Startup Lifecycle Series: Stage One – Validation

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No two companies share the exact same path to growth and success. The plain fact is that various factors influence how a business develops; these can include existing market conditions, industry type, founding team (or lack thereof), so on and so forth. However, there are general stages of development that a majority of startup companies experience: 1) Idea-Market Validation 2) Product Development 3) Commercialization 4) Scale-Growth. In this blog series, we will offer some unique insights from leading experts in each of these areas.

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The first in our "startup lifecycle" series concerns validation. You may hear various terms for this, but it really boils down to the question: should I invest any more of my time or money into developing this business idea? Credit to Hart Shafer, innovation coach for Adobe and CEO/Founder of Theraspecs, for a majority of the information included below (except where cited otherwise).

Why should you validate?

As Hart notes, running experiments leads to more validated learning over time, which basically means that the information you gather is substantiated with quantifiable data. In terms of your business, this ongoing learning loop decreases risk and ensures that you as an entrepreneur are investing your money in something that is more likely to yield a positive return.

Eric Ries’ lean startup process also explains that it is not just about “failing fast, failing cheap;” instead, entrepreneurs are building a methodology that eliminates uncertainty through constant testing- an approach that will ultimately aid in the ongoing development of their companies.

What should you validate?

In the simplest of terms, you need to validate ACTUAL customer behavior. This seems easy on the surface, but there are numerous challenges to it. For instance, we all have cognitive biases that can become traps for our experiments because they frame our questions, our tests, our assumptions, and can therefore yield less-than-ideal data. As a result, we must acknowledge where these biases exist and adapt our experiments to reduce and eliminate them as much as possible.

Beyond that, there are specific areas of validation an entrepreneur can follow. The first is “problem-solution fit,” which determines if there is a demonstrated need on behalf of a particular customer segment. Simply put, is there really a pain point?

Second, “product-market fit” is whether or not a specific, proposed solution would be adopted by your customer. It is important to remember that you have NOT built a product yet, you are simply probing to learn whether or not your imagined solution – which does x, y, z – will actually be purchased by your potential customer.

Last, “scale” validation evaluates whether or not you can actually engage your customers on a mass level. Kunal Punjabi also defines this as validating the demand or market potential of your business idea (Validate or Die: Using Validation to Build the Right Product). Is there enough interest or is this an omnipresent problem that facilitates the need for a viable business solution?

What validation tools and techniques are available?

There are numerous validation tools available. The overarching framework is, of course, the lean canvas business model. It helps entrepreneurs conceptualize their customer segments and those corresponding problem(s) before then on to solution development, engagement, etc. 

One of the most common (and frequently overused) validation techniques is a survey. Hart explains that, while not a bad option, they should be used more to supplement quantitative data by offering qualifying findings that offer a deeper understanding of the business proposition.

Interviews are a great way to gain insight into your customers. Whether it is problem based or solution based, open-ended questions that probe customer behavior will help you identify key patterns and findings.

Landing pages, A/B testing, and paper-sketched prototypes can gauge purchasing interest in your solution as well as the effectiveness of specific messaging and feature sets. For additional tools, innovationgames.com has numerous options for tackling business problems.

Greg BullockComment