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Should You Give Up on your Startup Idea?

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All great startups start off with an idea followed by years of hard work. So how do you evaluate quickly and efficiently whether the idea merits further investment of your time and money? The following article describes the process that we have seen play out with great success for the companies we have been working with over the last 2.5 years.

 

Steps to evaluating your startup idea

Over the last 2.5 years we have worked with a number of founders who have all had a startup idea and needed help in turning it into a valuable business over the 12 months we worked with them. We have refined the first few months into a process that is fairly consistent in its approach (especially for ecommerce and marketplace businesses) and it has proven really effective in assessing whether the idea is going to fly or not over the rest of the year.

1. Stay objective.

All founders fall foul of “Confirmation Bias” to a greater or lesser degree, but it’s really important to understand that in this super early phase you need to be super flexible deciding if this idea is worth pursuing. The worst situation is to end up investing a lot time building a product for a weak idea. Once you move into a phase of execution it becomes harder and harder to change direction so it is far better to be open minded now and alter the idea if a bigger truth comes along in this evaluation phase.

2. Use the Lean Canvas to identify your assumptions

Before we invest in any idea stage companies we ask the founders to create a Lean Canvas (similar to a business model canvas but more designed for startups).  Below is an example of a lean canvas when we first were evaluating Lexoo an online legal marketplace (thanks to the Lexoo team for letting us share this).

Lean Canvas

3. Identify your assumptions

Now that you have filled out the canvas as best as you can, go and find some friends (preferably with some business/startup experience) and on a whiteboard  and draw the following chart.

Assumptions chart

Spend 15 minutes on each of the 9 sections of the canvas and ask yourself what assumptions you have made about the business. Write down all the assumptions and how you would test them on post-it notes and categorise them by how easy they are to test and how critical they are to the business succeeding. Below is an example of a few of Lexoo’s post-it notes on the chart as an example.

Assumptions example

This exercise will give you an ordered list of assumptions and ways you can test them based on importance and ease. We have found that assumptions around whether users want this service or product are usually the most important and can be easily tested through speaking to users to understand their needs. The hardest assumptions to test are often to do with how the business will perform at scale (where market sizing and looking at parallels can help).

4. Test your assumptions around the problem, customers, and existing solutions

All startups are trying to solve a problem/aspiration of some kind. Some problems are clearly felt but for others your potential users may never articulate them clearly (because they didn’t know it was possible to improve on how they are currently doing things).

“Don’t ask your potential users what they want. It’s your job as a founder to figure that out based on your deep understanding of their unmet needs and your knowledge of what is possible”

However, through interviews and observations you should be able to see strong evidence of them struggling to solve their problem or solving it in a way that you know you can significantly improve upon. We recommend interviewing at least 20-40 users of different types in order to do some early validation around the problem, your customers and existing solutions. It is also a great idea to observe people as they try to solve these problems and also to try to solve it yourself using existing solutions. Not only does the process of interviews and observations give you a sense of whether you are onto a good idea and validate your key assumptions around the problem to be solved, but it also will give you a wealth of more nuanced information that will inform your product solution.

“Sometimes I work with founders that are reluctant to invest any time in learning about their potential users before building their product. They usually have a hard time.”

If you don’t see a strong need through this process then you should really think about whether it is a good idea.

5. Testing your unique value proposition and solution

Once you are confident that you are solving a problem the usual next set of assumptions you want to test are whether your target market will respond to your unique value proposition and solution. How you go about testing this depends on the product and business type. For consumer companies we usually create a homepage with a call to action that requires some commitment from the user (however big or small that is) and for more complicated products (Saas or mobile) we have built prototypes and observed users interact with them to understand if we are providing value. For hardware products a lot of companies will run a Kickstarter or Indiegogo campaign to prove need (and get funding for the first production run). Dropbox (a very complicated product) famously used a video to explain what they did to prove their solution was what people wanted. If you are building a homepage test then it is important that it clearly describes what you are offering and that is beautifully presented. Users expectations of consumer products in terms of design are always increasing, so if your product isn’t doesn’t look professional then your users may not engage and you may come to the wrong conclusion. With tools like Strikingly or QuickMVP or a few days from a designer and front-end developer you should have something that looks and feels professional. Below is an example of the homepage that we used with Lexoo that also had a simple form for the users to fill out with what they wanted the lawyer to help them with.

Lexoo homepage test

6. Testing marketing channels

Great startups are created through great products and a relentless focus on growth (and good good unit economics for the most part!). For consumer companies, paid marketing is probably going to be part of the mix so it is important to drive some users to your service to test your proposition to get a baseline of cost and volumes that you can expect from channels like search, facebook or twitter. We usually see CAC to be way higher in the beginning but also see it reduce quite rapidly over the 12 months through campaign and product optimisations. Obviously if it is extremely high then that is a warning signal you should pay attention as your unit economics might not work. Volume is also important as it helps you understand how quickly you will need to invest in offline marketing channels and PR in the early stages. By driving users to your homepage test you will be able to see whether users engage and start to test some assumptions about your marketing strategies.

7a Test value  and revenue in an unscaleable way through a concierge service

Using a concierge style service on top of a thin product is a great way to test the real value you want to provide quickly. You can use manual effort to fill out the steps you one day hope to automate. Not only will you have very happy customers from day one but you will also get a deeper understanding of what you need to build to keep them happy. Marketplaces and ecommerce lend themselves very well to this technique, as do a lot of startups that use intelligent systems to offer a personalised service. Lexoo did this by manually matching lawyers to jobs and sent lawyer profiles to customers via email. Over time they built more product to automate some of the process to get it to scale while keeping the same level of personal service.

“Use the concierge service not only to test you are offering value but also to have more face to face conversations with your users and deepen your understanding of their needs.”

7b Test value using prototypes

For SaaS and more complicated products you will generally need to build more product before you can know if you are providing value. In these cases we prefer testing that value through prototypes. It is not as powerful as the concierge service but you can still learn a lot quickly before committing to building something. Running design sprints is a great way to rapidly test out a product or feature and is a great way for the whole team and customers to provide input.

8 Keep learning more about your customers at all times

This last one really isn’t a specific step in the process but is the underlying principle to what you should be doing while evaluating your idea. In the 4-8 weeks you may spend on this (depending on how well everything goes) you will continue to understand more and more about your users. Be sure to email every customer, give them phone numbers to call you, add live chat on the site and organise user tests (online and in person). It is only through a really deep understanding of your customers that you can then move onto the next phase of building a product that really resonates.

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About the Author

This article was written by  of the Path Forward. The Path Forward was developed by Forward Partners, a VC platform that invests in the best ideas and brilliant people. Forward Partners devised The Path Forward to help their founders validate their ideas, build a product, achieve traction, hire a team and raise follow on funding all in the space of 12 months. The Path Forward is a fantastic startup framework for you to utilise as an early stage founder or operator. The framework clearly defines startup creation as being comprised of three steps. The first step of this framework involves understanding customer’s needs.Nic is Head of PR & communications at Forward Partners. Over the course of a 10 year career in communications, he has working with global brands including Orange, Warner Bros., BBC, and amazon.co.uk.

Entrepreneurship

Women on Top in Tech – Daphne Ng, CEO of JEDTrade

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(Women on Top in Tech is a series about Women Founders, CEOs, and Leaders in technology. It aims to amplify and bring to the fore diversity in leadership in technology.)

Daphne Ng is the CEO of JEDTrade, a blockchain technology company focused on trade, supply chain, and financial inclusion projects in ASEAN. She is also the Scretary-General at ACCESS and Exco. of Singapore Fintech Association

What makes you do what you do?
I was introduced to blockchain technology in 2016 after I left my corporate banking career after 10 years. It was my mentor who first got me interested in this technology, which I then went on to delve further into, on its potential applications in the lending and trade finance space – domains where I came from.

How did you rise in the industry you are in?
Being in the space for 2 years and actively involved in the ecosystem, I was able to bring on the projects, network and a good degree of thought leadership in this vertical. Early on in the startup journey, our team faced many challenges. And to me, the key to rising above failures are two essential factors – resilience and support. While resilience is innate, I received a lot of help be it in terms of connections or advice. ‘Nobody succeeds without help’ rings very true for me.

Why did you take on this role/start this startup especially since this is perhaps a stretch or challenge for you (or viewed as one since you are not the usual leadership demographics)?
From the start, I focused on my domain expertise in trade finance and the application construct of how blockchain and DLT can be applied to these use cases. Also, my strategy from the start was to build a technology company made up of 80% tech and engineers, which is also our key competitive advantage today. At the end of the day, deliverables are about strategy and execution, which includes building and leading an ‘A’ team.

Do you have a mentor that you look up to in your industries or did you look for one or how did that work?
I have many mentors, which includes our company advisors (all of whom are well-known in this industry) and mostly informal mentors I meet via my connections, and on various occasions and circumstances. Creating opportunities also means putting myself in the right place, at the right time. And in my case, these were mostly organic and genuine friendships formed from the initial connection.

How did you make a match if you and how did you end up being mentored by him?
To me, a match in values is very important. It also takes humility to ask for help and be willing to listen to advice, which is important in order for mentorships to be successful – be it formal or informal.

Now as a leader how do you spot, develop, keep, grow and support your talent?
I love this question! I am passionate about building strong teams and helping my people grow. I abide by the 3Rs when identifying talents: resourcefulness, resilience and right values. And then I invest in the ‘potential’ and this means giving them room to lead, make decisions and take risks.

Do you consciously or unconsciously support diversity and why?
My support of diverse talents, skillsets and characters can be seen in the make-up of our core team – all helming specific roles and each bringing their own value to the table. We need the sum of all parts to build a great company.

What is your take on what it takes to be a great leader in your industry and as a general rule of thumb?
Great leaders emerge in times of failures and challenges, never abandoning the team, and always putting the team’s interests before her own. And I consciously live by these mottos every day.

Advice for others?
My advice to other entrepreneurs: be resolute and dare to be different. If you are going to follow others, then you will end up on the same path as them. No right or wrong; but I would rather chart my own path. This June, we are officially launching our blockchain project, Jupiter Chain (www.jupiterchain.tech), which have garnered much interest in the industry, even before we made it public. We believe this project is the epitome of marrying innovation with practical implementation, and we want to be the first to truly operationalize blockchain for our ecosystem projects in this region.


If you’d like to get in touch with Daphne Ng, please feel free to reach out to her on LinkedIn: https://www.linkedin.com/in/daphne-ng-%E9%BB%84%E7%91%9E%E7%8E%B2/

To learn more about JEDTrade, please click here.

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Callum Connects

Jace Koh, Founder of U Ventures

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Jace Koh believes cash flow is the lifeblood of your business. Understanding it will enhance your ability to run and manage your business.

What’s your story?
My name is Jace Koh and I am the Founder of U Ventures. I’ve always been inclined towards investment and entrepreneurship. I’ve played a hand in starting businesses across these industries – professional services, cloud integration, software and music. I believe that succeeding in business is tough, but that’s what makes the rewards even sweeter.

What excites you most about your industry?
Everything excites me. These are my beliefs:

  • Why is accounting important?
    The accounting department is the heart. Cash flow is like blood stream, it pumps blood to various parts of the body like cash flow is pumped to various departments and/or functions in a business. It is vital to the life and death of the business.
  • Is accounting boring?
    Accountants are artists too. They paint the numbers the way they want them to be.
  • What makes a good accountant?
    A good accountant can tell you a story about the business by looking at the numbers.
  • Why is budgeting and projection important?
    Accountants are like fortune tellers, they can predict the numbers and if you wish to understand your business and make informed decisions, feel free to speak to our friendly consultants to secure a meeting.

What’s your connection to Asia?
I was born and raised in Singapore, and here’s where I want to be.

Favourite city in Asia for business and why?
Singapore is my favourite city. We have great legal systems in place, good security and people with integrity. Most importantly, we have a government that fosters a good environment for doing business. I recently went for a cultural exchange programme in Hong Kong to learn more about their startups. I found out that the Hong Kong government generally only supports local business owners in terms of grants. They’ve recently been more lenient and changed the eligibility to include all businesses that have at least 50% local shareholding. But comparing that to Singapore, the government only requires a 30% local shareholding to obtain government support. In the early days of starting a business, all the support you can get is precious. It’s great that we have a government that understands that.

What’s the best piece of advice you ever received?
The best time ever to plant a tree was 10 years ago as the tree would have grown so big to provide you with shelter and all. When is the next best time to plant a tree? It is today. Because in 10 years time, the tree would have grown big enough to provide you shelter and all.

Who inspires you?
Jack Ma. His journey to success is one of the most inspiring as it proves that with determination and great foresight, even the poorest can turn their lives around. I personally relate to his story a lot, and this is my favourite quote from him, “If you don’t give up, you still have a chance. Giving up is the greatest failure.”

What have you just learnt recently that blew you away?
I’ve faced multiple rejections throughout my business journey, and recently came across a fact on Jack Ma about how he was once rejected for 32 different jobs. It resonated very deeply and taught me the importance of tenacity, especially during tough times.

If you had your time again, what would you do differently?
Nothing. I live a life with no regrets. Everything I do, regardless of whether it is right or wrong, happy or sad, and regardless of outcome, it’s a lesson with something to take away.

How do you unwind?
I love to pamper myself through retail therapy and going for spas. I also make a conscious effort to take time off work to have a break outside to unwind as well as to uncloud my mind. This moment of reflection from time to time helps me see more clearly on how I can improve myself.

Favourite Asian destination for relaxation? Why?
Taiwan! Good food with no language barriers and the people are great!

Everyone in business should read this book:
I don’t really read books. Mostly, I learn from my daily life and interactions with hundreds of other business owners. To me, people tell the most interesting stories.

Shameless plug for your business:
We’re not just corporate secretaries, we’re “business doctors.”
U Ventures is a Xero certified advisory firm that goes beyond traditional accounting services to provide solutions for your business. You can reach us on our website: http://uventures.com.sg/

How can people connect with you?
Converse to connect. You can reach me via email at [email protected] or alternatively, on LinkedIn here: https://www.linkedin.com/in/jacekoh/

This interview is part of the ‘Callum Connect’ series of more than 500 interviews

Callum Laing is an entrepreneur and investor based in Singapore. He has previously started,
built and sold half a dozen businesses and is now a Partner at Unity-Group Private Equity and Co-Founder of The Marketing Group PLC. He is the author two best selling books ‘Progressive Partnerships’ and ‘Agglomerate’.

Connect with Callum here:
twitter.com/laingcallum
linkedin.com/in/callumlaing
Download free copies of his books here: www.callumlaing.com

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