As Professional Venture Builders, our main challenge when it comes to launching a new startup is to minimize the risk.
Why? Well, because there are so many problems in the world that deserve to be solved that it would be a great waste to invest significant human and financial resources in solutions that might look interesting on paper but nobody actually wants.
By testing and growing 300+ tech businesses over the last 6 years, we’ve developed much more than “just” a skillset and a methodology: a 6th sense.
No matter the project, our team members have the capability to :
- Quickly identify the riskiest assumptions that need to be tested in order to make sure that the project is feasible from a business perspective
- Implement testings scenarios in order (in)validate these assumptions in a fast and lean way.
No more talk, here's a real-life example that perfectly illustrates what we mean when we say that we are “Masters in the art of de-risking a tech project”.
How we de-risk idea-stage projects at Make it
ParkPlace started with the following observation: Going to the stadium with your family to watch football or baseball games is really part of the American culture. The problem is that booking a parking place inside the stadium costs on average $200. And to top it all off, the stadium parking area is so crowded that it's a real pain to get in and out.
The solution imagined by ParkPlace is pretty simple: allow people who live in residential areas around the stadiums - imagine that small residential area with houses that have a garage and a driveway - to rent their parking spaces to people attending the game.
What most entrepreneurs would do
In most cases, entrepreneurs who come to this solution would start by conducting market research and interviews. Once they get promising results, their first reflex would be to think about the product: they would create an app that allows property owners and visitors to register, match and proceed to payment.
At Make it, we believe this is a very bad reflex that most entrepreneurs have. Indeed, technology is in most cases required to automate and optimize processes to scale a business. However, most of the time one can deliver value to a customer without the need of building tech.
How we de-risk idea-stage projects in 3 steps
1. At Make it, the first step when it comes to de-risking a project is to systematically generate traction as a mean to validate the project's main assumptions, such as:
- What exactly is the problem I am trying to solve?
- Is it a problem really worth solving?
- Who will pay for my solution? How much?
- What is my customer acquisition cost?
For ParkPlace, our first step was to go to residents a few days before our first game and offer them money to be able to use their parking space during the game. Then, on game day, we stood at the entrance of the stadium dressed as a sandwich man (you know, the people who stand on a street corner waving signs for restaurants and other services!) and offered visitors convenient parking solutions. When someone was interested, we told them to follow us, ran to one of our spots and got paid for that service.
It's this kind of hack that doesn't require significant technical development that allowed us to validate the main assumptions and indicate whether we were holding a real business opportunity or not. In the case of ParkPlace, we generated more than $90K in 3 months thanks to this hack.
We are therefore convinced that the only good way to validate these fundamental assumptions is to put a first version of the solution on the market (which most of the time doesn’t require any tech development at all), generate traction, analyse how the market behaves, measure the results and iterate.
At Make it we have developed a 6th sense allowing us to design and implement that kind of testing scenarios in a couple of weeks with very limited capital invested in product development.
2. Thanks to this method, we make sure to develop the right technical solution for the right people.
This means that by focusing on the market first, we identify exactly how technology can deliver real value.
For ParkPlace, you would think that the first thing to develop would be a mobile app where property owners and visitors sign up and match up. In fact, we didn't need an application at all to be able to do that and generate revenue.
However, the real problem we had was with our sandwich men - the so-called attendants - who didn't have a real-time overview of the available parking places. And that was clearly limiting our growth capacity.
As a result, our first investments in development were made in the creation of an app dedicated to our attendants.
This is how we make sure we only develop features that really add value and create a product that is scalable from day one.
3. Testing and shaping the founding team.
“Team” is a crucial component as it is often defined as one of the main reasons why startups fail.
Going through a market validation stage together with the founding team allows us to test the co-founders, identify their strengths and weaknesses, raise their awareness about it and teach them the right mindset.
By being involved very early on, we minimize the risk that the founders team up with the wrong people for the wrong - often emotional - reasons and help them find the right talent for their project. In other words, the sooner we jump in, the better we can shape the “A-team”.
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