickstart guide to idea validation- Tactical ways to evaluate your market- Look for problems everywhere- Immerse yourself in relevant communities- Learn to ask the right questions- Release the idea, and focus on the customer- How to evaluate yourself as well But first, a good place to start is with the following three questions. Read through and jot down your thoughts so we can reference them throughout this guide.● Can you describe your idea without relying on startup tropes? (Do we really need an Uber for x?) Take away the tropes and get down to the actual problem.● Is the idea specific enough? Broad ideas aren’t impossible, but often require much more funding and take a much longer time to gain traction, if they manage to do so at all.● Is there a clear business model? Not every “great idea” is a viable business. Eventually, any product or business has to have a path to making money. A quickstart guide to idea validation You can learn how to conduct customer research but for now, there are three main questions you’ll want to give some thought to early on: What problem do you want to solve? Are there a lot of people with this problem? Are they willing to pay for a solution to their problem? Identify the problem you want to solve For many successful startup founders, their winning idea begins with the problem that’s been keeping them up at night. Sometimes it’s a problem that has been plaguing them personally. Sometimes it’s a problem they experienced firsthand in the workplace. And sometimes it’s a problem that keeps coming up in conversation with friends, family, colleagues or perfect strangers. If a particular problem has been haunting you in some way, that can be a good indication that it’s a problem worth solving with your new business.Are there a lot of people with this problem? What counts as “a lot”? Well, that’s subjective and depends on a host of factors. For example, if you’re starting a lifestyle business, you don’t need the entire world to be your customers. You probably don’t even need 1,000 true fans, the commonly cited magic number. Some businesses can thrive on a handful of customers a year. On the other hand, if you’re looking to build a scalable company that grows beyond you as its founder, then you’ll want to think about (and find if you can) a large enough group of people who have the problem you’re trying to solve. In other words, you’ll need a sizable TAM (total addressable market). Keep in mind that “sizable” is also pretty subjective; that depends on your business model. A business that charges premium rates needs fewer customers to be sustainable than a business that makes money with a broader market and lower price per sale. But the latter is often viewed as more scalable because of the larger TAM. Are people willing to pay for a solution to this problem? You also need a problem they’ll pay to have solved. Some problems are annoying but not valid as business ideas because people won’t pay to solve them. Conversely, you’ll see examples of highly successful businesses today that don’t necessarily look like they’re solving a problem. So identifying problems that people will pay for is nuanced. Generally, business strategists point to businesses that solve pain points as being easier to start because pain points drive urgency. That doesn’t mean it’s the only path, just something to consider. Understanding your market’s pain points deeply is also really helpful later on when starting to market to them. Your business idea doesn’t have to be new and innovative: All businesses answer pain points and address problems throughout the delivery of the product and the journeys of their customers, not just through the business idea itself. So, addressing pain points by conducting research on your competitors can be another way to think about your business idea. The easiest way to determine whether or not people will pay for your idea is by looking around: Are they already paying for a solution, a.k.a. your competitor, that doesn’t meet their needs? That’s validation right there. Got it? Check. But it may not be that simple. The market shifts quickly enough that sometimes there isn’t an existing solution that people are paying for, or maybe you don’t know enough about the market to know if there are competitors. You’ll need to dig deeper in these cases, validating your business in other ways to really understand the market. Whichever path you take, keep in mind: size of market in relation to the kind of business you’d like to start and willingness of customers to pay. Look for problems everywhereGreat ideas are often just simple solutions to complex problems (don’t get that mixed up with simple execution; anyone with a successful business will tell you it’s anything but). Keep your eyes and ears open in your life: at work, among your peers, in your community. Anyone telling you about their problems can become fodder for your next great business idea. And when you have a lot of people telling you about the same problem: well, what are you waiting for?Tactical tips on how to evaluate the marketOnce you’ve zeroed in on a problem to solve, the next most important thing to do is validate your idea with potential customers. And while there are ways you can do this research passively (we’ll suggest a few in later sections of this article), we strongly recommend you put in the real, on-the-ground work to talk to potential customers first.Interview 25-50 people with this pain point Set a goal to interview at least 25 people who say they have this problem. To get this number of interviews scheduled, you’re going to have to reach out to 75-100 people, simply due to the law of averages. Some people won’t want to talk to you; some people will ignore you; and some people just won’t see the message. Make a plan to reach out to 10 people each day (on LinkedIn, Twitter, or wherever this target audience is hanging out) until you have 25-50 conversations with people with this real pain point. Note how they talk about their problem If you ask 50 people what their biggest hair-on-fire problem is around the issue you’re hoping to solve, you’ll get 50 different answers. People use different language to talk about the same problem, but you’ll notice common themes coming up in their answers. For example, you might want to solve the problem of bookkeeping software being too complex — but when you interview 50 people, you might find that they don’t use the word “complex,” but instead “cumbersome” or “time consuming.” This isn’t just semantics. Customers won’t buy a solution that doesn’t address the problem they think they have. It’s these common themes that you’ll need to address with your new solution. Not what you say the problem is, but what your prospective customers say the problem is. Pay attention to the language people use when they’re describing their problem to you so you can frame the problem correctly as you continue to validate your startup idea.Ask them to pay If you’re getting strong validation from these interviews, that’s a great sign that you’re homing in on the right startup idea. But the best way to confirm that you’re on the right track is if people will pay for your solution before it exists. If pre-paying for the product or joining a paid beta program are valid options with your startup idea, consider asking for payment when someone seems really excited about your idea. Best case scenario: You’ll raise money to build your solution. Worst case scenario: You’ll discover that once they have to put skin in the game, people aren’t nearly as excited about your solution as they said they were. In that case, you’re ensuring that people who say they have this problem are truly interested in how you want to solve it, and they’re not just expressing interest to be nice.[JM2] Only once you’ve interviewed real people should you move on to other methods of evaluating the market and your idea. Here are three other tactics for evaluating the market and your idea, both at this early stage and throughout your business building journey:Immerse yourself in communitiesAs you dive deeper, you’ll discover niche communities beyond the obvious. That’s where the real conversations are often happening. They often come in the form of Discord or Slack groups for tech-adjacent communities, but can even be real life communities, too. Make it your mission to find these. The best way is by opening yourself up to rabbit holes, which often start with broad search or media. Find the people who are leaders, experts, and up-and-comers, then with a bit of sleuthing (read: social media stalking), find out who they’re following, what they’re reading, what communities they’re a part of. Sign up for the newsletters, join the Discords, get involved. A bonus: finding these communities will not only help you immensely with market research but can be a helpful launchpad for building and growing your business.Ask the right questions Look at trending searches (Google Trends), products (Product Hunt), startups (Crunchbase), and topics/threads (Reddit). Are there any patterns? Look not just at what, but at who. Is there someone who you see as an expert in the market/field? Many online communities allow you to view what they’re looking at through their upvotes (Product Hunt) or conversations they’re having (Twitter). Go open-ended, and don’t forget to ask “why”. They’ll lead you to deeper insights than yes/no questions that offer no room for insight. Let go of the idea, focus on the peopleIn 2005, Derek Sivers wrote this blog post that explained ideas as a multiplier of execution. To summarize, a so-so idea with great execution is worth more than a great idea with weak execution. Now that execution has become exponentially more accessible to more people, that alone is no longer the differentiator (it still matters, of course). So, what matters today? A “market” is just a lot of people moving in the same direction. So when you’re evaluating the market, out of all the questions you can and might ask, don’t lose sight of who your customer is. The more resonant and connected to your customer, the stronger the multiplier. Think of your market and customer as the driving force of your business, not the idea. Your idea should always be a testable hypothesis, not the end-all-be-all. For further proof of this, see all the businesses today that aren’t anywhere close to where they started: DVD by mail service (Netflix), access to podcasts (Twitter), wall cleaner (Play-Doh). Even the best executed, most successful businesses fall when they lose sight of what their customers really want. Evaluate the market, evaluate yourselfProduct-market fit is how well your product or idea solves the problem of the market. Product-founder fit is how well you as the founder or founding team match your product or idea. Once you’ve evaluated your idea against the market (or before), you should also evaluate the idea against yourself. Thinking about this early on can help you narrow down on an idea not just to determine its validity but its chances of success too, which are not the same thing. What do you naturally gravitate towards? What communities are you already part of? What experience do you have? There’s not one way to think about this: you don’t need to be experienced in a particular industry; maybe you have experience that’s highly transferable. One thing is certain for now: the world is getting more complex and there are always more problems left to be solved. If one idea isn’t quite right for you, there are many other awful ideas, so-so ideas, and great ideas left. Just keep listening. Your checklist to validating your startup idea:- Find the problem you want to solve.- Look for potential problems everywhere. - Learn to ask the right questions about those problems.- Ask yourself, are there a lot of people with this problem, and are they willing to pay to solve it?- Validate your idea with yourself too. pull quote [JM2]I'm not sure this is in alignment with Wing's advice, so delete if necessary!
How to evaluate your startup idea
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How to evaluate your startup idea