In this section:
1. We validate that the problem you are trying to solve is a real problem for a sizable population.
2. Then, we offer you bullet-proof tips on how to determine whether or not you have a valid solution.
3. Furthermore, we'll help you get out there and get real feedback to help you build traction from day 1.
(This questions was asked in an earlier task, but we're asking this again just in case you need to change it because you couldn't find a good web domain name for your startup)
The domain name name should be meaningful to your business. Nowadays most shorter domain names are not available, especially for domains ending with .com, so it's really hard to find something that's good. A good domain name is often a synonym of the keywords you are thinking about, or it could be names that sound like the keyword you are looking for. A combination of words is also quite good, but make sure to keep your domain at 2 words max.
Case Study: Google wanted Googol, but they got Google because Googol was already registered.
Also, nowadays it's very popular to add prefix words like "join", "get", "team" or suffixes like "app" after the domain just because good domains are hard to come by.
Examples: joingrouper.com, bufferapp.com, getpocket.com
.com domains are the most popular, and the .net is a pretty distant second. However, there have also been a lot of companies who use country domain suffixes to complete their domains.
Examples: delicio.us, or something like bit.ly.
.co suffixes are very popular recently for new-age startups, so that's great too.
.io suffixes are pretty popular too, especially for geek-friendly websites!
Jason Calacanis's advice on domain names:
Places to register your domains (and to host your website):
If you plan to host your website at a shared host (cheapest at around $2/month and the easiest to set up), a lot of them also give you a domain name for free for the first year. The options below are the most popular options:
You can also use whois.net to find out who a domain is registered under, in case if you really really want it and want to acquire it from the owner.
Websites to find good domain names:
http://www.visualthesaurus.com/ (good to visualize alternative keywords) - Use it to find synonms to your keywords
Spend maximum 15 minutes on this. This is not important for now since we will need to validate your business idea first.
Also read: How to Name Your Startup
What are the #1 problems you're trying to solving? Write out 1-5 problems, each on their own line.
Don't try to solve too many problems at once. Focus on the #1 problems. Solve that #1 problem very well.
Google started out with a simple search engine with very little features (Their MVP - Minimum Viable Product). The point here is that they want to solve the problem of pages not being properly index. They focused on solving that #1 problem and made that solution superior to all other existing alternatives.
Example (for StartitUp):
It's very hard for an aspring entrepreneurs to find the best practices to follow when starting up a business.
Startup knowledge is being outdated too quickly. There is no place that consolidates all the best knowledge.
Startup knowledge are often theories - not immediately applicable for many people
Action items are not organized chronologically, so it's hard to know when you should do what.
What are the solutions for their corresponding problems? Write 1-5 solutions, each on their own line.
For example (continuing from StartitUp's example from last task):
An Lean Startup e-Leaning Platform that gives you step by step action items that yield immediate results.
The guide is updated constantly to have the latest startup tricks and case studies on Lean Startup, Growth Hacking, Content Marketing, SEO, and more.
Integrated startup community for asking questions and getting help
Who are your users? Write 1-8 different types, and each on their own line.
Who are your customers? Write 1-8 different types, and each on their own line.
It's important to realize that users are not necessarily customers. For exampe, Facebook and Linkedin has a bunch of users on their services, but the only ones that are paying are the corporations.
Also, your customer is not "everyone". If you are building a social network, your target cannot be everybody. Every startup starts with a niche target audience that will be your best early adopters. The early adopters are the ones that needs your solution the most. These are the people that will deal with the flaws and bugs of your service and also tell their friends about your service. Therefore, you should build your solution for these early adopters.
Imagine if Starbucks started out with a tens of different kinds of coffee selections on their menu with only a few of them tasting okay. They probably wouldn't have become so prominent now. The point here is to do 1 thing really well first, for 1 niche audience. You can build additional features in the future to appeal to a bigger audience.
Case Study: Facebook not only started out in Harvard, they started out with the students of several targeted dormitories. He then later rolled this out to other dorms, the whole school, the other Ivy League schools, and the rest is history.
Example of Users (StartitUp):
Entrepreneurs in their 20s-30s
Wantrepreneurs in their 20s to 30s
Example of Customers (StartitUp):
Incubators in the US
Accerelators in the US
Online tool providers
Please describe your customer in detail. Write at least 2-3 types of customers, each on their own line.
Please be very specific. Describe the person's gender, height, hobbies, what he/she does for a living, etc.
Example: His name is Alan. He's 34 years old. He loves staying up for video games and snacks. He likes dogs and loves ice cream. He spends a lot of time on Youtube.
This is Alan
The reason to be specific is because by knowing who your perfect customers are, you can find other like-minded people based on this person's hobbies. You can check out the blogs that Alan reads (by searching for topics or categories on Technorati, and find out the blogs that cater to that audience. These blogs will then become your best marketing channels where you can not only get new customers but learn about them.
Is this a problem that you personally have?
It's best if it's a problem that you personally have and are actually building the product so that you can use it yourself. However this doesn't mean that you don't have to do customer development/validation.
We built StartitUp because we were frustrated about all the startup knowledge and tips being too scattered and unorganized for us to efficiently utilize for our startup, so we wanted to organize it for ourselves. Therefore, while solving a problem for ourselves, we also solve the problem for many others like us.
Case Study: Craigslist, the biggest classifieds listing website in the world, was created not because Craig Newmark had this grand idea, but because he had some friends who asked him to build an webpage so that they could list the stuff they want to sell. Slowly people started using it because the only alternative was the newspaper. Craig wasn't especially good in the business of classifieds ads, but he still made it happen "accidentally".
This is what Craigslist looked like in the beginning. They haven't improved much since.
Case Study: Facebook was built because Mark Zuckerberg wanted to meet girls, not just because he thought of this great idea and thought that he could make money off it.
Who are your early adopters? Write 1-5 different types of early adopters, and each on their own line.
These are the people that will not mind if your service has bugs because they really need your solution. These are the people that will evangelize your business and help you refine your solution. These are the first group of people that you should try to find.
You want to initially build your product for the early adopters, since you do not want to try to do everything for everybody. Again, you just want to solve that #1 problem really well - for 1 niche market. This is just to start it off. Once you are established with loyal early adopters, you can slowly add features to appeal to a bigger audience.
Wantrepreneurs have full time jobs, in their 20-40s, and visit Hacker News
Wantrepeneurs who ask about Lean Startup questions on Quora
Incubators who want to get earlier access to promising startups.
What is your actual addressable market size (calculate an estimate)?
Don't take this lightly. If you are targeting a country with less internet users, you have to make sure you have a good reason to do so.
Case Study: When Pinterest started, they only had around 3000 early adopters during the initial months, which was not a lot. However, most smaller countries have only 1/10 of the population in the states, so in a smaller country, your service would probably only have around 300 early adopters in the beginning. There is a big difference in the speed of content creation between 3000 and 300 users.
While there is also less competition in the less saturated countries, it also means there aren't as many marketing channels or users to help you grow your company. This is a very practical way to see this problem. However, we aren't saying that either way is better than the other. There isn't a sure formula on knowing where to start, or who to start with.
Your final decision should depend on:
1. The competition
2. The total population of your target audience
3. The available (free) channels that will allow you to market your product
How to calculate market size?
There are 2 types of calculation methods. One is "top down" and another is "bottom up". Calculating market size a big key point that drives VCs to invest in your company. When they see and believe that you are tackling a huge market, they will do the calculation themselves and know what kind of upside there are with your business. In terms of the actual calculation VCs like both methods (if they are realistic), so if you can come up with both, it'd definitely help you. Also, you should also do these estimates just because it's important to do due diligence for your own future! The key is to be realistic.
Top down market estimate:
This is where you take a forecast by a market research company like Gartner or Nielson, and multiply that by the number of potential customers, and then multiply that by the % of customers you think you can actually acquire - which would then give you your addressable market.
If you want to get the revenue estimate, you then multiply that number with the price of your product which would give your revenue. Remember to always site your sources so that it's more believable.
There are 300M people in the US.
50% of those are internet users.
50% of those are obese
You can capture 10% of that market
You will make $200 off each user per year
Addressable market: 300M * 50% * 50% * 10% = 7.5M
Yearly revenue: 7.5M * $200 = $1.5B
Bottom-up market estimate:
This kind of calculation method is where you try to make the estimate according to the actual business situation instead of just taking a raw data and jamming out an estimate. This method is more realistic, so that often times VCs really like this method.
Each sales person can call at least 20 prospects a day
there are 240 working days a year
5% of the calls will convert
Each sale is $300
We have 10 sales people
Yearly revenue: 10 sales * 20 calls * 5% * 240 days * $300 = 10*20
Another good thing to do is to use your competitors' data. Say your competitor has 1M users, and you feel that they've only captured 10%. So you can say that the market has at least 10M users, and each user spends $2000, which comes out to be 20B. It's a 3rd method to add on to the 2 methods above.
Besides your competitors, what alternatives do your customers usually use to solve their problems? Write 1-6 other alternatives, each on their own line.
These are also your potential competitors and places where you can learn how your users behave. They are also a good reference point to understanding how big your market actually is.
Example (for StartitUp):
Where do your customers frequent?
Write down at least 5 destination URLs, each on their own line.
Good places to start would be blogs (Find blogs based on categories at Technorati), Twitter channels, Facebook pages, Quora sections, etc. To find relevant blogs, you can use Technorati.com to find blogs that fall into the same category, so that you can easily pinpoint your customers.
For Twitter, go to Twitter and find influencial users who are in your category and then also see what other users these followers are following.
For Quora, search for specific keywords that your target customers might search for.
We used Technorati to find other blogs that cater to our target audience
You can also search for bloggers that have written about your competitors. You can either post a comment suggesting your service as an alternative or you can try to contact the users who also commented on the articles directly.
Also, another awesome place to find your users is at your competitors’ site. They’ve already spent the time to build up their audience so that you can "harvest" them.
These places are the places you will find your early adopters so that they can test out your service later on and validate your solution. They will also help you test and give you feedback so that you can grow your business, since these are the people that need your solution the most.
There are a lot of niche destinations where you can find your early adopters, but it might take some detective work to find them.
Now, if you don't already have a Google Adwords account, do sign up for one. This is not for advertising, but so that you can use their awesome Keywords Tool.
Think of 5-10 keywords that your customers might type into Google to find websites that might help them. Input them each on their own line.
Examples: iphone 5, iphone 5 battery case, iphone 5 battery charger, iphone 5 battery pack, etc.
Short-tails are harder to rank for, but it doesn't hurt to choose about 2 of those to target. It's best to use long-tail keywords for the rest.
There are short-tail keywords (1-2 words), and long-tail keywords (3-6).
Short-tail keywords are keywords that are very general.
Example: iPhone 4, iPhone 5, Startup Guide
Long-tail keywords are keywords that are more specific, and are easier to rank for because there's less competition.
Tip: Try adding some common words like – ‘best’, ‘free’, ‘cheap’, ‘top’ etc. along with your actual keyword and you might eventually get some good long tail keywords.
Example: Step-by-step Startup Guide, Startup Guides for noobies, Best way to start my business
What is SEO?
We are getting these keywords for SEO (Search Engine Optimization). SEO is about optimizing your website for Google, so that the content on your website is written in a way that it can communicate with Google so that when someone searches for something that your website has the solution for, Google will see that your website is relevant and show your website's link in the search results. Therefore, when we talk about keywords, it's about communicating the "business" we want Google to think we're in.
Case Study: StartitUp's main keywords are "startup guide", "start an online business", "how to build a website", etc. When someone searches for "how to start an online business", Google will see that StartitUp is a relevant resource for the customer, and thus it will show StartitUp's website in the results. If a user searches for "how do I start a business", even though we didn't target the keyword directly, but since Google is smart, Google knows that we are in the same business as what the user is searching for - due to it being able to also see semantic keywords to your keywords.
Read This: SEO Explained in 2 Minutes
Now go to Google Keywords Tool and input the keywords you've thought up to see if you were accurate with the keywords that you've imagined your customers would search for. If you are targeting locally, set up the location and language for the keyword search.
Also input the keywords you've collected from competitors in the Competitor Research stage.
Google Keywords Tool will show you all the valuable informtion for your keywords
At this point, you will see how popular or how unpopular each keyword is by seeing how many searches are done on each keyword per month. Under the competition tab, you can also see the amount of advertiser competition for a given keyword. Note that the competition shown here is not about the competition on SEO. We want to find out about the competition in terms of how many websites or webpages out on the internet are also targeting the same keywords we are targeting, and not in terms of advertising.
So, what's next is that you will have to check the competition on each of the keywords in terms of SEO to see how difficult it is to rank organically for the keyword - meaning that Google shows our website's link to users even when we're not paying money to advertise on those keywords. Below we will give you an accurate way to analyze competition. It's also better that you start with long tail keywords, since those are more specific - thus less competition.
Other than competition and a bunch of other information, you can also find some other awesome keyword suggestions that you can use under the "Keyword Ideas" tab.
So, by using Google Keywords Tool, you will find out whether the keywords you've chosen are popular. However, what you need to find keywords that are popular, but are not competed heavily on. If the keywords you've found are not popular or if the competition is too high, revise your keywords list and do the search again.
Case Study: Some successful businesses like Mint had their primary customer acquisition channel as their blog, which they scripted their headlines and content based on the most popular keywords their customers search for. They had a seperate article for every single targeted keyword phrase.
Once you've taken down the list of your keywords you want to research on, this is how you find out exactly how much competition there is for a certain keywords, and see if you can actually rank for it.
How to find out about competition:
#1. Allintitle:, Allinanchor:, and AllinURL:
1. Allintitle: Go to google, and use the operator allintitle: keyword - to search for your keywords. Example: allintitle: start a startup. You will then see all the pages that have "start a startup" in the title, which means they are also directly targeting those keywords. It's better if the resulting number is less than 5000.
2. Allinanchor: You can also use allinanchor: keyword - to to see how many links are on the internet with the keywords as the link text. The results that you see are the people who are directly competing with you for the keywords, because they are even using those keywords for their links (the text for this link is the anchor text - the anchor text is "this link"). If the results is under 5000, then you would have a better chance of ranking for it.
3. Allinurl: The 3rd search is searching for all the webpages that have the keywords in their URL address as well (e.g. www.startitup.com/keywords-keywords-keywords). As mentioned, the results should be under 5000.
#2. Install a plugin called SEO for Chrome and that tool will help you see the page rank of any web page. Page Rank is the rank (the higher the better) that Google gives to a web page to see how trust worthy the page is and is a reflection of the strength of a site's backlinks - meaning the amount of link juice that a link is able to contribute.
#3. Google your keyword, and then open up the top 5 results. Use "SEO for Chrome" and look at the PR (page rank) of the top 5 pages. If they are too high, like more than a 5, then the websites would be too trustworthy for you to beat.
#4. You can also check the domain age of the top 5 results. The older the domain is, the better it will rank in Google.
The combination of the indicators above will tell you whether or not you will be able to rank for your keywords organically by Google.
You can learn some details of SEO here:
See these pages for some useful tips:
Tools you can use to check website ranking and other information:
Often times, people think they know who their customers are. But very often, you might actually have gotten the right problem or solution for the wrong audience, or vice versa. You could even be building a right solution but with the wrong key features. It can really go into details.
Customer Development (see it on one diagram) is one of the most important sections because it pretty much minimizes the mistakes that can happen with your startup. This means that we have to get out there and really verify our assumptions. You need to find out everything about your customers, know their every day schedule, and understand exactly how you can solve their problems.
The truth is out there.
So for this part, the most important takeaway is that to become a good entrepreneur, the most important thing is to listen and don't assume you have all the answers already, because the best entrepreneurs that you have heard of, do not assume anything.
It's not a customer's job to tell you what to build, but they will tell you what they want.
Which channels will you use to acquire your users proactively?
Outbound marketing is marketing that is done proactively. We're talking about actively reaching out to these people to get them to come to your websites.
Example: Google Adwords/SEM, advertising, trade shows, cold calling, sales, etc.
Which channels will you use to acquire your users organically/naturally (without active effort)?
Organic visitors are visitors that are arriving at your website without your active effort and usually without cost. We're talking about users who found your website on Google, on blogs, referrals, etc.
Usually this channel is built overtime, but will last a lot longer than outbound marketing, since this channel is passive and is persistent.
Example: SEO, social media (Facebook, Twitter, Quora, Tumblr, etc.), blogs, content marketing (your blog)
What are your assumptions of your solution that makes it risky for your business? List them each on their own line.
Businesses fail because their assumptions are wrong, and they didn't make necessary precautions to address those false assumptions. When you guess that a problem is a problem, that is an assumption. When you assume that your solution will solve the customers' problem, that's an assumption too. The features you later define for your product will be assumptions too.
What are the assumptions that are not proven, and can seriously affect the operation of your product in the future?
Assumptions are best resolved by asking users or interviewing them.
In the future when you have the product ready, you can also monitor your users' behavior so that you can collect data and understand whether or not your assumptions are correct.
Example: StartitUp's riskiest assumptions are:
1. Assuming entrepreneurs like to learn or build their startups in step-by-step style.
2. We assume that our guide can really help startups build, grow, and get funded.
3. We assume that entrepreneurs will like to help each other.
While you are building for a niche right now (you should be at least, since trying to appeal to everybody and trying to do everything at once will not only make you lose focus but will also make your early adopters confused), you might have a grand vision.
This is actually one of investors' favorite questions. The reason is because usually lean startups start out tackling a problem for a niche market while holding off on the bigger vision. This is not to say you should start building for the "bigger" problem. Because as a Lean Startup, you need to satisfy your niche first before you can move on to the bigger picture - so you can cross the chasm - move from early adopters to the majority market.
Digg's first version of the product only catered to tech news and thus to the techies. However, they later "zoomed-out" after they were more popular and became a social news platform for every topic, which made Digg then a platform for everyone. The thing to remember is that if they had not started with the tech news sector and tried to target everyone, they might not have been able to get enough users to even become a viable business. The trick here is to be focused in the beginning, get 1-3 demographics first to solidify your user base first, then expand to get to more demographics after you reach a certain size.
What are you selling? and How much are you selling it at?
The best best way to find out how much you should charge is studying your competitors, which you did you the last stage.
The whole startup guide + startup profile
30 days free trial @ $10/month
If the revenue is too low, lets go back to the drawing board and see if you can appeal to a bigger market. Perhaps you are being too conservative. However, most of the time we overestimate. If the number here is too low, it's possible this market or this problem is not a big enough problem to solve. It's not too late to go back to the drawing board.
However, if your service requires reaching a critical mass first, then maybe it's very hard to come up with a revenue analysis here. However, regardless, coming up with something is better than nothing.
Read here to find out figure out your pricing strategy.
Here are some tools to help you understand your market:
Problem Interview is Ash Maurya's term for the interview you conduct to validate whether or not we have a real problem that our target audience has.
In the Problem Interview, you want to find out 3 things:
1. Problem - What are you solving? - How do customers rank the top 3 problems?
2. Existing Alternatives - Who is your competition? - How do customers solve these problems today?
3. Customer Segments - Who has the pain? - Is this a viable customer segment?
Talking to people is hard, and talking to people in person is even harder. The best way to do this is building a script and sticking to it. Also don’t tweak your script until you’ve done enough interviews so that your responses are consistent.
While you can conduct the interview any way you want, whether by person, by blog, by emailing, the main point is to collect the information that you will need to validate your problem. Also, the interview script is merely a suggestion. As long as you can get the answers with your own methods, do go ahead!
You can use the space below to write up your script.
The script below is a great interview example proposed by Ash Maurya. However, if you can still arrive with answers that can help you, feel free to conduct the interview in any way you'd like.
Components of a good Problem Interview based off Ash Maurya's Running Lean
StartitUp's Sample Script:
Welcome - 2 minutes
We’re building a step-by-startup guide that will provide action items for entrepreneurs like you build and grow your business. blah blah blah...
Collect Demographics (Test Customer Segment) - 2 minutes
(This is where you try to understand who this customer is - is he/she a customer? an early adopter?)
- What are you doing for a living now?
- Have you started a company before?
- If yes, how many?
- If not, do you want to?
- Do you use a lot of online resources for your work?
Tell a Story (Set Problem Context) - 2 minutes
So, one of the biggest problems we have is that we start a lot of startups, and it's always quite frustrating to not be really able to keep track of our progress, or knowing what to do, and when to do them. We find that we spend a lot of time scavenging over the internet for the newest tricks, or growth hacking tricks. While we are seasoned entrepreneurs, we still prefer to have some kind of guidelines to keep us in check.
Is this something you face as well?
Problem Ranking (Test Problem - see if they really struggle with this problem) - 4 minutes
(Ask your customer to rank the top 3 problems)
1. Do you feel a strong urge to want to start a company?
2. If you have not started a company, do you feel overwhelmed by the fact that you don't have a clue about how to start it?
3. If you have started a company, do you also feel helpless sometimes when you don't know the best way to build or grow your company?
Explore Customer's Worldview (Test Problem) - 15 minutes
(In this section, you just want to understand how your customers solve this problem today)
1. What resources do you usually use to start your business?
2. What parts of starting up is most difficult for you? Or what topics?
3. What is the best way for you to learn?
4. While starting up, if there was a checklist that makes sure you do everything you can do to grow your company, would you be able to follow them step by step, or would you skip most of them and get to the part where you are having most difficulty with?
Wrapping Up (the Hook and Ask) - 2 minutes
We are almost done with our product, and I think we have a pretty awesome solution to help startups build and grow their business in an efficient manner.
Thanks a lot for your time today.
Do you think you'd be interested in using the guide when we have it ready?
Would you know anyone who could be a good candidate for this topic?
Document Results - 5 minutes
Spend 5 minutes to document the results.
1. Don’t ask questions that might get a polite response back. Asking a yes or no question or whether or not they will use your service will often yield a polite answer.
2. Always ask questions that will make them tell you what they already do right now as an alternative to solve their problems.
3. Probe their behavior instead of asking them questions that leads them to answer that they want to use your solution.
4. The point of the interview is to learn about them, not to sell to them.
5. The trick to get people to talk more is by asking them open-ended questions like "What do you usually do to solve this problem." and not "Is this how you solve ths problem nowadays?"
Please check out Ash Maurya’s Problem Interview Script Deconstructed from "Running Lean" for instructions on a more comprehensive interview strategy.
If possible, you could also use emails or survey tools to get feedback as well.
Here are some tools you can use:
(Problem Interview) With the script from the last task, go and talk to 10-20 potential customers and document their feedback. Spend 20% of the time explaining and then spend 80% of the time learning.
Avoid friends and family, because they will be biased. You actually want to interview everyone, and not just your early adopters. The reason is because you want to get an objective "world view" on the problem you are trying to solve. You will learn a lot more if your sample is diverse.
You can also use StartitUp's community to get feedback.
Use this space to document their responses.
The BEST way to learn about your problem is by talking to people. There is no better way to do this. You do not need to build the solution first to test it. If the response to your problem confirms it, then move forward, if not then we need to either scrap or tweak our assumption, depending on how accurate or inaccurate your assumption is. Maybe you also have the target audience wrong, you might have to readjust your target audience.
People will not steal your idea. But if you're still very worried, script your interview so that you don’t reveal your solution. You can reveal your solution at the end, but that time you would already have found out if the interviewee is a potential customer.
Schedule these interviews through your product development. It’s important that you learn to develop and learn about your customers at the same time.
These people don’t all have to be your early adopters or target audience, because the problem with only selecting the target audience is that that might narrow your view. Go to the places where you think your potential customers go to. These people could be your 1st degree friends, their friends, your beta email list, etc.
By filtering out everyone and only targeting your perfect customers, you might run into the local maxima problem. Which is that when you only ask a selected demographics of people, you only get 1 type of response, which may result in tunnel vision for you. It also means that you maybe be building a good feature for 1000 people when you can be building a great feature for 100,000 people.
Also, your friends and family might be too polite (or brutally biased in some cases - older brothers anyone?), so it’s not bad to interview them, but do take note if the results are overly positive.
Is there a theme to the responses you got back? If there is, write it down to take note.
If most people responded that they do not face the problem you are solving, then it’s best to go back to the drawing board and work on a new problem.
Do not take this lightly, as if you move forward without a validated plan, you might have to either scrap your whole project or tweak it drastically in 2 months.
At this point, review the feedback you collected carefully and objectively think about whether or not the problem you are trying to solve is really one worth solving. If you feel comfortable that the problem you are trying to solve is indeed a real one, lets move forward to the next stage!