How to validate your startup idea

Lenny tackles reader questions about building product, driving growth, working with humans, and anything else that’s stressing you out about work. Here’s what you missed this month: Preparing for a PM interview and how to prepare for PM interviews.Subscribe to Lenny’s newsletter:

What traps should I look out for?

Asking the wrong questions

• Settling for a “meh” or “nice to have” reaction from early customer discovery
• Not having enough conversations
• Selling a vitamin, not a painkiller
• Myopia in focus (e.g. only focusing on the product).
• Pivoting too early
• It takes a long time and a lot of work to test an idea and give it time to develop. Don’t rush to find a new idea and throw in the towel.
• There’s no right answer to when to figure out the right timing
• Find a formula that works for you

Quick tips

Find low-lift ways to validate your idea with mock product screenshots before starting to build

The biggest advice is simple

Look for an audience that is large but underserved, and take the time to understand their needs.

• Seek out both functional and emotional needs from your users to make sure you build something that’s must-have, not nice-to-have.

Final thoughts

The early journey as a founder really comes down to a few steps

• Find an audience with a problem they want solved
• Have the empathy and creativity to come up with a solution that resonates
• Put in the work to validate the solution with your target customers
• Make sure there’s a large enough audience who wants to buy what you’re selling
• Be willing to do things that don’t scale in the early days

If you want to learn, you can’t lose

If you’re doing it for the money, it’s not worth it

• On a risk-adjusted returns basis, founding a company is not the best way to make money, and you’ll ironically probably make less money

In the beginning, LaunchDarkly only had one paying customer a month.

They raised a seed round in 2015 but struggled to put together a Series A because VCs doubted that the market was big enough and that developers would pay for it

• Edith got more customers and was on a path to become profitable
• Strong internal conviction from seeing this problem at previous companies carried Edith a long way, before eventually getting external validation from the inbound responses to their blog, the InVision call showing high employee interest, and landing their first six-figure deal

Quick tips:

Create a structured way to assess your ideas

• Talk to as many customers as possible until you discover some earned secret or insight
• Pick a single product wedge as a starting point
• Ryan Petersen is the CEO of Flexport, a full-service global freight forwarder and logistics platform using modern software to fix the user experience in global trade

Finding traction

The Cocoon team began by designing a UI flow in Figma, which they shared with the employees and employers they’d previously interviewed.

• They signed their first two customers-Carta and Benchling-off the Figma prototypes, which strengthened their confidence that they were on the right track.

What advice would you give a founder just starting out?

Explore user-generated content (UGC)

• Launching on PlayStation VR, Xbox, and mobile eventually helped them jump from 30K to 150K users each month.
• Rec Room now has 3 million monthly active VR users, which is just a fraction of its total monthly active usership.

If you can’t raise venture capital, don’t do a startup

Pick something you can do, get started, and try to get traction before raising

Advice for a Newbie

Flexport joined Y Combinator, partnered with First Round, and earned $2M in revenue eight years ago. Today, the company is on track to do $5B in revenue this year and is the fourth-largest U.S. freight forwarder by volume operating on the world’s largest trade lane, the trans-Pacific eastbound.

Emotions are high early on in the founder journey

You can go from feeling on top of the world in the morning to feeling at the end of the day like the company is going to die next week

Cacioppo started by interviewing founder friends and security leaders and asked them about the best and worst part of their days.

SOC 2-often the first way a company needs to prove its security competency-was a major pain point and, while security consultants offered expensive help, many people wanted an easier solution

• After hearing a strong desire for a “SOC 2 easy button” solution, they built a zero-code MVP to test with potential customers and determine whether SOC 2 preparation was actually productizable
• As more people proactively reached out to ask about what she was building, she got a real sense of market pull, which led to growing confidence
• They joined Y Combinator, kept building the product, and completed their first full audit with a customer

Pinwheel is a payroll data connectivity platform building the income layer to power a fairer financial system

Kurtis Lin is the CEO and co-founder of Pinwheel

• Pinwheel has raised $77M to date, built a team of 100+, scaled its platform to 4.6M monthly transactions, and signed flagship customers like Square, Varo, Current, and many more.
• They started with health savings accounts (HSA) because Kurt and Curtis had poor experiences using them and recognized that many Americans living paycheck to paycheck lacked the cash flow to pre-fund their HSA
• Later, they considered building a way to invert the process and let consumers make health purchases on their Plaid-connected cards and then credit tax savings onto paychecks

Start with an intuition about a better consumer experience and work your way to a winning idea

It takes a lot of conversations with consumers to pinpoint exactly where they’re experiencing pain, in and around the hunch that got you started.

• Start with your intuition, but don’t let it be the only information that informs your approach-unless you’re happy being your only customer.

Using Photoshop to create screenshots that looked like an app

Put them up on a website to see if people would sign up for this fake product

• Over 300 companies signed up
• People wanted clarity and transparency in the customs process
• Large enterprise companies didn’t have their supply chains dialed in beyond emailing Microsoft Excel
• The biggest oil producer in the world signed up for the fake website
• Found traction from 2010 to 2013
• Launched the product in 2014 with a laser focus on solving the customs problem

Celebrate wins

Take time to appreciate victories, however small, instead of always grinding on to the next step

• Document metrics and share them with investors and advisors
• Keep updating your roadmap and goals
• Carefully expand your team while making a conscious effort to build the company culture you want

Start with a problem you’re experiencing and figure out if other people or companies are experiencing it too

Founders who experienced a problem at one company sometimes leave to start their own business solving that problem for other companies.

• If you’re starting a developer or API-focused business where you’ve lived the problem before, it’s critical to have a deep belief in the usefulness of your tool but equally critical to make sure there’s enough market pull for what you’re building from other developers.

If you can’t keep up with customer demands, you don’t have PMF

If you’re taking orders from internal management instead of external customers, you have it

Quick tips

Go in with an open mind

• Listen to what the person you are interviewing is saying and notice if there is a trend.
• If it feels like you’re pulling teeth to find the pain point, you haven’t found a problem worth solving.

Quick tips

Build prototypes and test your early ideas on real customers

• Don’t build a full product until you’re feeling real pull from the market
• Figure out who you can sell to most easily and start there
• Develop a product that unlocks revenue for your customers

How to Pick an Idea and Validate It

Market first

• Look for a market or space that interests you, then look for a specific problem
• Experience ripe for improvement
• Find areas where you believe there should be a better consumer experience than what currently exists, and iterate from there

How can I validate that it’s a good idea, and how will I know when an idea is promising enough to commit to?

Committing to a startup idea is possibly the most consequential decision you’ll ever make

• There’s no single right way to get started or build a business-and timing, luck, and grit often play an outsize role-over the years, I’ve observed a few clear patterns around how people come up with their ideas, validate them, and build the conviction they need to go all in

Finding an idea

It’s OK to do things manually to get in front of customers and see if your idea works

• Thoughtful social integrations (like gifting reward points) can unlock substantial growth
• Find traction in one market before expanding into others
• Remain laser-focused on your core value propositions and vet new ideas against whether they deliver

Start with a market/space first and look for a problem

Talk to people in that space to understand their experience and challenges

• Look for a burning pain that’s so bad, customers will literally try anything to solve it
• Don’t ideate in a bubble – get out into the market, have conversations, and test early models

Optimize relationships for the long term

Build toward a big idea by starting with a small step that’s more accessible and affordable to launch

• Watch how customers use your product to find inspiration for new features
• Listen to audience feedback, but balance it against doing what you believe is right for your company to survive and grow

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Quick tips:

Don’t rush into just starting a company-wait for the right thing to hit you personally, emotionally, and logically

• Be clear-eyed about what it means to start a venture-backed company
• Have belief in your idea and feel it in your core
• Implement a social points system, inspired by the Starbucks app, to reward users for orders and let them send points to friends on every purchase
• Create a mobile app for a better customer experience

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