I analyzed the pitch deck and business plan of 100+ startup teams in the past years. And, I worked with 10+ teams closely to help them become successful. On a daily basis, I was approached by some similar questions such as “What problem is worth to solve?” or “How can I validate a startup idea?”. Therefore, I decide to answer these questions in a series of articles.
You, as entrepreneurs and investors, can use the analysis framework explained in these articles. For example, as an entrepreneur, you can validate a startup idea before spending much time and effort to implement it. And, as an investor, you can distinguish between companies with high potentials and those with high risk to invest.
A technology startup company has 3 main stages of establishment: (a) idea validation, (b) build a product, and (c) company growth. Each stage has its own characteristics. For example, when a startup company is in the “idea validation” stage, there would have many unknowns. Therefore, it is very hard to measure the potential of success in this stage. In this article, I explained 3 requirements that will help you to validate a startup idea.
Is The Startup Idea Aligned With A Mega-Trend?
“Mega-trend” is a term to describe a set of changes that are enormous in their impact and unstoppable in their occurrence. A mega-trend is sustained global changes that undoubtedly and significantly impact the economy, society, and cultures.Ensure your startup idea is aligned with at least one mega-trend! Click To Tweet
What are the current mega-trends?
The infamous international conferences annually publish reports noting the major changes happen in the world. These reports help to identify current world-wide mega-trends. For example, the World Economic Forum and Munich Security Conference notes the current major changes in economy and security respectively. Moreover, the leading management consultancy firms (e.g., McKinsey, BCG, or PwC) also publish reports on this matter. For example, according to PwC, we currently have 5 major global mega-trends as follows:
- Shifting in global economic power,
- Demographics shift,
- Accelerating urbanization,
- The rise in technology,
- Climate change and resource scarcity.
Mega-trends are powerful external growth drivers that can significantly and effortlessly promote one’s work. Therefore, an idea that is aligned with a mega-rend may have a high chance of success. For example, Beyond Meat is an example of recent works that is aligned with the “climate change and resource scarcity” mega-trend.
What Does Hype Cycle Say About The Idea?
“Hype Cycle” is a branded graphic representation of the maturity, adoption and business application of a technology introduced by Gartner. According to Gartner, technology has 5 stages of maturity as follows:
- Innovation trigger
- Peak of inflated expectations
- Trough of disillusionment
- Slope of enlightenment
- Plateau of productivity
Related Link- Gartner Hype CycleUse the Hype Cycle analysis to determine the risk profile of a technology Click To Tweet
You can use the Hype Cycle analysis framework to determine the risk profile of a technology. Then, you must ensure it is suitable for you as a founder or an investor. For example, a technology that is moving toward:
- “Peak of Inflated Expectations” is suitable for a risk-taking investor
- “Trough of Disillusionment” will have a hard time to convince a third-party investor
- “Plateau of Productivity” is suitable for a conservative investor
Can You Use Local Opportunities To Drive Growth?
To become a successful company, you have to think globally and act locally. Nevertheless, most entrepreneurs think globally but they forget to act locally. Every city has its own problems and opportunities. Therefore, as an entrepreneur, you have to take advantage of the opportunities in your community such as a leading industry or a dominant culture.Take advantage of the opportunities existing in your local communities Click To Tweet
For example, Let’s assume the financial industry is huge in your town. So, you have a better chance of success if you aim for a problem in that industry. Why? Since you most probably can raise capital or find customers in the local ecosystem easily.
- Ensure your startup idea is aligned with at least one mega-trend
- Use the Hype Cycle analysis to determine the risk profile of a technology
- Take advantage of the opportunities existing in your local communities
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