In a start-up’s early days, your most important task is to sort out the good ideas from the bad--without spending a ton of money. Here’s how.
Entrepreneurs often worry that someone else will steal their best ideas before they get going. That's understandable, but it's the wrong thing to be afraid of.
The bigger danger is that entrepreneurs won't share what they're doing with enough people, especially early on in the process. That's bad because it reduces the odds that they'll learn a lot before investing a little.
When we wrote our book, Breakthrough Entrepreneurship, we peppered it with nearly two-dozen references to a single theme: "Maximum Information for Minimum Cost." Call it MI/MC for short. This is the smart entrepreneur's mantra.
You’ll likely need to examine many promising ideas before you find one that you might be able to leverage to create a successful new entrepreneurial venture. So the goal should be to examine and discard the bad ideas quickly in favor of the good.
How do you obtain the information you need? If you don’t know where else to begin, here are five near-universal strategies to pursue.
Find potential customers and ask them about their challenges, their motivations, and how important it is to them to solve their problems. And remember—we said, customers, not just friends or family who might shade their answers out of politeness or just to make you feel better.
Find people who have worked in the industry you’re targeting, or who have tried similar ideas in the past. Unless you’re going to be their direct competitors, you’ll be surprised at how many knowledgeable people are willing to give you their time.
Conduct focus groups
These don’t need to be formal events with everyone seated around a conference table and you behind a one-way mirror, although there’s nothing wrong with that except for the potential expense. By asking several potential customers or others and getting them to interact with one another, you can often learn more than just by asking directly.
Sell your product, even before you’ve produced it
There is an ethical issue here, and possibly a legal one, so of course you don’t want to take money for promises you know you won’t be able to keep. But at the very least, you can gauge people’s interest. In a best-case scenario, you might wind up with customers offering you cash before you’ve invested very much yourself. That’s some of the best information you can possibly get.
Ask people to consider investing in your idea
Even if you don’t think you’re ready to take other people’s money yet or if you don’t think you want or need to do so, people who are considering putting their money behind you are almost always going to ask hard questions. Better to force yourself to examine the answers early, before you get started.
Remember, you’re looking for feedback—but more than that, you’re looking for feedback that demonstrates that customers and investors are excited. If not, that's a pretty good indication your best ideas will be found elsewhere—and isn't it better to learn that very early and very cheaply?
JON BURGSTONE was co-founder of SupplierMarket, acquired by Ariba for $1.1B. He now teaches at Berkeley, where he helped launch the Center for Entrepreneurship & Technology. He is co-author of Breakthrough Entrepreneurship. @jburgstone
BILL MURPHY JR. is a journalist, ghostwriter, and entrepreneur. He is the author of Breakthrough Entrepreneurship (with John Burgstone) and is a former reporter for The Washington Post. @BillMurphyJr