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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.

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Entrepreneurship

Women on Top in Tech – Laina Raveendran Greene, Co-Founder at Angels of Impact

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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.)

Here is our interview with Laina Raveendran Greene, Founder of GETIT Inc. and Co-Founder of Angels of Impact, an impact network focused on women social entrepreneurs helping to alleviate poverty. She is an entrepreneur and social impact investor, whose passion is female empowerment, and enabling women to be key agents to help alleviate poverty in Asia.

What makes you do what you do?
As a minority female Singaporean from relatively humble beginnings, I have never taken anything for granted. I learnt early on that I have to work doubly hard to overcome the “glass ceilings” but if I persevere, I can succeed. That is why I chose to focus on helping women-led social enterprises as I know how hard things are for them and I hope to make things a little easier for them.

How did you rise in the industry you are in? 
I rose by being courageous enough to push against the “glass ceiling” and seizing opportunities open to me no matter where they were. Early on, I realized I would have better opportunities overseas, so I worked in many countries, including Switzerland, USA, and Indonesia and used these opportunities to learn and open new avenues for myself. I now come back to Singapore with many more networks and skill sets.

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)?
Yes, as a minority Singaporean, it may appear that I am not the usual leadership demography in Singapore. In my own way, however, I think I have amassed my own international accolades and work experience such as serving as the first Secretary General for the Asia Pacific Internet Association, CEO of one of the first few tech startups in Singapore in the early 90s, being on the International Steering Committee of the Global Telecommunication Women Network, and most recently selected as one of the 2nd cohort of Edmond Hillary Fellows in New Zealand.

I am now moving to the next phase of using these networks and skills to help other women to social enterprises, which seem to be exactly what I want to do in my next phase of life (after more than 25 years of global work experience).

Do you have a mentor that you look up to in your industries or did you look for one or how did that work? 
It was harder in my younger days, as one of the few women in tech to find mentors but today I do.  Men were reluctant to mentor me for fear of rumors.

How did you make a match if you did, and how did you end up being mentored by him? 
I found my mentor when I was taking an executive program at Stanford. He was one of the keynote speakers and I went to talk to him. Intrigued by my background, when I asked if he would mentor me, he said yes. I meet with him at regular intervals and I always ensure I have put his ideas to test before reporting back to him. I feel that I value his time if I do actually listen and act on his advice.

Now as a leader how do you spot, develop, keep, grow and support your talent? 
The key qualities I look for is an eagerness to learn and humility to be open to new ideas. Also, when asked to be a mentor, I usually give homework and see how proactive they are. Only the ones who do their homework, take the advice and act on it, are the ones I actively mentor.

Do you consciously or unconsciously support diversity and why?
I consciously and unconsciously support diversity, as I see the importance of diversity on true innovation. You never get anything new, talking to like-minded people. It is always good to have different perspectives to create new ideas. I am also an active supporter having faced racial and gender discrimination in my life and want to ensure that others are given a better chance.

What is your take on what it takes to be a great leader in your industry and as a general rule of thumb? 
A great leader to me is one who has empathy and humility, and a genuine spirit of service. Today’s challenges such as climate change and social injustice, requires many players to apply their knowledge and skills to solve and have a sense of ownership in solving these issues

Advice for others?
The only advice I can think of is do what you are strongly passionate about. You need to persevere to succeed so it helps if you truly care about the endeavor you are working on.

If you’d like to get in touch with Laina Raveendran Greene, please feel free to reach out to her on LinkedIn: https://www.linkedin.com/in/laina/

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Callum Connects

Denise Morris Kipnis, Founder & Principal of ChangeFlow Consulting

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Denise Mossis Kipnis’ curiosity in people and the world, lead her to set up ChangeFlow Consulting.

What’s your story?
I’m driven by curiosity. Having been the only one in a room who looks like me for most of my life, I developed a curiosity about who stays, who leaves and who thrives in minority/majority situations including when and how connection and collaboration happen. I was a systems thinker long before I knew what that was, always asking why and so what; and seeing the pieces, the whole, and the places in between. So helping people and organisations move through the complexity of transformation feels natural to me.

What excites you most about your industry?
I see change and inclusion as two sides of the same thing; I don’t practice one without the other. Some people see change as death, as loss, as exhausting. And it can be. But I see in the work I do as an opportunity for something new or hidden to emerge. When an organisation understands that it is first a group of people, who themselves represent and belong to groups of people, and it begins to tackle what it would mean to understand and learn from all that talent, all that diversity, to have them all working for and not against the organisation, to truly unleash all that their people have to offer; that’s magic.

What’s your connection to Asia?
Change and inclusion are personal values as well as professional strengths. For me, living and working outside of the States was a bold experiment to see whether any of the stuff I’d learned about change and inclusion would work outside of the US. My husband and I targeted Asia specifically: it would be the greatest contrast, culturally speaking, for me; and a unique career springboard for him.

Favourite city in Asia for business and why?
Although I’ve practiced in other cities, I am biased towards Singapore. In some ways it’s what Los Angeles is to the rest of the United States, a microcosm of sorts. The regional/global nature of it means that so many different nationalities and cultures are represented. As a result of this mix, you never know what you might get. In some situations, cultural dynamics are obvious, sometimes subdued. The variability is compelling.

What’s the best piece of advice you ever received?
“Never ask anyone to do anything you wouldn’t do yourself.” Michael Rouan.

Who inspires you?
Often it’s a “what” not a “who.” I can get inspiration from a passage in a book or a situation in a movie, as well as a turn of a phrase or watching people interact. I often make the biggest connections between the various threads I’m working on when I’m sitting in someone else’s event.

What have you just learnt recently that blew you away?
I’m honestly not blown away by much. Instead, I’m struck how circular things can be: ideas often come back around with a slightly different twist and I watch the way it shakes things loose for people. I recently sat through a workshop on Self as Instrument, and despite being thoroughly versed already, I learned something. In preparing for a panel on design thinking, I unearthed a new language to describe things.

If you had your time again, what would you do differently?
You’ve caught me at a good time. I’m sitting in appreciation and gratitude for all my experiences, because I wouldn’t be who I was today if all that has happened, didn’t. And yet one thing comes to mind: It wasn’t until I redesigned my website two years ago (shout out to Brew Creative!) that I realised I hadn’t made explicit agreements with my past clients as to what I could share publicly about our engagement, or whether I could use their logos in my promotional materials. In my business, confidentiality is so important, and yet I need to be able to talk about the work as reputation and experience leads to the next success, and so on. It turned out a lot of the contacts I had known had left the organisations where the work was done, so they couldn’t help at that point. So the practice I’m carrying forward is to get those agreements up front, and to make sure my relationships in client systems are broad as well as deep.

How do you unwind?
Science fiction, puzzles, wine.

Favourite Asian destination for relaxation? Why?
Home. I don’t travel to relax, I travel to learn and explore.

Everyone in business should read this book:
Built to Change, by Ed Lawler and Chris Worley. To my knowledge, it’s the first pivot from advising organisations away from stability and toward dynamism, from strategic planning to strategizing as an action verb; to blow up the traditions and rigidity that impede organisations from developing change capability.

Shameless plug for your business:
We’re taught that there are two kinds of people: those who see forests, and those who see trees. There is a third type, my type, and we see the ecosystem. Worms, climate, birds, the spaces in between. This is the perspective organisations need to be successful in solving complex problems and thriving in change.
ChangeFlow uniquely blends four disciplines (two of which are multi-disciplinary in themselves): organisation development, culture and inclusion, change management and project management.

How can people connect with you?
Facebook: https://www.facebook.com/ChangeFlowConsulting/
LinkedIn: https://www.linkedin.com/in/dmorriskipnis/
LinkedIn Company page: https://www.linkedin.com/company/4862954/
Email: [email protected]
Website: http://www.changeflowconsulting.com

Twitter handle?
@ChangeFlow

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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