Top 5 Startup Tips for Testing Your Value Proposition By Desiree Almodovar
As a founder, you already have a strong vision for the product or service you want to build. But how do you know if it will work? As an angel investor and growth advisor, I’ve seen dozens of ideas blossom from pitch decks into popular products. While there’s no magic bullet that unites them all, there are some things you can do in the early stages of company development to pressure test your idea and set yourself up for success.
First, find out everything you can about your market
When I’m advising companies, we always start out with a research and strategy phase to define the core of the company: What are your goals? What problem does your product solve? Who will use it? What value are you providing them? These seem like simple questions, but here’s where it gets tricky—you can’t assume you already know the answers. You have to talk to as many people as you can, from potential customers who can tell you exactly what they’re looking for to other founders and VCs who can help you make sense of the tidal shifts and trendlines in your industry. And you have to review as much existing material as you can find: scoping out your competition’s websites and materials, reviewing third-party research on your market (Pew, McKinsey, Deloitte and other research and/or consulting agencies are a good place to start), and connecting with people in your network who have tried to accomplish something similar to you. This research doesn’t have to be incredibly formal, but it should be thorough and well documented, because you’ll refer to it often. At the end of this phase, you may be in a vastly different place than where you started, but that’s the point. Now you know what you need to know. So you can make better, more informed decisions about what key features you want to test in your MVP.
Define your MVP
MVP stands for minimum viable product. It’s a limited version of your product or service that allows you to test and refine your idea with minimal cost and effort. But this does not mean launching a product with minimal features. In fact, that could backfire—frustrating users and making them less open to trying your product when it’s fully baked. This is where your research phase becomes really important. Now that you’ve understood your market, you know what your target audience really cares about. Start building from there. And don’t be afraid to test and learn along the way. For some companies, this means finding creative ways to interact with end users along the way, learning about their pain points and desires throughout the process. This could mean assembling a small focus group of consumer proxies to try your MVP as you build it, and advise on what stays and what goes before you launch to a wider market. These learnings are invaluable, as they’ll help you discover if you need to pivot or continue on the same path.
Figure out how much money—and how many customers—you need to succeed
Up until now, you’ve been dreaming and building. Now comes the sobering reality of running a company. You’ll need to be realistic about what resources you need to bring this vision to life. Start by determining how much capital you need for the next 6-12 months, including both the cost of goods sold and ongoing operations. Make sure you’ve clearly planned for who and what you’re paying for, and have done enough research that you fully understand what these things cost. Founders who take the time to meet with vendors and advisors and gather proposals in order to get realistic timelines and budgets often go on to have greater success, because they have based their burn rate and runway on real data. Once you know what it will cost, then you need to show how you’ll make this venture profitable. Define your financial targets and provide solid data and metrics to show how you’ll achieve them. This includes clearly defining your customer acquisition strategy, which is different today than it was even a few years ago when digital ads dominated. Project things like sales, cost of goods sold, cost of services, and operating expenses, and show that you have a clear path to profitability. Make it clear to everyone in the company what metrics really matter, as they’ll be the indicators you closely monitor to measure progress along the way.
Fundraise
Pitching to consumers is different from pitching to funders. But the core story is the same. You have to show potential funders how your idea is a real solution to a very pressing problem, with a sizable target market who is willing to pay for what you’re offering. Make sure you are able to clearly articulate why you, specifically, are the right person to bring this product to market with passion and authenticity. Talk confidently about your background, experience and accomplishments, and how they perfectly position you to make this business a huge success. And, of course, show you will drive profitability. Showcase the team of advisors that you’ve built to prove that you’re surrounded by experts. But don’t treat fundraising pitches as a one directional. You’re evaluating potential funders, too. Make sure the people that are investing in you and your business are aligned with your vision, and think about how they can add value in other ways.
Operationalize Your Company
Once the right pieces are in place, it’s time to operationalize the company. This means building out capacity across product, marketing, customer experience and operations. Startups and other fast-growing companies are often led by generalists or people very passionate about a cause. But specialists are required to take a company from concept to launch. For some, this means making strategic full-time hires, such as an in-house Head of Product or a CMO. But often, in the early stages of a company, it means bringing on part-time hires or consultants who augment your team and offer more bang for your buck, as you’ll only pay a fraction of the cost of a competitive full-time hire.
Learn More About Desiree and her work on desireealmodovar.com & theinlay.com