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Market validation is tricky. At first glance, it makes sense: who doesn’t want to know if the market wants their idea?
But there are some lurking misconceptions that make this counterproductive. For starters, we don’t usually want accurate information, we want validating information.
“Validate your idea” nudges you to prove that you are right, which makes you vulnerable to false positives. I fell for this trap and burned months on ideas that went nowhere. Then reality hit: real market validation only comes after launching. Before then, de-risking your idea is the best way to save time.
Once I came to my senses, I refined a stair-step approach that I've since used it to develop my own side hustle, on track to make $100K its first year.
Before we dive in, an important caveat: not every idea is worth de-risking or even can be de-risked:
- Easy-to-build, trivial to reverse: if building time < de-risking time (think small product changes, simple MVPs), you may as well launch and get real feedback
- Unknown problems / behaviors: if your idea tackles an unknown space (think iPhone or Instagram debut) you’ll only get blank looks until you show customers what you mean; this applies most often to new consumer behaviors
Now when it comes to known problems, de-risking is a powerful tool. By reframing your idea as a series of risks, it becomes easier to seek the truth, not just validation:
- Nobody wants this enough
- Enough people want it, but it’s not top of mind
- It’s top of mind, but they are hard to reach
- They can be reached, but this is the wrong solution
- Waiting for zero risk
In other words, start by being a scientist, not a salesman.
Each step is a risk that can put you out of business. Product people tend to over-index on #4 even though market failure is more common. Paranoid people tend to over-index on #5 and end up building too slowly or not at all.
Let’s cover how to tackle each one!
Risk #1: Nobody wants this enough
“Enough” is the key word because your first set of customers will need to be highly enthusiastic to thaw the inertia of trying something new. Your product is your world, but for your customer, it’s just another thing fighting for their attention.
There are also two types of customers: the decision-maker, and the user. They are usually one and the same, but when they’re different (more common for B2B), you’ll want to talk to both, starting with the decision-maker.
The only way to develop customer intuition is to get out of your head and into theirs:
- What does their life / workflow look like?
- How do they solve problem X?
- How much do they need your solution? Definite need, kind of need, or not really?
- Can they freely choose your solution?
Make it easy for people to tell you that it’s not a burning need. The goal is to identify what separates those who “get it” vs. those who don’t. This helps you niche down to your early customers, and guesstimate whether there will eventually be enough to support a business given your goals.
It’s also useful to learn about the burning needs of people who are not your perfect customers. While it’s disappointing to run into a dead-end, an idea is not a destination, it’s a maze. When you rule out one path, you can still uncover others.
Risk #2: Not top of mind
When someone says they have a burning need, check for action:
- Have they looked for better solutions?
- If so, where did they look? How much time and money did they spend?
- If not, why not?
History is an imperfect predictor of the future, but if you expect things to be different, you gotta know: why now?
Risk #3: Hard to reach
Customer’s willingness to talk = familiarity with you + importance of problem
Having an existing customer base or an audience gives you a leg-up on the first variable. I’ve had an easier time finding people to talk to since starting this newsletter! Cold outreach can also work if you address a problem they care about.
This step is where unfair advantages are built — if you have a cost-effective way of reaching the right customers, you can learn and grow much faster. It’s also why the trendy advice of “build an audience” is most useful when you know what you want to work on. An audience is only as valuable as its overlap with who you want to reach.
More likely, you’ll need distribution channels that expand your personal reach.
Risk #4: Wrong solution
I used to think this was the biggest hurdle. In truth, mastering this step makes you a better employee, not entrepreneur. When you’re improving an existing product, finding the right solution is most of the job. But when you’re starting something new, the job doesn’t exist until there’s a market!
Once you get here, you’re facing execution risk. This is a relief because finding the right solution is a matter of patience and iteration, whereas nothing can help you find a non-existent market.
As with all ideas, the solution is a maze and the #1 rule is to show, not tell. It’s tempting to tell or sell a customer, but you learn more by observing what they do.
Risk #5: Waiting for zero risk
For all this de-risking talk, the reality is that you’ll never get to zero. If eliminating risk was the only goal, nobody would ever build anything daring. So how much risk is ok? Consider two variables:
- Effort required to build your idea
- Opportunity cost of building your idea
The higher your effort and opportunity cost, the more rigor is worth putting into de-risking. This is why growing companies become more cautious: when you’re swimming in a sea of opportunities, pursuing the wrong one is wasteful because there’s probably a superior option. Changing direction also takes longer with more people.
When you’re starting fresh, however, no idea is truly wasteful. Building the thing (even if it’s risky!) will teach you more because it puts you in a position to encounter problems that can plant the seeds of new ideas. Optimism is your friend, paranoia will kill you before you start.
Above all, de-risking is permissionless — you don’t need anyone’s approval to start.
Recap
- Real market validation only comes from launching; de-risking is a proxy to save time
- Some ideas are not worth de-risking: easy to build, trivial to reverse
- Some ideas can’t be de-risked: unknown problems, new behaviors
- Everything else benefits from a de-risking framework
Recommended reads 📚
- Your idea sucks, now go do it anyway
- Reducing product risk and removing the MVP mindset
- How to talk to customers about your product
👋 P.S. Want to join a top startup? Check out who's newly funded and hiring or compare your startup salary & equity!
