Tips for Startups: 3 steps to validate your concept
Our regular businessing events touch upon many subjects. Recently, we came upon the question of external financing and the benefits individual investors can bring in. I decided to approach several business angels, who provide “smart money” to various businesses, and I’m going to share their views with you through this short blog series.
Tips for Startups should help you avoid common misconceptions and get you ready for the questions investors are fond of asking when meeting you for the first time.
I’m starting with three pointers from Jan Všianský, a Brno based business angel, known by the local start-up community as a mentor and a business expert. You might have met him in person – for sure if you attended our September meeting, where we gave several startups a chance to present themselves. He’s the co-founder of Lingea, a successful company in the area of language software and dictionaries.
Here are the tips he gives to almost every startup very early on.
At the very beginning, when you come across a new idea for a project, you might get so absorbed that you devote most of your time thinking about the project itself or how to solve its technical challenges. Angel investors, on the contrary, would love to hear what your customers say, and what problem your project solves for them. Here are my three usual pieces of advice.
1) Talk to at least 100 potential customers
Don’t focus only inwards, on your ideas, your thoughts – get out of the building instead and talk to as many potential customers as you can. See if you can validate all your assumptions, focus on the customers’ problem and the existing solutions – from the customer’s point of view.
It’s good to make these surveys methodically – have a written scenario/checklist, use open questions and measure everything. I recommend this book by Ash Maurya: Running Lean – it contains valuable instructions and useful sample questions.
2) Fake it till you make it
For a good conversation with a potential customer, it’s good to have something tangible in your hands, something to show them. Even hand-drawn sketches or Photoshop mock-ups would do in most cases.
3) Get the first real data
Before meeting an investor, you should have an idea of how to acquire customers and how much it might cost you (Cost per Acquisition).
Instead of unsubstantiated assumptions, why won’t you prepare a one-page website with a single Call to Action, run a small (say PPC) campaign and get first real numbers (CPC, completion rate)? It’ll make a huge difference to your presentation to the investors.
Bonus tips
Check this drill with the most frequently asked questions by investors, prepared by Supernova, the first Czech startup accepted by Y Combinator (out of 12,000 applicants). Or read the inspirational story on how they got there.
