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A Problem Worth Solving – How to Validate Your Startup Idea

How do you know if your startup idea is valid? If it is even worth starting this journey? How do you know which of your many ideas is the one?

Your pre-journey should consist of the validation of three elements:

  • Perception of the problem
  • Value of the problem
  • Size of the addressable market
 

If you read these three bullets and think, ‘everyone has this problem and it is a painful one’, you definitively need to validate this thought. You are not Google, or at least not yet.

Your starting point will be always the same. Once you define the problem, the next stage is to ask yourself who has this problem? If you are the only person on earth with this problem, then you should go and see a shrink, it will be so much cheaper and faster than building a startup. The answer ‘everyone does’ is incorrect.

Speak with Other People

Once you define segments of people having this problem, you’re starting to focus. The next critical part will be to speak with those people that you believe have this problem, and understand their perception of the problem.

A problem worth solving will look like this: when you start a validation dialogue with someone and present them with the problem, they will instantly tell you their version of it. If it takes you more than seconds to describe the problem to them, then they don’t have it (and please don’t tell me 600 seconds is still seconds. Try to think of a shot clock violation).

That stage by itself will help you to understand the flavors of the problem and the perception of it. Imagine that you hate waiting in lines (like me) and you say everyone hates it (you might be right here). Go and speak with 100 people to get their perception of the problem. Some will speak about security lines at the airport, some will tell you the post office lines are a nightmare, or that the lines at the DMV are the worst, others will tell you these are the lines at the supermarket.

Now wait a minute, not all lines are equal, which one are you going to address?

How do you qualify which flavor of line is worth solving?

Think of two dimensions: frequency of use and Total Addressable Market (TAM). Yes, DMV is the worst, but it is only once when you move to another state. Yes, a line at the supermarket doesn’t sound like a big deal, but it is very frequent. Airport security, for some who travel very little, is infrequent but for a traveling salesperson it might be a few times a week.

If you can figure out something that has a large addressable market (for example, all commuting drivers) with a high frequency of use (e.g. every time you drive) – you are up to a winner. The challenge is the winners are rare. Most of the problems and ideas will have either a niche addressable market or a low frequency of use.

Once you have determined the size and frequency of use of the problem, you move to the next set of validation. Instead of frequency of use, we will define ‘value’, how big the problem is for a person, or how much they care and are willing to pay for the problem to disappear.

Valet parking, fast pass, and Uber eats are examples of cases where people are willing to pay to shorten their wait time. So obviously there is value there.

The qualification stage is a bit harder. The willingness to pay and the actual action are not the same. The difference between ‘in theory’ and ‘in reality’ is much bigger in reality than it is in theory. The willingness to pay is certainly a good starting point.

Check Market Size

The final part of the validation is to size the market, understand how many people are there and how valuable the solution would be for them. People who are waiting all night long for the Apple store to open in order to get the newest iPhone, are likely to be willing to pay more for that wait time than those who are paying for valet parking. People who air travel often are willing to pay more for a fast pass at the security lines than those who travel only occasionally.

If your market is broken into multiple segments, find one flavor of the problem that is worth solving and focus on it.

By ‘worth solving’ I mean that TAM x VALUE is big enough.

Read more about starup idea validation in my bookFall in love with the Problem, Not the Solution – A Handbook for Entrepreneurs

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