A startup creation scheme that allows you to evaluate your idea before you spend $ 1. Steps 1-3 of 6

If your startup fails, this is all because you could not solve the primary problem for a fairly wide audience, so I will tell you how not to make this mistake again

Not so long ago, I announced the opening of our new startup studio, Capital H labs, in which I and a whole crowd of talented engineers and designers are working on products that can help companies grow faster and more predictably.
We will launch our first product quite soon, and most of the time in the last 5 months we spent on 1) an assessment of the need for a product and 2) the creation of a product after an assessment of demand.

Today I want to share a simple scheme that we used to evaluate our first idea, in the hope that it will help other entrepreneurs avoid mistakes.

For reference: this is exactly the scheme we used to evaluate ideas for Bigcommerce (of which I am a co-founder) in 2009. Today, Bigcommerce has more than 100 thousand paying customers, 500 employees and $ 125 million of venture capital.

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Estimating the demand for your product is more important than ANYTHING. More important than functions, your team, design, price, and more.
Without an assessment of the market, you will have a product for which no one will pay. You will spend a lot of time, energy and money, and earn stress, depression and a sense of complete burnout.

And this is a shame. Very disappointing.

So let's get started. I will tell you how to evaluate the idea of ​​your startup before launch. Before you invest $ 1. Before you hire anyone.

Step 1 - Record the problem, not a separate solution.

You need to formulate a problem that you or other people regularly encounter. Please note that here the emphasis is only on the problem, and not on a separate solution - it will come later.

You need to write your problem in simple words. A few examples:

• Unable to maintain contact with customers after they left the restaurant
• It's hard to determine which customers will be unhappy before this happens.
• It is very difficult to develop professional graphics for social networks.

I think you understand me - stick to the basics and simplify the problem until you can formulate it in one sentence.

Step 2 - Determine whether this problem is paramount

Finding problems is easy - they are everywhere. What you really need to find is what I call the “primary problem”, which means that the problem you have to solve is one of the 3 most important problems that your consumers are experiencing.

Imagine that your (possible) target customer is the CEO of a small company. Its five main problems may look like this:

1. Generate more sales
2. Making marketing work more efficiently (hire a marketing manager)
3. Outsource payroll and benefits
4. Expand the range of products
5. Advance on social networks and invest in advertising on Facebook

If you are planning to launch a tool for social networks, you may notice that this is NOT the primary problem (one of the 3 main ones) for the average CEO of a small company - it is only fifth in the list.

They will be so focused on solving the first three problems that they will never pay attention to you - EVEN if you have the best product, EVEN if you have the best support, etc.

They simply will not have time (or money) for you, if you do not solve the problem that is most important to them - the primary problem.

Probably, this is the most difficult lesson to learn, and which most start-up founders ignore - “But my product is so cool, if they try it, they EXACTLY buy it !!!”.

So how to check whether your problem is paramount? First you need to know who can buy your product. You need to build a basic profile of this kind:

• Company size: 100–500 people
• Role: CEO or Vice President of Marketing
• Location: North America
• Industry: Sales, Technology, and Hospitality

After that you need to make a list of 20-50 potential customers that meet these criteria. The easiest way to make such a list is to go to LinkedIn and do research. Then just contact such potential customers by writing them a message like this:

Hello [name],
We want to talk 15 minutes on the phone with CEOs who are faced with [the problem]. We do research and sell nothing. Could you give us time tomorrow at 15-00?

A few points:

• Be brief and concise - do not waste their time
• Immediately turn on a specific date and time - this will avoid unnecessary correspondence by mail
• Write three times more potential customers than the one you want to talk to. That is, if you want to talk to the 20th, write 60. Most will not answer, and some will simply not interesting

Fine. Now you have 20 people who are ready to talk to you and who have encountered the problem you have discovered.
(I understand that I greatly simplified this step - but you are an entrepreneur, use a creative approach. If you do not like talking to people on the phone, then maybe such a startup is not for you ...)

Before you make the first call, you need to make about 10 questions that you ask them. As a result of the call, you need to evaluate that:

1. They ran into this problem
2. How hard is it for them (i.e., is this problem paramount?)
3. How do they solve this problem at the moment?
4. Are they willing to pay for solving this problem?

Match the answers to all your calls in a Google document, Evernote, or others. After 5 or more calls, you will begin to understand whether this problem is really significant or that it simply “does not hurt”.

Never create a startup to solve a problem that "would be nice to solve." People will take advantage of your product, but they will never pay for it.

Step 3 - Clearly identify available solutions.

After more than 20 calls, you will learn one thing - how this problem is being solved at the moment. People can call you certain products / companies or can describe the process in the company, or to whom they give this problem to outsourcing, etc.
It is very important to find out during the call. Do not ask, “what product are you using to solve this problem?” Because they may not use a specific product.

Instead, ask "how are you doing with this at the moment?" And just listen. They can use the product, or they can bundle a set of tools or processes to solve the problem.

In general, you need to solve a problem that other companies are already trying to solve. In most cases, this will show that the market for your primary problem is quite large - perhaps you have at least one existing competitor who does a good job (he is popular, he has attracted funds, he’s been on the market for several years and is growing successfully, and etc.).

Be careful if no company tries to solve the same problem as you. In most cases, this means that you have not understood the market or that your problem is too specific and affects too few people. Specificity is good, but it needs to be balanced with a fairly large market.

Part 2

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