Validation — the Product Works and People will Pay for It
Today, we’ll talk about demonstrating product and market validation
In talking with startup investors the first two questions that come up are Product validation and Market Validation.
The product works and someone will buy it.
Investors look for evidence of this before moving into further diligence so it’s important to show this in your pitch.
Beta users are a great way to show the product works and customer interest. In many cases, the product is a website providing some value in the form of data storage or analysis.
In today’s world, the chance that you will get the product up and running is fairly high but will someone use it and more importantly pay for it becomes the bigger question.
Customers who pre-pay for it check the market validation box. It demonstrates you are solving a real problem.
If you don’t have anyone paying for it, then you’ll need to resort to pipeline metrics showing the number of downloads, trials, and pilot programs.
While not the same as a paying customer it gives a leading indicator that the customer will most likely buy.
It’s helpful to show the funnel prospects go through in engaging your product. This includes lead generation, qualification, closing, trials, pilot tests, and signed customers.
Investors look for a consistent signup percentage on the leads going through your program.
While the absolute number of signups may not by high, the repeatability of your model can be compelling to the investor.
Thank you for joining us for the Startup Espresso where we help startups and investors connect for funding.
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Hall T. Martin is the Director of Investor Connect which is 501c3 non-profit dedicated to the education of investors for early stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions.