On our previous post, we reasoned and gave examples of why it’s better to Solve a Pain than to Follow Your Passion. Now that you have taken a week to develop some ideas for solving pains in your life, it’s time to put them to the test.
The smart entrepreneur never charges into battle without first analyzing the market, the competitors, funding opportunities, and revenue potential. Time and time again, I hear many entrepreneurs say that their biggest mistake was one of two things:
- They did not do enough market research
- They did not build a product that solved a pain for their target market
This post will help you validate your startup idea and make sure that you start off with an idea that solves a tangible pain in a targeted industry, and that has concrete revenue potential.
1. Take an experienced entrepreneur out to lunch
I have met some amazing people and received the best advice over a cup of coffee or lunch with an entrepreneur that is more experienced than I am. Your mission is to find an experienced entrepreneur in your area, send him or her an email, and invite him or her to lunch. Everyone loves a free lunch, so you have a high chance of success if you’re polite, explain that you’re a young, ambitious entrepreneur looking for advice, and persistent. Entrepreneurs are busy, so don’t feel discouraged if you don’t hear back from them immediately. Just keep pushing until they respond back with a date and time for lunch.
2. Ask an angel or venture capitalist if they would fund your idea
Lets get one thing straight here: the goal is not to get funding; the goal is to get feedback.
Angels and Venture Capitalists can be brutally honest, which is exactly what you need. They are very hard to schedule time with, so your best bet is to find them at a speaker event in your area. In areas like Silicon Valley, Los Angeles, Boulder, Austin, and New York, there are A LOT of startup panels where VCs come together to give young entrepreneurs advice.
After going to 3 or more of these events, you’ll notice that all the advice is really the same. The real value is in speaking to the VCs after the speaker panel so that you can ask him or her for feedback on your idea. Furthermore, try to connect well enough to where you can ask the VC out to lunch or coffee to discuss your startup idea further (this is rare but worth a shot).
Questions to ask:
- Do you have any portfolio companies that are doing something similar to my idea?
- Do you think my business model is viable?
- Can you recommend any entrepreneurs that I can reach out to partner with?
Good places to start:
- Silicon Valley: SVASE.org
- Orange County: Octaneoc.org
3. Look for competitors
You will always have competitors. Please don’t ever tell a VC that your idea is so revolutionary that you don’t have any competitors. It’s simply not true.
Furthermore, you want to have competitors. You can learn from them and understand how you can make your product better.
The ideal situation is to enter a market that has competitors who are doing well, but who have not yet captured a significant portion of the market. If your competitors are doing well, then this almost immediately validates your idea. You just need to figure out how to do it better.
It’s also a positive to see that your competitors are funded. This means that the pain you chose to solve is hot right now and that investors are looking to invest in your idea.
How to find competitors: Use http://www.crunchbase.com/ to find competitors and to check to see if they’ve been funded.
4. Interview your target demographic to find out how to solve their pain
This is very important. You may think that your product or service will solve a pain, but you will not know for certain until you directly ask your target demographic. Reach out to your target demographic and do what it takes to get them on the phone to answer your questions.
Important topics for discussion:
1. Ask your target demographic what is their biggest pain
2. Ask your target demographic if your idea would solve their pain
3a. If no, what changes would your target demographic make to your idea so that it would solve their pain?
3b. If yes, ask your target demographic how much they would pay for it.
5. Above all else, listen to yourself
Everyone in the world is trying to give you advice. Just the other day I was at a VC event and this random guy starts telling me how I should run my company.
Ultimately, you must listen to yourself.
If you believe your idea solves a pain, then I say go for it! Don’t get discouraged if investors and entrepreneurs shoot down your idea; instead, use it as an opportunity to make your idea stronger. Find the holes in your idea and ask what advice they would give to improve these holes in your idea. Constantly seek out constructive feedback and make the necessary adjustments to improve.
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So if you’re in the Silicon Valley area, I expect you to email me for some lunch 🙂
This is a really great down to earth resource. Thank you. I am always coming up with what I think are great business ideas, but now have some concrete ways to test them. Busy with an SEO business at the moment.
Thanks
Andrew
Here’s some similar advice on the exact same lines as Jun’s post re: developing new startup ideas by Chris Dixon, Co-founder of Hunch — http://cdixon.org/2010/03/14/developing-new-startup-ideas/
Hi Jun!
Great article! I am just starting out in trying to be an entrepreneur and after living in the world of arts, design and all things creative all my life, making the shift to being more structured is kicking my butt, however I appreciate the challenge and articles like yours help me a lot! Would love to take you out to lunch, maybe when I am down in the States one day 😀
If you’re ever near Norcal, we should definitely meet up 🙂
You going to SXSW?
Am definitely gonna try! Would love to connect with you on skype or somewhere else one day if you’re up for it?
I really liked this post. It’s a completely different tactic then just trying out your idea on google adwords, which is exactly what I’m doing on a certain product idea. Although that will give me some data, an experienced mind will be able to tell me a lot more for my overall path.
Wish I still lived in the OC!
Who can I go to near Philly?
Do you know people who are active in the Montreal area?
Hey Chim, my Twitter connections say that this guy is a good person to reach out to: @austinhill
Good Luck!
Hi Jun,
I have recently arrived in London, however I have been living in Auckland, NZ for the last few years. My UK network is a bit thin at the moment so I am open to any connections and suggestions!
Brendan
Hi Jun,
Thanks for the post, it is an interesting read. I would like to know your thoughts for international entrepreneurs in this position. I realise social networks now allow us to reach out across the globe, but no tweet or email can compete with a face to face meeting or referral. I am not making excuses, I am just curious for how you would tackle this?
Thanks,
Brendan Shanahan
Well, I’m pretty confident that wherever you may be, there are at least some entrepreneurs in your local area that you can talk to.
But even then, a nice Video Skype chat can do the trick as well. It’s like you’re almost sitting next to the person.
What area are you in? Perhaps I can refer you to some people
Hi Andre:
Thanks very much for the resources. Definitely appreciate it.
I’ve met David Crow before. He’s very active and involved in the startup community. However, from his LinkedIn profile, I don’t see a lot of experience in specifically starting up businesses (other than his own consulting business). I will reach out to him to see if he can recommend any good entrepreneurs to speak to though. Thanks!
Hi Jun:
I’ve really been enjoying this series. Probably because I’m very much your ideal audience.
I’m pretty fresh out of college, drawn to entrepreneurship, took a corporate job in consulting… read the 4 hour work week, started an online business part-time… always thinking of ideas and businesses and set on ‘making it’ on my own.
The content has been superb so far. Seeing your sample daily schedule is certainly inspiring… that shows grit. Anyway, will definitely be keeping my eye on the series.
I’d very much like to take some experienced entrepreneurs out to lunch. Do you know any great people in Toronto, Canada?
Re: serial entrepreneurs in Toronto — @davidcrow is a great guy that I met a few months ago who is a serial entrepreneur and is very involved in the startup community in Toronto.
Here are some ways that you can reach out to him including other startup people in Toronto:
– Check out http://www.startupnorth.ca which David runs.
– He also frequently puts on Startup Drinks with other entrepreneurs that you can check out — http://toronto.startupdrinks.com/.
– http://thestartupdigest.com/ — is a weekly email alert that shares top startup events happening in a number of cities. Select Toronto to find out what’s happening there.
Hope this helps.
Cheers,
Andre
Great tips, Jun. Figuring out what you don’t know in terms of implementing your business idea, marketing it, and growing it, is important to do before you start. It could even change the focus of your idea once you start learning what you need to know. Getting feed back from experienced entrepreneurs, investors, or your target market can be crucial to any idea.
Great tips Jun. I’m going to incorporate these ideas in my next venture. My favorite is “take an experienced entrepreneur out to lunch,” its a great way to network and gain valuable tips and feedback.
Jun, personally I think you’re the best content writer on this site right now.
Thanks Mike. Truly appreciate your comment.
Where you from? Perhaps I can get you on an Untemplater interview in a few weeks.
Great post Jun!
I think even before #2 — re: asking angels if they would fund your idea, I think one of the scrappy startup tests that I’ve found is to see if you can even raise any money from your own smart friends and family (or others that they know of). Sometimes, angel investors will see if you were able to raise anything from people who know you first, before deciding to invest themselves.
Good point, but the goal here is to test the viability of your startup, not to get funding.
If an angel or VC likes your idea, then that’s a good sign.
If your friends and family give you money, that pretty much is meaningless in terms of product validation. It just means that your friends and family have spare cash and that they care about you.
Remember, the goal here is not to raise money. You need to make sure there is a need for your product or service before you build it.
Yes, that’s true. I would say in addition to speaking to angels or VCs, who are sometimes very tough to meet with, find 5 of the smartest people you know and ask them to critique and poke holes in your idea. It’s important to hear as many push backs as possible.
Good tips! I would also add “make sure your idea can make money”. It seems like there are too many internet companies out there with no plans to make any sort of revenue.
True. This is something I just cannot understand. As far as I know, Twitter is still not making any money, has quite a few employees and I’d imagine a really decent slew of benefits and perks.
Am I incorrect?
You’re right twitter isn’t making any money yet, unless they are selling merchandise?? It’s a perfect example of how confusing the social media thing is making business. Facebook and Myspace never start out as business models either, but once they both blew up business people started throwing money at them hoping their was a model in there somewhere to make money. Look at Facebook, still having trouble making money. But hey, Amazon didn’t become profitable for 10 years.
I’ve made the mistake Kyle mentioned in starting something without defining how I plan to make money. And without knowing how you are going to make that money you can’t really define who you’re going after, you’ll eventually go in circles and go nuts.
Facebook is still having trouble making money, however, they do note, that they have generated revenue. I believe they generated nearly $500 million last year — http://bit.ly/9f8AI8 (ads + virtual gifts). That’s quite a bit. I also believe I’ve heard that they will be making a profit this year or very shortly. Sometimes, these web properties take time to become profitable, as you mentioned with Amazon.
Hmmm, from what I know, Facebook is already profitable as of late last year.
I mostly agree, however, it is possible to identify your target market, but not know how to make money. That’s the problem I’m having right now with my idea.
Hi Jun!!
Once again, awesome post! Would you by chance be visiting the NYC area anytime soon so I can’t take you out to lunch ?:) If not do you have any suggestions for contacts in the NYC area?
All of the adivce you have given thus far in this series has been very beneficial!
Hey Monique, I don’t know too many people in the NY startup scene, but these people should be able to point you in the right directions:
1. http://www.sandbox-network.com/fabian-pfortmuller/
2. http://www.linkedin.com/in/mheinrich
3. http://www.linkedin.com/in/cartercleveland
Sorry, don’t plan to visit NYC anytime soon. I’ll be at SXSW though!
Good luck!