The beauty of startups is that there are so many unknowns.

Risks are inherently present when you’re building a new company/product/market — which is what makes it so fun! You need to mitigate as many of your startup’s early risks as you can (there will be many) by finding answers to the most pressing questions. This adds value i.e increases your valuation, when you set out to fundraise later. The more you can prove out, the better position you’ll be in to defend your valuation.

In The Lean Startup, Eric Ries offers a method called validated learning to help entrepreneurs make better and faster decisions, with less waste. When we first started working on Pepper, we unwittingly leveraged a lot of Ries’ principles, and was able to get customers and a minimum viable product (MVP) with just a few thousand dollars!

Below are a few examples of how we began justifying Pepper, and ideas on how you can apply The Lean Startup to validate your startup idea on a shoestring budget.

Think big, start small

You have a grand vision. You want to take on the goliaths of your industry. What’s the first step?

There are two fundamental questions to answer before you quit your job and pursue your grand vision:

Does your idea solve a problem?

Will customers pay for your solution?

To find answers to these questions, The Lean Startup proposes that you conduct tests to learn in real-time rather than after the fact. The fact-finding process in a nutshell:

  1. Outline the riskiest assumptions that make or break your startup
  2. Create your hypotheses to these questions
  3. Build the cheapest and lowest effort test/MVP that can give actionable answers
  4. Measure learning progress using innovation accounting
  5. Repeat process

Does your idea solve a problem?

When I first had the idea to create a better fitting bra for small-chested women, I was just shooting the shit with my Mom in a car ride. I personally had a problem finding a bra that made me feel and look good, but I wasn’t sure if I was the only person in the world who felt that way.

1) Hypothesis: I was not the only one who was unhappy with my bra options.

Test: After that car ride with my Mom, I fired up my laptop and sent out an email survey to a close group of 25 girl friends. The cost was $0 and took maybe 5 minutes to write.

Measurement: Only one person gave the feedback that didn’t confirm the hypothesis. Those results were good enough for me! This quick gut check made me more comfortable investing in the time to continue exploring the project.

Recommendation: When doing customer development (surveys, interviews etc), keep in mind that directly asking customers what they want will never tell you what they want. Try to frame questions around their intentions and pain points rather than closed off yes or no questions.

The next step was to find out if people would be interested in actually solving this particular problem with a product.

2) Hypothesis: Small-chested women would be interested in trying a bra that was designed especially for their body type.

Test: Had an early prototype manufactured (don’t worry about getting it perfect on the first try), took some photos and launched an email sign up landing page. We also launched an Instagram account and used it to drive traffic to the landing page. This phase cost us around $700.

Measurement: We saw about a ~15% conversion rate of people coming from Instagram and signing up on the landing page. It was slow trickling growth. Then something unexpected happened, and we got several press hits that blew our email list UP. All of a sudden our email list grew 10x. We took this outcome as hypothesis confirmed and continued to persevere!

Recommendation:

  • Make the product LOOK as real as you can. Smoke and mirrors is all that’s required for this kind of test. You can make an early prototype, create beautifully designed mock ups or maybe even a video (here’s the original Dropbox MVP video) showing how the product works.
  • We used Wix to build our landing page because it had easy to use templates that didn’t require any engineering skills. It was also cheap yay! Click here to give Wix a try >>
  • Implement Google Analytics on your landing page ASAP and make sure you have all your conversion goals set up properly. If you’re getting a lot of bounces, track where that traffic came from and see if there’s a trend with specific acquisition channels. Using Google Analytics, you can also break out your traffic into cohorts based on the day the visitor first landed on your website and track specific behaviors over time for more interesting analyses.

Will customers pay for your solution?

So now we’ve learned that a) I wasn’t the only one who wanted a better fitting bra and b) There’s interest in a new bra product designed for small-chested women.

Now it’s time to test if people are willing to pay money for it!

3) Hypothesis: People would be willing to pay $40 for a bra for small-chested women.

Test: We spent 3 months and about $1,000 preparing for our Kickstarter campaign launch. Our goal was to reach $10,000 because that was the minimum order requirement from our factory.

Measurement: By the end of a 13 day campaign, we had 950 backers and $47,000 in pledges. Green light means go! 25% of our backers were international, so we also learned that there was a market outside of the U.S for this product.

Recommendations:

  • Crowdfunding campaigns are awesome because it de-risks the initial manufacturing order, but it requires a SUBSTANTIAL amount of time and effort to pull it off. Click here to learn more about launching a successful Kickstarter >>
  • Another way you can test this hypothesis is by conducting pricing plan page experiments. When Buffer was still validating their MVP, they built a simple pricing plan page and measured how many people clicked on the paid plans. Their test told them that there was a small market for premium versions.
  • Tesla also crushed it with their brilliant pre-order strategy for their new Model 3. Tesla only required $1,000 to reserve a car, but it was just enough skin in the game where this data would be a good indicator of how much demand there was.

 

Now that I have the Lean Startup methodology in my back pocket, I’m excited to start applying it to upcoming experiments rather than retroactively! The assumptions I’d like to validate next:

  1. Do our customers want to be part of a community?
  2. Does our bra meet the needs of our customers across our size range?
  3. Does a personalized shopping/content experience increase retention?

Anyone have experience in these areas or practice The Lean Startup method? Let’s chat! @jaclyn_fu