THINKS USER DATA DRIVES THE VALUE
POSTED BY DAN YOUNG
Being in the mobile industry for as long as we have, our name is passed along to a number of aspiring entrepreneurs. They come to use to pitch their idea of their vision of the "next greatest app" since [ADD THE NAME OF THE CURRENT TRENDY APP HERE]. Almost every man jack of them honestly believes that they know how big of a product their idea will be. Just as many of them have never collected any data on how big their idea will be. This is the quintessential recipe for a product disaster.
I had a recent conversation with one of these aspiring entrepreneurs, an obviously smart, knowledgeable fellow. He was preparing a significant self-investment into a startup idea that he was convinced would be a hit within a creative industry (I'm purposely obfuscating the details to keep things confidential). The concept requires the pairing of a particular mobile device with a software infrastructure. My interest was piqued.
Their team sketched out an articulated problem. Good start. Then they provided a 30,000 foot view of how their system was designed to solve this problem. So far, so good. When the started talking about how they were going to monetize the system, that is when the model started to fail. I inquired as to what their user research indicated, specifically as to how much their target users thought their solution was worth, their model crashed.
As good of a concept as it is, they failed to adequately test their user's valuation on their solution. They had not tangible data of any kind to see how much someone would pay to use their system. Thus, when they tried to explain how they were going to make money, they failed.
When you are contemplating a business idea, start with the value that your solution delivers to your customer. Refrain from speculation and ask a sample of potential users. Even if it is a group of five or ten people, their feedback will give you quick guidance on the valuation of the solution.
