This is Part 2 of a series of articles on how to validate a startup idea. In this article, I introduce an analysis framework to evaluate a startup pitch deck.
This framework suggests a pitch deck must be evaluated against 3 main criteria if its core idea meets the high-level prerequisites described in Part 1. These criteria are listed below in order of priority.
- Need Significance. Do users really need the product?
- Market Attractiveness. Is the market attractive enough?
- Execution Complexity. Can the team overcome challenges?
So, if, for example, the first step doesn’t pass, there is no point of going to the second step.
The first step in this framework is to measure the “need significance” for the potential product. A need may currently exist as pain-to-be-removed or gain-to-be-achieved. Or, sometimes a need doesn’t currently exist and will be step-by-step created according to the vision of founders.According to human psychology, an individual always takes action to remove a need. Click To Tweet
Related Link- How To Avoid Failure – Market Need.
The next step is to measure “market attractiveness”. The market attractiveness must be evaluated based on 3 sub-factors:
- market size
- market trend
- monetization time
A cool product which doesn’t have a reasonable market size is not worth a dime. In addition, if the market goes in direction A, even a great product will have a hard time to position itself in the market. In short, you can NOT fight the market.A cool product which doesn't have a reasonable market size is not worth a dime. Click To Tweet
Running out of cash is one of the top failure reasons among startup companies. So, if the monetization time is long, a small company will find many challenges to finance the project.
If you end up having high scores in the need significance and market attractiveness, don’t get excited yet! An important step still remains anyway.
The execution complexity must be evaluated based on 3 sub-factors.
The underlying technology must be well developed before the industry starts spending money on it. So, if the technology is still in its infancy stage, you should not build a company relying on that technology. Read more about technology readiness level here.If there is no great team with great culture you should think twice. Click To Tweet
A successful product always has a AAA star team behind. If you want to have a long-lasting team, you have to ensure everyone is accountable and happy. So, if there is no great team with great culture you should think twice.
In the end, the company must have a clear and simple marketing strategy. That includes competition analysis, a go-to-market strategy, and a growth strategy. You do not need to have an extended plan for each of them. But, if they are ignored, something is wrong!