Validation: Entrepreneurs Can’t Thrive on Compliments

comliments

When founder of Digg, Kevin Rose, moved on and launched Milk Labs, there were plenty of compliments flying around, especially from top venture capitalists in Silicon Valley who actually invested in Milk. There was no way someone like that would fail, right?! Wrong. Milk’s first app, Oink, was shut down in less than 5 months and the company was acqua-hired by Google. There is the expectation that someone like Kevin will, by default, be successful in whatever he does, based on previous success and a freshly stoked ego.

Whether you’ve built a successful company before or not, you cannot rely on the excitement from your friends or family, or even your best connections to make your new business a success. The secret to success is effectively validating your idea early on.

“Getting feedback from co-founders, friends, small focus groups, user testing sessions and even existing customers can be very helpful to qualitatively understand how others view your offering.” says David Skok of Matrix Partners. “ But many times the sample group that you can reach is too small and biased towards people that will be polite to you, or who have self-identified as liking your product.”

Talk to Strangers

Your closest friends, family and colleagues will always say “Oh, that sounds like a good idea” when you pitch them your product. The problem is that they will always feed your ego to not let you down. Though they are a great first batch of people to test your messaging, they aren’t the best group to validate your idea or provide insight into to market size.

“We were making videos for clients for awhile and they all wondered where to put them and how to manage them.” says Micheal Litt, Co-Founder of Vidyard a video hosting and analytics platform “We were suggesting YouTube but they kept running into issues (ugly player, outbound link, ads, recommended content, rabbit hole) so we developed our own platform. We originally used it to manage our portfolio and then started rolling a hosting/player/analytics solution to our clients. They loved it and needed it so much that they were willing to pay upwards of $250/month. What we created was a product for ourselves and for our clients. The only validation we looked for was money in the bank.”

“What we created was a product for ourselves and for our clients. The only validation we looked for was money in the bank.” – Michael Litt

Once you’ve confirmed what the pain is, discuss how you’re planning on solving it and judge their reaction. As you continuously get feedback on your idea, iterate your pitch – and your product – until you consistently get the reaction you want. More importantly, listen to your customers! They will tell you what they need and are willing to pay for.

Do Surveys and ASK FOR MONEY!

Surveying potential customers is known to work to get initial insight.  “Surveys are a good starting point for customer validation. But the cost for someone to affirm your idea via a survey is low.” says Isaac Souweine. “One way to go deeper is through intensive customer interviews with potential power users. Even better is to validate customer interest through an exchange of value, e.g. collecting email sign ups for a beta launch.”

Sean Ellis uses a survey to determine if more than 40% of his customers would be disappointed if the service were discontinued than he knows you’re on to something. While Dave McClure suggests hitting a 6 or higher on a customer satisfaction scale out of 10. If people are paying you money and they would be disappointed if your product disappeared, than it’s safe to say your product is validated (Ash Maurya claims that this notion is a bit vague as it’s a blanket approach that doesnt account for how many people you survey. 100+ is a safe number).

Measure and Iterate

Once you have at least some paying customers – I like atleast 10 – keep the communication channels open. Talk to everyone about your product and continue to iterate until you start creating something you know people will pay for.  “Our customers constantly provide great feedback. I like to think we build things that people want” says Litt.

When your product is actually live and people are using it, you have the advantage of measuring more of what people actually do, not just what they say they do. “Larry Smith told me that Apple’s most valuable asset was their data – hence, we built the analytics tool to analyze data on our customers’ viewers. That data became very useful in our video sales process and eventually our clients wanted to see it.It’s the inflection point that laid the foundation for our business.” says Litt.

Use services such as KISSmetrics and Intercom.io (full disclosure, I am an investor) to help turn users into paying customers. Decide which features you need and which ones to cut in order to keep them paying. Now ask yourself, Are you selling a painkiller or a vitamin?

While compliments are nice to have, only money and hard metrics can truly validate your idea.

How have you avoided letting compliments feed your ego? How are you/have you validated your idea?

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Comments.

  • http://www.vmrcommunications.com/ Hugh Macken

    Good reminder. thank you, Dan. On the flip side, I think you could also say that it’s not good to be too influenced by friends and family who say your idea won’t work. As you say, let the money and hard metrics speak for themselves.

    • http://twitter.com/danmartell Dan Martell

      Hugh, totally agree.

      Essentially, don’t listen to your friends, or parents … only listen to your potential customers.

      Great point.

  • http://www.facebook.com/derekcball Derek Ball

    Great post Dan. As a serial entrepreneur, this struck many a chord with me. Now several ventures down the road, my current new project is very focused on trying to validate with ‘strangers’ and getting them to vote with their wallets!

    • http://twitter.com/danmartell Dan Martell

      I should’ve call this post “Voting with their wallets” :) .. totally agree.

      Show me the money! :)

  • http://www.facebook.com/michael.healander Michael Healander

    Good read. I have to present to the board this afternoon if customers care about our Geogame MVP. Co-workers, family and friends love it, but strangers
    who love it are few.

    • http://twitter.com/danmartell Dan Martell

      It’s not about strangers per se .. but potential customers who don’t know you (so customer strangers? :)

      but yeah, that’s the best way to get validation.

      Thanks for the comment.

  • http://blog.user10.com/ Brian Sun

    Your post got me thinking about the character of a person who is able to look past nice compliments and focus on the money and hard metrics that can truly validate an idea.

    I’m thinking humility, empathy, and teachability — all pretty interwoven.

    For humility, someone who is able to maintain a realistic picture of their strengths/weaknesses, company situation, and need for their idea to be validated regardless of past successes.

    For empathy, someone who tries their best to put themselves in their user’s shoes and feel the pain of their problem.

    For teachability, someone who knows they don’t have all the answers and needs to learn from continual customer feedback and data of what people actually do.

    May we be humble, empathetic, and teachable in our efforts to validate ideas.

    • http://blog.user10.com/ Brian Sun

      Forgot to mention, is there any other traits that would be helpful to add to this list?

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