Should We Even Try?
A startup is a lot harder than most people think. Many enthusiasts are attracted by the success stories of silicon valley, the billionaire entrepreneurs who grew out of their garage, the teenagers who changed the world and the possibility of being part of the next breakthrough.
Very few understand that a startup is inevitably a business that must be managed for growth. It must be driven by research and strategy as much as by its product or service. It’s the boring stuff that ends up being the meat and potatoes of success.
Unfortunately, most startups remain laser focused on the promise of delivering the next best thing by focusing on the MVP and expending less energy on its feasibility. It pays to be cautiously optimistic upfront.
Now, all new businesses are essentially starting up in a way, but, for a new business to qualify as a startup they must develop a revolutionary concept, whether to an existing market or new one. This could be in the form of technology, product, service or markets.
A bakery shop wouldn’t make it as a startup because it isn’t something new, unless their process, product or distribution is something no one has done before. In essence, a startup is an experiment that operates under a set of risks above and beyond traditional businesses.
Fact is, failure rates for startups are high – 90%. Some of the major reasons for failure include bad cash-flow, bad marketing, bad product-market fit, bad partnerships, bad research and legal issues.
According to information from Failory, 34% of startups fail because of poor product-market fit, 22% because of marketing problems.
Therefore, it’s evident that 56% of a startup’s problem is in marketing their concept i.e. finding their connection with customers.
By prioritizing research and strategy early on, you limit the wastage of resources that go into executing inconsequential ideas. It makes sense to address high-risk assumptions first. That leap of faith will be a lot less daunting if you’ve done your homework diligently.
Hopefully, the list of questions below, which are by no means exhaustive, will help new entrepreneurs gauge the potential of their ideas at an early stage.
What Answers Do We Need Before Building A MVP?
How are customers currently managing the problem you plan to solve? Will the problem persist over the long run or is this a short-term phenomenon? Is there a workaround? If so, is the workaround cumbersome or cost-intensive? Will the problem be solved entirely by our new concept or will some areas be left unattended? Will our product give rise to new issues?
Are close substitutes available? Do prospects consider them a worthwhile alternative? What threats do they pose now or in the future?
What is the estimated market size for this problem? Is this problem faced locally, regionally, nationally or globally? Are there any legal, environmental, labor, privacy, ethical or societal laws and regulations that need to be addressed? Where will this market be 3/5/10yrs from now? How strong are the barriers to entry or exit? What risk factors influence this market and how likely are they to occur?
Are we first to address this market? If so, can we establish an early mover advantage? If not, how established is the competition? Does it make sense to enter at this point? Are there gaps in their solution? What differentiates our product from the competition? Is the difference something customers would be attracted to? Is the difference sustainable? What reactions can we anticipate from competition?
Do we have a succinct positioning statement? Do customers value this position? What features do we include at launch to be competitive? What is the best method of delivery – physical or virtual? Can the solution be built in-house? Does development need to be outsourced? Can our solution be patented or trademarked?
What is the timeline to deliver this solution? What assumptions do we expect to hold till the time we launch? What market parameters could potentially change by then?
Based on estimation, what will it cost to build such a solution? What is the current market pricing structure? Is the margin worth it? Is that margin sustainable for the business? How do we anticipate prices to behave over the short, medium and long-term? Are there supply-chain issues we need to consider? What resources do we not have currently that we would need in the future?
Why Do We Question And Second Guess Ourselves?
Startups operate under conditions of high uncertainty. Therefore, being cautiously optimistic is important. The way to do that is with a good deal of research and strategic thought.
This pre-validation process forms the basis of Go/No-Go thinking and is imperative before entertaining MVP development.
If the concept passes this pre-validation stage, it would have accumulated sufficient data and analysis to offer confidence in pursuing a MVP.