How To Validate Your Idea?

How to Validate Your Startup Idea?

42% of startup failures are attributed to a lack of market need. While we Israelis love the "run and build" mentality, it's crucial to ensure that there’s a genuine need for the product before diving into development. This article outlines our approach to validating a startup idea, specifically within the B2B sector. These principles can easily be adapted for B2C with some adjustments.

Why You Should Deeply Validate Your Idea:

Save Your Time: As an early-stage entrepreneur, your time is your most valuable asset. Strong conviction in market demand can save you months of unnecessary development and fundraising. Remember, fundraising isn't the end goal; even if you manage to convince investors of the market's potential, you still need to find and create a product that solves a big enough pain to build a successful company.
Refine Your Value Proposition: Engaging with potential customers allows you to understand the value they see in your product. Their feedback will help you prioritize feature development and ensure you’re building the right product.
Identify Your Ideal Customer Profile (ICP) and Buying Persona: Your ICP represents the best type of buyer for your product. Identifying who these customers are could be the difference between success and failure. Within these organizations, it’s also crucial to pinpoint the right buying persona - the decision-maker who will purchase your product.
Convince Investors: A thoroughly validated idea significantly reduces risk in the eyes of investors. Well-documented validation not only signals a solid product value proposition but also demonstrates the professionalism of your team.

How to Validate Your Idea:

The essence of validation is gathering enough feedback from your target market to confirm that your offering is compelling. Before you start, assess your current situation—do you have a solid startup idea, or are you exploring a general domain or technological frontier that interests you? Each stage requires a different validation approach, but both involve engaging with your target market.

Step 1: Organize & Track – Building Your CRM

You’ll be conducting numerous customer validation calls, and their responses are invaluable. Therefore, it’s crucial to set up a basic Customer Relationship Management (CRM) system to track all customer interactions. A CRM can be as simple as a spreadsheet or a more sophisticated platform like Notion, HubSpot, or Monday.com. Your CRM should have a row for each prospect you interact with, including details from your conversations with them. Here are some fields to consider:

Company Detail: name, field of operations, size, link to website
Contact Person: LinkedIn link, phone numbers, email, etc.
Timeline Fields: date reached out, last interaction date
Current Stage: prospect, reached out, call scheduled, call made
Interest Level: showed interest, not interested, willing to be a customer, willing to be a design partner
Summary: a free-text field to capture key points and quotes from the conversation
Next Steps: closed, schedule another call, follow up later

These are just a few examples; you should always tailor the CRM to your needs. Make sure to update it diligently after each call and whenever a new prospect is added. Be thorough and precise to make informed, data-driven decisions like whether to continue pursuing a prospect or move on. It’s important to note that some tools that should help you with these processes. For example, AI-based in-call agents can help you summarize key insights and capture customer feedback.

Step 2 – Source

Once your CRM is organized, the next step is sourcing potential customers to validate your idea. You'll want to divide your conversations into two categories:

General domain prospects
Potential customers

General Domain Prospects:

Leverage your personal and professional networks to identify prospects who can participate in Q&A discussions, even if they aren’t direct customers or industry experts. Speaking with as many of these domain-relevant individuals as possible can help you gain a deeper understanding of the industry. These can include figures that aren’t customers but do understand the domain, like for example founders of other companies in the space that don’t compete with what you’re building. Additionally, these conversations often lead to introductions to more relevant prospects and potential customers, who may offer even greater insights.

Potential Customers:

Begin by segmenting your potential customers based on factors like company size, industry, and their likely readiness to adopt new technologies. Focus on organizations that align closely with your product’s value proposition.

Several cost-effective platforms can help you source potential customers. While the budget is very limited in the early stages, SaaS platforms can sometimes provide a significant shortcut. Tools like LinkedIn Sales Navigator (you can make the most out of the trial), Apollo.io, or Hunter.io are great for identifying key contacts within target organizations.

During this initial prospect list-building phase, check whether you have any direct connections within your network—warm introductions are always better than cold ones. Once you’ve exhausted your network, and it's time for cold outreach, look for individuals who are active on LinkedIn or other platforms, as they tend to be more responsive.

When reaching out, keep your message brief and personal. Mention any mutual connections or shared challenges, and frame your request as an opportunity to gather feedback rather than making a sales pitch. Here’s an example outreach message:

By following these steps, you’ll ensure your outreach is targeted, efficient, and more likely to be well-received.

Step 3 – Prepare for the Conversation

Proper preparation for a prospect call is crucial—not only to respect the prospect’s time but also to ensure you’re making the most of the opportunity.

Set Clear Goals: What do you want to achieve by the end of the conversation? Options could include scheduling another demo, gauging initial interest in your product, agreeing on a design partnership, validating the pain point, validating the solution, or securing an introduction to other potential customers. By setting clear goals, you can plan the meeting more effectively and evaluate whether you succeeded or fell short, helping you improve for future calls.

Prepare a Customized Agenda: It’s important to create a meeting agenda that aligns with the length of the meeting. Outline the key points you want to cover and segment the conversation into different parts. This helps you stay on track and know when it’s time to move on to the next topic if one area consumes too much time. Be sure to leave space for open discussion and feedback. Decide if you’ll present anything (e.g., a presentation or demo), and plan accordingly. We’ll dive deeper into managing specific aspects of the call later.

Research the Company: Understand the company’s operations, challenges, and priorities. Identify the specific pain points your product can solve. Having a solid understanding of their industry will allow you to speak knowledgeably, leave a strong professional impression, and increase the likelihood of them seeing value in your solution, improving your chances of moving forward.

Research the Prospect: People are naturally drawn to those with whom they share common interests or traits. Finding small points of commonality—whether it's a mutual connection or offering a compliment on a recent achievement—can help break the ice and set a positive tone for the meeting. Study the individual you’re meeting with—learn about their interests, background, and professional achievements. Use LinkedIn, Facebook, Twitter, podcasts they’ve been featured in, or articles they’ve written to find common ground and gain insights into their perspective.

Anticipate Questions: Think about the questions prospects might ask regarding your product, market fit, or your company. Be prepared with clear, concise answers and have supporting data or examples ready when possible.

By thoroughly preparing in these ways, you’ll demonstrate professionalism, improve the quality of the conversation, and maximize the chances of building a valuable relationship.

Step 4 – Managing The Call

To make the most out of your meeting, it's essential to follow a structured approach that moves from broad to specific. This method helps you fully understand the prospect's needs and challenges before narrowing the conversation to your product or solution. By following this order, you can gather valuable insights and ensure the conversation remains productive.

Take a Top-Down Approach: Begin by learning about the company and the individual you’re speaking with, focusing on building a personal connection and learning general information about the company. Ask about their broader goals, challenges, and pain points. This will not only help you connect but also provide a solid understanding of their context and priorities.

Identify Key Pain Points: Ask the prospect what their top three challenges are—those they haven't yet found an effective solution for. This is crucial in determining whether their problems align with what you plan to offer and helps you understand if your solution addresses their most pressing needs.

Focus the Discussion, but Stay Broad Initially: Gradually narrow the conversation to the general topic you're addressing, but don’t immediately dive into your specific solution. Focus on broad areas such as "B2B payments," "identity management," or "CRM integrations." Ask the prospect about their experiences and pain points in these areas. This will help you uncover adjacent challenges you might have missed and also refine your understanding of their broader needs and how your product fits in.

Present Your Solution: Once you've gathered sufficient information, introduce your solution. Be sure to ask targeted questions to assess their interest and willingness to move forward:
- Do they find your solution compelling?
- What aspects are most appealing to them?
- Is this pain point one of their top priorities?
- Why haven’t they solved it yet if it was such a high priority?
- How much would they be willing to pay for it?
- How would they assess the ROI of your offering?
- What changes/developments would make them more willing to pay for it?

Define the Next Steps: Before concluding the call, make sure both sides are clear on the next steps. If the prospect is willing to take on another meeting, aim to schedule it before ending the conversation or set clear time schedules for when to approach them again. Try to always leave the meeting with a well-defined plan on how to proceed. Feel free to ask the person whether they may have relevant connections to introduce you to, this could help you expand your network.

Step 5 – Post-Call Debrief

The debrief is one of the most critical parts of the process, as it helps solidify the relationship with the prospect while ensuring you extract valuable lessons from the conversation.

Thank You Email: After the call, promptly send a thank you email. In it, briefly summarize what was discussed, including any solutions offered and next steps agreed upon. Consider attaching relevant documents, presentations, or use cases if they can help keep the prospect engaged. However, be selective—only share valuable materials and avoid overwhelming them with unnecessary information.

Self-Reflection: Take a moment to reflect on how the call went. Were there areas where you could have improved the conversation flow or better addressed their concerns? Use these insights to fine-tune your pitch and adjust your approach for future calls.

Debrief and Update:
- First, update your CRM immediately with key data from the call. This ensures that all the information gathered is organized and preserved for future reference.
- Note any new pain points that surfaced during the discussion. These could inform slight product pivots or help prioritize future R&D efforts.
- If competitors were mentioned during the call, it might be helpful to log any insights into their strengths, weaknesses, or perceived differences.

Weigh the Feedback:
- It’s crucial to assess feedback proportionally. One piece of negative feedback doesn’t necessarily mean your product isn’t needed, just as one positive comment doesn’t guarantee success.
- True product validation means that the solution is one of the prospect’s top priorities, and they agree to pay a big enough check size to justify your business model. Without both of these elements, even a positive call may fall short of confirming product-market fit. In many cases, vague or noncommittal conversations won’t elicit genuine feedback from the customer. This often leads to different feedback when you return with a formal sales pitch.
- Be honest with yourself—don’t cling to small positive signals if the overall feedback leans negative. A balanced evaluation will help you avoid misjudgments and save you a great deal of time.

Assess the Prospect: Finally, reflect on whether the prospect is a good fit. Did they align with your Ideal Customer Profile (ICP)? Was the person you spoke with the right decision-maker or buying persona within the organization? Use this insight to refine how you characterize your ICP and target better prospects moving forward.

Step 6 – Aggregate and Use the Insights

Once you've conducted enough calls, it’s time to aggregate the feedback and use it to refine your strategy. The number of customer opinions needed to validate a pain point varies significantly, depending primarily on your average contract value (ACV). Generally, the lower the ACV, the more validation calls are required. For B2B software, this often means 50+ calls with prospects, while B2C products may require hundreds. In B2C, it can also be beneficial to use polls or surveys to capture broader market insights more efficiently.

Key Questions to Ask:
- Does your value proposition resonate with prospects?
- Are they interested in taking the next steps?
- Would they become a design partner?
- Is there willingness to pay?
- How urgent is the pain point?
- Will they allocate resources to implement the solution?

Quantify the Feedback: Aggregate and quantify responses for a clear view of market demand:
- 85% experience the pain:
  - 20% built in-house solutions (1 year of R&D, 1-2 full-time employees).
  - 35% use competitors.
  - The rest handle it manually.
- 70% are willing to pay for a solution.
- 60% of those using competitors are dissatisfied and see your value proposition as superior.
- Expected ACV is between $40,000 to $70,000 annually.

Competitor Insights: Pay close attention to feedback regarding competitors. If prospects are unhappy with existing solutions, understand why—this insight will be crucial in positioning your product more effectively against the competition.

Evaluate the Results: There’s no set number that marks a sufficient validation, but look for significant positive feedback, especially on pain points and willingness to pay. Focus on whether customers are ready to commit financially, as that is the ultimate test of market demand.

Conclusion

That’s it—a long road filled with critical steps to ensure your startup is built on a solid foundation. Remember, validation isn’t optional; it’s an essential part of your journey. Skipping it directly reduces your chances of creating the right product and solving the right problem. Stay focused, listen to your prospects, and use the insights you gain to guide your next steps.