For many founders or aspiring business owners making it to unicorn is the ultimate goal. Unfortunately, more than two-thirds of startups fail within just 20 months. And the major reason behind this high failure rate is that there is no need for the company. Founders spend endless time, stress, money and endless sacrifices all for building a product or service that nobody wants.
Entrepreneurs and the teams that surround them all desire to launch technology or innovative products that solve their target market’s most pressing need. The best way to achieve that goal is to go through a strong startup evaluation in order to gain insight on if it is a viable venture. We are going to walk through the process of how to evaluate if your startup concept is worth your time and effort.
1.) Understand the problem you are trying to solve.
Any startup concept is about building a solution to solve a specific problem. The founding team must understand the problem thoroughly and how it will be solved with your product or service. Ask your self what are the significant problems your target customer is facing? The answer to this question is the foundation of turning your idea into an actual company. It is your launching pad.
You will also want to ask yourself, how are these problems being solved today? A great example is AirBnB. I use them often for examples because it was a total out of the box concept and the execution was almost flawless (as flawless as a startup can be). They saw a solution in people short term renting out their rooms or homes to bring in side money. They also saw that people were wanting cheaper travel and travel experiences that brought them into local communities.
Solutions before AirBnB were hotels or hostels and people either bringing in long term roommates or finding a side job. It was completely out of the box but it worked and is now considered a unicorn startup.
2.) Understand the Market you are entering.
The market is extremely crucial when developing a startup. You must understand the market in great detail. Is the market even big enough? If you are looking to create software that connects people who like to go on hikes with their ferrets that probably is not going to give you a strong return. If your focus is building software that disrupts the travel industry… well… now you have something.
What does the future of that industry look like? Is it growing? Or is it shrinking? Or has it already exploded and the market is already saturated? These questions are crucial. Some ideas are too late and some ideas are too early. Really understand where that market is and where is it going.
Up next: How are you going to be able to enter the market? Is it a two sided market? Are your customers buying off the internet? Or are those buying decisions being made in boardrooms located in places like New York City? Is it feasible and does your team have the ability to execute that initial on boarding process?
3.) Can you build it? And if you can’t right now; how and when can you?
What is it going to take to launch that idea? With technology today you can create incredible companies on a shoestring budget. But, there are some ideas that are going to take an insane amount of capital. Really work to understand how much money, what kind of talent, and how long it will take you to bring that product or service to market. Also remember that the initial product should be an MVP. Do not, I repeat, DO NOT spend a huge amount of time or money (unless you found the cure for cancer or something) to immediately bring your first product to market because no matter how strong you evaluate your idea it is bound to change.
Once you know the reality of what it will take to get your company to launch, ask yourself if your team can make it happen, or if you can recruit a team to actually make it happen.
4.) Who is your competition?
Deeply get to know the competition in your market. What are they currently doing? Where are they in their development? If the market is flooded with competition it may be too late in the game to enter, unless your solution is vastly different and much stronger than what is presently out there. You need to think about your value proposition and be sure that it raises you above the rest.
If there is no competition, that is not a great sign either. You could be too early or you very well may be solving a problem that does not need to be solved.
5.) Pricing your product or service.
At this stage of the game, a lot of your numbers are going to be guesses and is why I highly discourage any significant time or effort being put into a business plan. The things you think you have figured out… you will figure out that you were wrong. BUT you should know ballpark numbers on what it is going to cost you and what you will need to charge. If you are solving a problem that is too expensive for people to want to have solved then it will undoubtedly fail.
Make sure you can solve a specific problem for a price that people are willing to pay.
6.) Do you want to solve this problem?
This is the last but ultimately, in my opinion, the most important. Do you want to solve this problem? Let’s face it… startups are insanely hard. Like climbing Mount Everest hard. If you decide to launch your own startup it will be one of the hardest things you will ever do. It is not for the faint of heart or for anyone who is easily discouraged. It is not for the people pleasers or rule followers. If you decide to go this route you have to truly want to solve this problem with every bone in your body.
You will be faced with naysayers and critics. You will be pushed to your limit. At the end of the day, as founder, you have to believe in what you are doing so insanely that you have no choice but to do the insane… which is start a startup.
This blog could go on and on, but this will give you a strong start in evaluating your startup concept. To wrap it up… think big, think passionately, think without biases.
If you have any questions please reach out to us at [email protected]!
