How to validate an IDEA?
I am Aarihant Aaryan! Welcome to the Iron Sharpen Iron newsletter,
I share my weekly homework from my startup journey, learning about human behavior, and sometimes decoding industries and business models for fun.
I can’t control my curiosity :) )
Last month when I was in Bangalore, I met pretty famous, well-accomplished, and highly insightful founders, one of the questions that I kept asking everyone is
How do you validate an idea or how do you know if something will work or not?
The reason I asked them that specific questions is because whatever they have built, people thought no one would pay for it - they thought it’ll not work but they proved everyone wrong
Most people are wrong with their hypothesis not because they are incompetent, it is because they are just lazy to think
Most answers that I got were highly insightful, they were kind enough to share frameworks as well.
STEP 1: Apply these frameworks
The entire startup ecosystem will teach you to think of products or ideas with an old framework → Acquisition, retention, and monetization
The acquisition means how will you bring users to your product, would be the cost, whether is it easy or hard
Retention means How many users are coming back to your product, what’s the reason for them to come back, is it already an established behavior or are you creating one?
Monetization means will consumers pay for it? how much are they paying? while they pay you at regular intervals?
But on the contrary here’s how you should think about ideas,
Monetization first: Will the consumer pay for this? validate that first
Retention: Why will the users come back to the product again? how many times are they likely to come back? are you trying to create a behavior or capitalize on one?
For example: On an app like swiggy you can keep on ordering food all your life, and you don’t have to worry about retention but imagine a learning app, it is hard to solve retention for such products because of no motivation for consumers.
Acquisition: How hard is it to acquire consumers? how long the sales cycle is going to be? What’s the cost per lead/cost per acquisition
A sizable business can easily be built if you have either one of these things:
High Monetisation: Where consumers are paying you high-value ticket sizes ex: Byju’s / unacademcy - their users churn after a certain period of time but ticket size compensates well
High retention: An app that high-retention users are coming back to the app again and again, ex: A payment app, a messenger app, swiggy or Rapido
Low Acquisition or organic acquisition: Acquiring users on your product for low cost or at least no cost - ex: Most of the online courses leverage youtube and solve for organic acquisition, that’s why they are able to sustain
with this framework, you should be able to Approve or disapprove of an idea in 5mins
STEP: 2 - Talk to your Target users
There are many ways for you to talk to users, there are a few things that I follow and have worked well for me
Do ADS - Make a poster (mention the problem you are solving in the poster) and run Facebook ads, you will definitely get a lead, just message or call the user, and ask them all your questions.
For example: If you have an idea to build a private chat app, what you should ideally do is run Facebook with a poster asking questions like
Do you need a private chat app? what’s the problem you have with WhatsApp? Do you have a privacy problem?
People can either reply to your poster or give their contact details so that you can reach out to them (Depending on the CTA that you choose)
Another possible way is to leverage social media distribution, one of the main reasons for me to start content creation on IG is because it is easy to get answers to your questions, just run polls on your story or ask questions on your stories and people reply,
My Instagram account grew 10x in 3 months, I have 500+ people voting to all my dumb polls and 50+ people replying to my questions which is literally amazing.
I think a sample size of 200+ is more than enough to validate an idea.
Final thoughts: As a fellow founder, who has been building for a couple of years in multiple domains the only thing I would recommend is never chase a hot or trending idea, always chase the most possible outcome - Always do this calculation before you pursue an idea,
IDEA X How well you can execute = The most possible outcome
If you have any thoughts or questions share them in the comments :)
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A ❤️and share on LinkedIn / Twitter would definitely mean a lot.