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How to validate
a startup idea?
Follow
May…
28,
2015 ·
5 min
Using aread
simple formula

At eFounders, we build 3 to 4
SaaS startups a year. Our
process is to develop our
illustration by Adrien Griveau
business ideas inside our
startup studio; once an idea is
validated and falls under our
“building thesis” we hire two co-founders to develop the business with us
and make it skyrocket.

Therefore, we have developed a methodology of business idea

validation. Our core philosophy is “You want to make something people
want”. Yet, as Ford said “ If I had asked people what they wanted, they
would have said faster horses”. As people don’t know what they want, you
cannot count on them to directly validate your business idea.

Here is a simple method to interview people in order to understand

whether they will go for your idea without asking them directly.
People will take your solution if they need it and if they perceive that what
you oHer is signiIcantly better than what they have today. Rather than Top highlight

asking people if they like your solution, you need to understand what they
really need and to appreciate whether your solution brings enough value to
the table to make them change their current habit. The main advantage of
this method is that it brings a quantitative dimension to a usually very
qualitative phase.

Phase 1: Target a survey panel and run interviews

Your goal is to interview 20 people you think are your target, using face-to-
face or phone interviews. The goal of this interview is to really understand
your future clients’ needs.

Your questions should enable you to understand:

what are their current needs

how those needs are currently fulIlled.

The interviews are a unique occasion to scope this need by asking as many
details as possible (how often they use their current solution, why they use
it, what are its limits).

It is very important before designing any solution to be sure that you 6ll an
existing need.

Example: our latest project, O?ceX, wants to provide a single app to manage
O?ce management tasks. We targeted 20 companies between 5 to 50
employees, in our “tech” ecosystem (because it’s easier to reach out) — we met
individually with every one of them (essentially O?ce managers, and also
some CEOs, HR or COOs). We asked them 6rst what tasks they speci6cally do
on a daily basis, second we go into details on speci6c workPows, providers,
software used and thirdly we asked about the challenges they face.

Phase 2: Ask your panel about the 4 dimensions

of their users’ satisfaction
SpeciIcally ask the client how he/she perceives the price, the quality, the
performance and the convenience of the solution she/he is currently using.
The deInition of these four criteria depends on the context (see example
below), be sure to bring your own context to your questions.

* Price: purchase fee, setup, fee, subscription fee, license fee

* Quality: relevance of results, infrastructure availability, customer service

quality

* Performance: response time, delivery time, travel speed, quantity of

items, number of results

* Convenience: easy to use, easy to carry on, easy to park, easy to access,
easy to order

The goal of the exercise is to deIne for every of theses dimensions if they
are perceived as

a) not a problem at all

b) a problem

c) a serious problem.

Example: Compared to what O?ce managers currently use, that is to say

multiple and complicated Excel sheets and multiple SaaS apps, we oRer a single
and free app. Here is what we got from the interviews:

Price: b)

Quality: a)

Performance: b)

Convenience: c)

Phase 3: Ask yourself about the 4 dimensions of

your product’s promises
You should do the same exercise with your own idea. For every dimension
you should determine if your solution makes

a) no diHerence at all

b) some improvement

c) a serious improvement compared to solution currently used by the

client.

Example: Here is what we got from applying those questions to ourselves

Price: c) O?ce managers tend to have several subscriptions to software

applications they use partially. O?ce X has a multiple-apps approach and is
free.

Quality: a)

Performance: a)

Convenience: c) O?ce X centralizes all the tasks an O?ce manager is facing on

a daily basis in one single, user-friendly interface.

Phase 4: Calculate your Perceived Created Value

You can then calculate the PCV (Perceived Created Value) which deInes the
value that your solution brings relatively to what your client perceives. You
can calculate your PCV by rating you and your client’s answers

a)-answers = 0 point,

b)-answers = 1 point

c)-answers = 3 points

PCV is the sum of the value created on 4 dimensions (Price, Quality,

Performance, Convenience) weighted by the importance that your client
dedicates to each of these dimensions. This score depends on the people
your are interviewing and should be considered in average. A score of 7 is a
great score and should mean that the created value is higher than the cost
of change (in algebra, it can be deIned by the dot product of the 2 vectors
Perceived Values and Created Values).

As you can see, O?ce X proved to be validated pretty strongly ☺ The beta will
be available soon, you can leave us your email here.

Some example of good PCV:

BIKE vs WALKING

PCV: 0*0 + 0*0 + 3*3 + 0*0 = 9

UBER vs TAXI

PCV : 1* 1 + 1*1 + 0*0 + 3*3 = 11

TEXTMASTER vs TRANSLATION AGENCY

PCV : 3*1+3*1+1*1+1*3 = 10

ALGOLIA vs ELASTIC SEARCH

PCV : 0*1 + 1*1 + 1*3 + 1*3 = 7

Go ahead, do it with your own solution ☺

Interviews have to be conducted as honestly as possible since we know that

we all are capable of convincing ourselves of almost anything. This
methodology is worth what it’s worth, but the worst thing that can happen
is you lose a few hours talking with future potential clients, discovering a lot
about their problems and having a better overview of the competitive
landscape!

Note: this article is extracted from TheBook. TheBook is a component of

TheNetwork which is the platform that eFounder’s startup studio oRers to it
startups. TheBook is a collection of best practices to build a (eFounders)
startup the best way from ideation to product management or recruitment.
Most of TheBook will be made publicly available chapter by chapter.

Thank you Rachel Vanier, Pascaline Bertaux, Sacha Schmitz and Cyril
Gantzer for reviewing this article.

Startup Startup Studio

218 claps 4 responses

WRITTEN BY

Thibaud Elziere Follow

Founder @efounders @fotolia @mention @mailjet

@textmaster @frontapp @aircall @spendesk @forestSaaS
@hivyapp @slitehq @getstation @up\ow

Inside eFounders Follow

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