Idea Validation Fuels Startup Success, Not Fundraising: Here's Why
Updated: May 11
Idea validation research is what separates startup success from startup failure.
That's not an opinion, but a fact testified by the onslaught of business failures that afflict founders every single day.
Even when heavily funded, unvalidated startup ideas consistently fail.
Truly, no amount of money can make a weak idea succeed. Don't believe me?
Consider the case of Quibi, the most spectacular startup collapse of the past decade.
Quibi: The Poster Child for the Value of Idea Validation
Imagine raising $1.75 Billion ahead of your startup’s official launch.
On top of the $1.75B, your team is led by Jeffrey Katzenberger and Meg Whitman.
These A-players previously led legendary companies like Paramount Pictures, Disney and eBay.
Creating a unicorn company with this cash and talent would be a slam dunk, right?
These rock stars raised that amount of capital prior to launching a mini-series streaming company called Quibi in April of 2020 and had a Titanic-like collapse shortly thereafter.
By October of 2020, the Quibi team burned through $1.4B of their capital and reached only 30% of their user goals. Just two months later, Katzenberger and Whitman were forced to sell the company’s assets to Roku for just $100M.
Despite a track record of massive media success, Katzenberger reflected on the root cause of Quibi’s failure by saying:
“[The] idea wasn’t strong enough to justify a standalone streaming service.”
Idea Validation: Way More Important Than Seed Funding
What’s the takeaway from Quibi’s downfall?
No matter how outstanding your work history is, business ideas sink or swim based on the quality of a founding team’s pre-launch idea validation research.
Failure to validate an idea is a common killer of startups, yet most founders continue to believe that raising capital will solve all their startup’s problems.
Quibi proves this belief wrong.
No amount of funding can make an unwanted product or service succeed. You can discern how desirable your product or service is before going to market by running idea validation research.
Founders who want to raise capital before validating their startup idea continually shoot themselves in the foot by skipping this step when developing their business.
As a result, their lack of product-market fit undermines both their business success and fundraising appeal.
Justin Kan, the original founder of Twitch, underlined this reality in a tweet back in 2021:
On top of this, investors usually invest in teams just as much as they invest in ideas.
99% of founders don’t have the superstar credentials of Jeffrey Katzenberger or Meg Whitman on their team either.
That fact makes your odds of raising money borderline impossible if you don’t have proof of traction or a feasible pathway to product-market fit for your startup idea.
At the end of the day, traction is the key force that drives business success and fundraising success.
If two industry titans couldn’t make an unvalidated idea gain traction with $1.75B in capital, why should an investor even throw $1 behind an unknown founder with an untested idea?
Newsflash: Smart investors won’t put capital behind a startup when the key players and concepts behind a company are unknown and untested. It’s basically like setting their money on fire.
How do you prove traction to an investor if you don’t have a product yet? Run excellent market research and an idea validation study prior to building your product.
No Product, No Problem: The Foundation for Excellent Idea Validation Research
Most aspiring founders think their product, service or store must be live before they can understand their chances of business success.
Most aspiring founders are wrong and need to think again.
Building first is a mistake because it often causes founders to heavily invest in their own solution before they discover how their market experiences problems within their space.
The common outcome? Founders build something in the hopes of proving themselves right rather than providing value to their target customers.
This is a recipe for failure. It's better to build with others in mind because those other people are the ones who will either pay you or ignore you.
To avoid failure, founders must become obsessed with their target market first and only start building once they have a pulse on their key customers' current problems.
Jeff Bezos made this customer obsession the driving philosophy behind Amazon's development.
So, how do you become obsessed along the road to building your company?
Only explore business opportunities within the fields that align with your primary professional skills or core personal passions.
Without the right skills, you won’t be able to execute on a viable opportunity. Lack of skills can be overcome with the right co-founder or business partner.
Lack of passion is nearly impossible to overcome in the long run.
Without enough passion, you’ll burn out or become bored before you reach whatever business goal you’re pursuing. If there isn’t deep passion for an opportunity during its earliest days, it’s better to explore other options.
Have enough skills and passion to build within an industry?
Great, now it’s time to talk with active members of your target market. These discussions should follow the path of open exploration rather than sales practice.