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Coming up with startup ideas can be hard, but validating them is even harder, and more important to your startup than you might realize. Because regardless of how world-changing your idea is, if you build a product before validating the idea it’s based on, there’s a good chance your product will fail.

The Founder Institute can help you validate your startup idea. Click here to apply to a program near you!

Luckily, this guide will show you how to make sure you have a strong business idea - well before you spend time and money building your minimum viable product.

Ensure Your Startup Idea Does Only One Thing - and Does It Well

Some of the biggest companies in the world - like Google, Apple, and Amazon - provide a multitude of products and services. Unfortunately, what too many founders don’t take into account is that none of these companies started out big; each of these companies started off with one simple, clear mission and stuck to it, building considerable traction before expanding into other ventures.

The lesson here is that if you have an idea for a startup offering, don’t get caught up in the excitement of launching the numerous versions, features, and other areas you want to expand to. Make sure that your startup idea does only one thing at the beginning, as this will make it easier to present to potential customers and investors. However, not only should your idea do only one thing, but it must do it well, as that is the only way that you can differentiate yourself from your competitors.

Questions to Ask

  1. What is the most important function/purpose of my product?

  2. Does my product have too many functions?

  3. What are the features my product can do without?

  4. How well does my product solve a problem? If the answer is “not very well”, how can I improve its use?

Be Clear on the Product You Want to Build

Countless beginning founders get carried away by the prospect of launching a successful company and living the startup life that they forget that they are supposed to focus on building a product. What budding entrepreneurs need to understand is that without a product, they have no customers, and without customers, they have no employees or fancy office, which means the chances of you living the cushy life of tech founder are slim to none.

If you begin with the phrase of “I’m in the business of...” when describing your product, your product will fail because you are too focused on the “how” of your startup rather than the “what”. Think about what it is specifically that you are building: is it software? Hardware? An online service or a mobile app? Focus on what you are making, who will use it, and why they want it. By narrowing on these aspects of your product, you reduce your risk of building something without value.

Questions to Ask

  1. What is my product? Software? Hardware? Mobile app? B2B or B2C?

  2. Who are the people who will use my product?

  3. How often will people use my product?

  4. How can I explain what my product is, what it does, and who it’s for in one sentence?

Your Startup Idea Must Address Large Markets

Yes, your startup must solve a problem, ideally only one problem at the beginning, and it must also solve that problem well. However, if the problem you’re solving only affects a very small percentage of the world’s population, don’t count on attracting enough customers in that market to become a successful company.

If you have an idea for product or service, conduct enough research to ensure that your market has at least ten million potential customers and worth at least $10 billion. Any market that has numbers smaller than these is not worth starting up in. Or, if you do have an idea in a small market, look for a way to for the idea to be relevant in a larger market. Addressing a smaller market is fine as a launch strategy, but you must make sure that you leave yourself the possibility to expand in the future.

Questions to Ask

  1. How big is your target market? Be specific (e.g. number of potential customers, number of people who experience this problem, etc.).

  2. How much is your market worth? Be specific (e.g. how much money is spent per year on products in your market, how much money your customers will save by using your product, etc.).

  3. If the initial market you’re working in is small, what is the bigger market you plan on expanding to?

  4. How can you apply your idea to a larger audience?

Consider Funding for Your Startup Idea

Your startup idea can only last so long on bootstrapped funds, and is going to require outside capital at some point. However, the global funding environment has changed, which means that most ideas will only be able to raise an angel round for $500K or less after have a strong prototype and a full-time team member. The days of a multimillion dollar Series A round are pretty much over, and certain types of businesses, like hardware, are increasingly difficult to fund.

Because of the growing challenges that face entrepreneurs who are looking for funding for their startup ideas, it’s important that you focus on something that is relatively easy and inexpensive to build, code, and scale, at least at the beginning of your company. This may sound like a daunting task for founders who believe that the only way they can change the world is through considerable funding, keep in mind that if your idea is simple and focuses on only one task, enticing investors shouldn’t be too hard.

Questions to Ask

  1. How much am I willing to spend of my own money to bring my idea to life?

  2. How much will it cost to build an MVP (Minimum Viable Product) of my idea?

  3. What are the manufacturing costs of my hardware idea? How much will it cost to develop my app or software idea? How many team members will I need for my service idea?

  4. If my idea costs more than I raise to build, how can I simplify my idea to make it more fundable?

Determine Your Idea’s Steps to Revenue

There’s no doubt that your product needs to generate revenue. But even if your idea for an offering has a great potential to become profitable and passes the tests of the previous sections, having the wrong revenue model can greatly reduce your chance of becoming a lucrative business. If your idea requires too many steps in order for your customer to pay you money, you will lose a lot of customers.

When determining a revenue stream for your product, simple is always better, and the simplest revenue models require only a few "steps to revenue" (i.e. steps that need to take place before your target customer pays you money).

To determine your steps to revenue, you need to analyze in detail all of the key steps that need to occur before you receive a payment in your bank account from your target customers.

Follow these tips:

1. Be extremely detail oriented, and focus on very specific customer behavior when using your product.

2. For each step, write the name of the step, the approximate timing, and a couple of sentences that describe what needs to happen for that step to be completed.


3. Aim for the fewest number of steps and key assumptions. For example:

“Encourage users to search for products on my website.”
“Sell users’ clicks to merchants on a CPC.”

4. Avoid a "branching" model, in which your user path has multiple options, as this will increase the likelihood of your customers losing interest before paying you.

Final Thoughts

After you’ve gone through these steps with your business idea, you might realize that your original concept doesn’t hold up as well as you thought. In fact, you might even have to go through this process numerous times before settling on a strong idea for a tech offering. However, this is all part of being an entrepreneur, and ensures that only the most dedicated will persevere. If you think that the idea validation stage is daunting, consider these words from Thomas Edison:

I have not failed. I've just found 10,000 ways that won't work.”

The Founder Institute has helped thousands of aspiring entrepreneurs validate their startup ideas. If you need more help bringing your idea to life, apply to a Founder Institute program near you!

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