Site icon Megan Horn

How to Validate (or Reject) a Startup Idea Using Simple Funnels

Validate-or-Debunk-a-Startup-Idea

I’ve been in the startup world for more than 10 years now—first as a marketing student at UNI’s Business & Community Services, then at a tech company that started as a startup and continued to stay involved in the startup ecosystem, and now as a startup myself.

In that time, I’ve learned that coming up with ideas is easy, doing something about them is the hard part. I’m pretty sure I’ve had more than 100 business ideas fly through my head this year. Not all of the viable and not all of them good. If you’re like most entrepreneurs, you also have zillions of ideas running around in your brain. Every once in a while, one feels like it could work. But how do you know which one(s) might be that big idea that turns into something?

Why You Need to Validate a Startup Before You Start

Creating a startup that’s bringing in satisfactory profits generally takes years and significant investment (both time and money). There’s no solid research on average length of time it takes for startups to turn a profit, and of course “satisfactory profit” is not a scientific term by any standard. The point is: profits take time and investment.

If you want to build a business (which usually starts as a startup), you want to be confident that what you’re building has a chance to pay off in the end. I assume. You can go off and build based on your assumptions and what you want. Or, you can build your business based on data and customer research.

I’ve watched a lot of startups skip idea validation and dive right in, and it usually doesn’t end well. Imagine spending your life savings and a whole year building what you think is an awesome business. Now imagine after you launch, you discover there’s no market for your product or service. If you could spend a few hundred dollars to prevent this vague but illustrative situation, it’d be a no-brainer. You’d think.

Rapid-fire Startup Testing

Rapid-fire testing, as I like to call it (I certainly didn’t invent this term, but I’ve adopted it), is a fast, inexpensive method of testing something—brand messaging, ad creative, and, of course, startup ideas. In general, my goals for rapid-fire testing are to validate whether:

If it works into the plan—sometimes it does, sometimes it doesn’t—I like to throw some A/B testing in there for things like messaging, pricing, and images. Rapid-fire testing is a great way to test these campaign elements, but this post is focused on validating startup ideas.

Elements of a Rapid-fire Startup Validation Funnel

A funnel with the purpose of validating a startup idea should be as simple and quick as possible. It should have the lowest common denominator of functionality—or in startup language, should be the minimum viable funnel. Something simple like this:

Funnel graphic created with Funnelytics.io.

To drive traffic, you’ll want a small budget for placing paid ads. Usually a few hundred bucks, but it depends on the audience you’re targeting and how competitive the market is at that point in time. If you don’t put enough budget in, your test will fail regardless of whether or not the idea is valid. So getting this right is key.

Targeting is also of the utmost importance. You likely won’t have audience data at this point to use AI and retargeting, so you’ll have to start with some assumptions about your audience and work from there. Then depending on the platform you’re using, you’ll choose the demographics, interests, keywords, and other targeting parameters.

As far as the ad creative goes, it needs to follow best practices of any digital ad. It needs to be engaging, spark an emotion, and lead the viewer to action, which in this case is a click. The ad creative is one of the easiest factors to test in your funnel. With online ads, you can pretty much create as many variations as you want. Just make sure you do so in a way that doesn’t diminish your overall findings.

When someone clicks on the ad, they’ll be directed to a landing page. Your goal here is to get them to take some sort of action that indicates interest in the startup idea…without coming out and saying, “Here’s what we’re doing, do you want it?” Some of my go-to’s are:

These options aren’t exhaustive, but they’re the standards. This step is another great place to test different optins, just make sure every ad and landing page match (in other words, don’t have an ad talking about an ebook and send someone to a page about beta testing).

Another option for the optin step is to ask people for money. This approach has pros and cons. The main pro is that you expedite the research on “will someone pay for this?” The main downside is that if your offer isn’t SPOT ON, the experiment will be a waste because your data will be skewed and you will have lost any potential customers for that round. But if you have a strong offer that you can sell for $5 – $10, you can get really far really quickly. If you ask people for money, you do have to have something to give them in return. At this stage of a startup, that can be difficult, so I save this approach for specific situations.

I’ve said it before and I’ll say it again, the thank you page is where the magic happens. It’s an often-overlooked opportunity to engage with someone who just took an action. Depending on the business model you’re testing, and your goals of the test, you could use the thank you page to:

There are plenty of other elements that could come into play in a startup validation funnel. But in general, it’s best to start simple.

After Idea Validation

Let’s jump ahead. You’ve run your tests and you have early indicators one direction or the other—closer to validation, a debunked idea, or a need for more testing. Remember, this approach to testing isn’t get an answer between “I have a million dollar idea” and “this will never work.” It’s more gray than that, so here’s what you can do next.

If Your Idea is Not Validated

If your test indicates little or no interest in the startup idea, you have a few options:

The route you take usually has to do with how passionate you are about the idea. If you’re testing on a whim, just to see “what if,” it’s a quick way to figure out that it may not have legs and you can walk away. But if you’re testing an idea that you’re passionate about and, frankly, will move forward anyway, you can adapt the testing to try, among other things, different targeting, different ad creative, a different offer, and so much more.

If there’s other data to backup the validity of the idea, keep at it. Don’t let one test squish your dreams. You may need to try additional tests, or you may need to go old school and do customer discovery before you understand why the test may not have worked.

One “failed” test doesn’t mean the startup idea is bad. It just means the test didn’t work. Remember, rapid-fire testing like this is meant to be fast and agile and get you to the next step.

If Your Idea is Validated

If your test shows that there’s likely a market for your startup idea, it’s time to keep moving forward. I highly recommend documenting any and all findings from your test—what targeting worked, which creative was best, what were conversion rates throughout the funnel, etc.

After that, next steps completely depend on your business model. If spinning up the product/business is quick and relatively low-risk, have at it. But if the business is something that requires a large capital and/or time investment, you’ll want to do more formal testing and customer discovery. Again, this type of testing is to get information fast. It’s not the be-all-end-all of determining the validity of a startup idea. But it’s a good start down that path.

Have an idea you want to test? Hit me up.