How To Validate Your Business Idea By Testing A Hypothesis

The problem with the landing-page-and-email-addresses method is that it's impersonal. It's also a low-commitment activity. It's so easy to sign up for something, and it requires so little conscious thought. You will get a lot of false positives because of that.

It's counterintuitive to some extent, but consider a two-phase signup process: a landing page plus an email validation of some kind, or perhaps a two-step signup process on the landing page. There will be a noticeable drop-off between Step 1 and Step 2, and that's good. Those are probably people who would have washed out anyway, and you no longer have to waste time catering to them as false positives. [1]

I'm not saying this was necessarily your issue, but a lot of people run into problems with hypothesis testing by conflating it with marketing or growth hacking. It's not. You're not trying to optimize a hypothesis test for pure signup volume. You're trying to use a hypothesis test as a filter: for the right audience, for your problem/solution statement, and for the value proposition you've chosen to test.

You don't want signup to be a total pain in the ass, but at the same time, you don't want it to be so easy that it loses meaning as a signal of intent.

[1] Caveat being that you still want to probe, and perhaps ask people who've bounced between 1 and 2 why they did so. Sometimes it really is just a UX issue. But in my experience, if someone really has the problem you're addressing, he or she will stick through a two-step signup or validation process.

I can give these two piece of advice.

1) Don't delude yourself into thinking you're "changing" the world (for some ridiculous definition of changing). It's most likely that you aren't. Focus on the business fundamentals.

There's an awful lot of startups making very ho-hum products -- small incremental improvements to existing things or dead end paths that nobody would ever possibly want. They've convinced themselves and their VCs that if only the entire world starts using their chat app or appointment reminder, that world peace would break out and we'd live in a Bill and Ted future where Rock music unites us all. They then build a business model that actually requires some percentage of humanity to get on board with their app to become profitable.

They also forget that to the VCs, they don't care about changing the world, the company is the product and in the end the company will be sold for parts to the highest bidder. The business needs to optimize for this case because this is what the end-game looks like. Not a neon colored future where everybody is playing air guitar and peace and tranquility because they used your app.

2) If you're bringing lots of technology into the startup, it's not necessarily an advantage. Technological debt can absolutely cripple you. And by the time you've realized it, you're completely out of money and left with old technology that nobody wants.

I know of a more than a few startups that get kicked off with a million lines of existing software. They think it's the matter of some source clean up and some new paint on the front end and it'll be easy street. Inevitably, they spend most of their VC investment bringing this legacy to market and getting customer #1. Feedback from early customers is positive, but with one caveat, "this software needs to do x, where x requires a fundamental rewrite of the entire product. By the time a decision is made to start a ground-up rewrite to support x the company is a couple years in and has lost all of the momentum a startup needs when coming out of stealth mode.

rewrite = reboot of the company.

You accomplish the rewrite, pitching it as the next version, but shifting entire technology stacks doesn't feel like a version bump to the customers (it's a huge investment for them as well). All the sales activity you've done over the last year is also junk, unless you feel like supporting the old and new versions simultaneously, and you probably don't have the resources to do that well.

By the end, you're out of VC, coasting on what your sales team is pulling in, but not moving revenue in enough of a positive direction to exit or raise another round. You try to sell it on the cheap and recoup the VC, but buyers are wary of the now very old technological debt you've accumulated and the small customer base you're bringing to the deal. Along the way you pick up some very onerous, non-friendly software licenses for some of your components -- %of gross revenue or something even more onerous like GPLv3 which makes your entire technological investment worthless. Buyers doing due diligence decide not to buy. Your company is a zombie at this point.

> but as we had to learn the hard way nobody was willing to pay for it.

I was part of a startup a few years ago with some really cool technology and good market validation. Somehow we got connected to a very well known media and technology company and were brought in to sell our product to them. The founders, star struck, pulled out all the stops on our presentation, flying people cross country, buying up demo data, the works. They saw the potential install base * our license cost (even at discount) and were thinking immediate exit.

During the demo there were oohs and ahhs at all the appropriate places especially around certain features we really wanted to show off. Questions were constant and detailed and follow ups were planned before we even left the room. High fives were given in the parking lot.

Over the following weeks calls were vague, "hard to coordinate all these people" "he's on travel" "she's changed departments"

Weeks turned into months, calls just stopped being returned.

The deal was put into back burner status with lots of finger pointing.

One day, a year or so later, one of our employees came back from a tradeshow pointing at a flyer they had picked up from that company's booth. It described a new feature in their technology offering that was an exact copy of some of what we had shown in our demo. The copy even used a term we had coined for the demo. The screenshot looked more or less like that piece of our product, reskined for their technology.

Lawyers were consulted.

The end result was that they hadn't done anything wrong, just copied an "idea" they had seen. But as a result we were effectively locked out of their market segment. They had simply done the math, develop it in house or pay a license fee per use and it had been cheaper to do it all in house. By buying relevant data and making a demo so complete you could make actual decisions off of it, we had even shown them what they should aim for, what worked, what didn't work. We helped them optimize their development process and made the decision to do it all in house even easier.

And yet a lot of times the best photographs are the ones that break the rules of what not to do...