“Shut Up & Take My Money” — How to Validate Your Business Ideas

Author

Moon Ma
February 21, 2023

This is a talk given by Josh Kaufman at MicroConf. It is not meant to be used as a guide for strategy or tactics but as a brain-dead simple checklist to ensure you cover all the bases from the beginning(idea validation). This checklist saves you tons of time and money in the later stage of a startup (related idea: The Checklist Manifest by Atul Gawande). If you find this checklist useful, you may read Josh’s book: “Personal MBA.” He also gave a talk at Google.

The iron law of the market:

Make 100% sure you are on the right side of the market before doing anything. We are looking at the problem and solution at the same time while both are changing, so it helps to have a framework to simplify this process.

3 Steps of Idea Validation

  1. Market Research (discover an idea)

  2. Market Evaluation (what it looks like when serving customers)

  3. Market Validation (if customers pay for it)

1. Market Research:

5 Parts of business:

  1. Value creation

  2. Marketing

  3. Sales

  4. Value-delivery

  5. Finance

12 forms of value

  1. product

  2. service

  3. shared resource (create once: museum, amusement park, SaaS)

  4. subscription

  5. resale (retail)

  6. lease

  7. agency: airbnb

  8. audience aggregation

  9. insurance

  10. option

  11. loan

  12. capital

2. Market Evaluation:

  • Evaluation Is a Two-way process: a good fit between the market and me, same as you should evaluate the company as well when you enter an interview

10 ways to evaluate ideas

(this is for bootstrapper, see here for venture-track)

  1. urgency

  2. market size

  3. pricing potential

  4. cost of customer acquisition

  5. cost of value delivery

  6. uniqueness for offer

  7. speed to market

  8. up-front investment

  9. upsell potential

  10. evergreen potential

9 universal economic values

  1. efficacy: does it work better than other options

  2. speed

  3. reliability

  4. ease of use

  5. flexibility

  6. status (Rolex)

  7. aesthetic appeal

  8. emotion

  9. cost

3. Market Validation: Outcome of the above checklist

  1. Prototype or sell sheet (a copywriting exercise)

  2. Talk to ideal customers.

  3. Collect pre-orders, pressing on money can point out the problem of your product

  4. Collect email; low hurdle; if people are unwilling to give you email, they will not pay. If they don’t trust your information, they will not invest in you.

  5. Closing deals ASAP