In the middle of the pandemic, I spent a few months on product idea validation. My goal: making impact investing more accessible.
“Ideas are meant to be attacked, torn apart, and put back together again. You may well want to shield your idea from the harsh sunlight at first, but by the time it’s ready to meet the world, it should also be ready for rain or shine.”
- David H. Hansson – creator of Ruby on Rails, founder and CTO at Basecamp
In the middle of the pandemic, I spent a few months on product idea validation. My goal: making impact investing more accessible.
I founded my first company a few years back but decided to shut it down when it became clear that it wouldn’t succeed.
One thing I learned in my first venture was the importance of product founder fit. This means that the product or service you sell needs to fit your personality and interests. My first startup was about food, and while I really liked the products, I am not generally a foodie. For my second venture, it was important to me to find something that better matched my skills and interests and addressed a problem worth solving.
I started looking into SaaS solutions that would help companies to measure their impact. Not just in terms of CO2 emissions but also regarding social factors. I cared about the problem but soon realized that it didn’t perfectly fit my skills and core interests: Measurement plays a critical role, but it’s too accounting-like, i.e., relatively passive and descriptive, for what I enjoy working on.
The market discovery that I had embarked upon showed me that it wasn’t the right topic for me. But it made me realize how many social and ecological problems businesses could now tackle. Some years ago, that would have been difficult, but the increasing shift in awareness in population and politics led to a greater willingness to pay for sustainability.
One thing that struck me, in particular, was the financing gap for the UN’s Sustainable Development Goals (SDGs). Given the amount and severity of challenges to overcome, it seemed incredible that the capital needed to solve all of them was a quantifiable number. At the same time, the problem fitted my finance background and interest in investing—a perfect match.
I embarked yet again on a discovery phase, looking for obstacles that prevented more money from flowing to the sector. It seemed weird that smaller private investors had few options to invest in the SDGs and align their investments with their convictions and consumer behavior. So, focusing on this specific problem, I researched investment regulations and talked to lawyers to understand what could be done from a regulatory perspective.
After this initial research, I came up with a list of assumptions about small private investors’ investment preferences. My list covered asset classes invested in, the importance of sustainability or even impact in investment decisions, returns, diversification, and liquidity.
Around that time, I came across Stun and Awe’s course, Growth Leap for Tech Startups. As it required little time investment on the side, I thought it would be good to be reminded of and maybe learn some new lean startup principles. And I was proved right. It is easy to take what you think you know for granted, especially if you have expertise in a field. The course was fundamental in that it made me test my assumptions more thoroughly by directly getting more potential user feedback and running some experiments.
The lessons on product strategy, assumption management, prioritization frameworks, and rapid testing were especially valuable for the ideation stage in which I was.
I set up a survey and conducted user interviews with potential customers, which allowed me to validate many of my assumptions. However, my deep knowledge of finance became an obstacle for one crucial aspect: I had expected the need for permanent liquidity to be less of an issue for investors. Yet, as it turns out, that’s what many people required, and long illiquidity periods were not acceptable for many of them.
Realizing the importance of liquidity for the average investor, I reconsidered my business idea. I followed the course’s lead in testing other ideas straight away and avoiding overthinking and overanalyzing. I set up a landing page for a modified product idea and tested how users would react.
I had resisted such an idea in the past for fear of not getting enough potential users on the landing page to get a good feel for what people wanted. Without running any paid ads, it turned out to be indeed hard to get a significant number of visitors. Interestingly, the few who gave feedback were enough to make me realize that my new concept was too difficult to understand for people with lower levels of financial knowledge.
Hence, I pivoted again.
This experimentation phase taught me the value of rapid testing and user research. Do it quickly without overthinking too much. It’s better to waste time on a test than on overanalyzing or trying to read the minds of your potential customers without talking to them. It’s not necessarily about getting tons of feedback and survey responses – just a few can be enough to make you see a meaningful pattern and possibly the need to pivot.
The Stun and Awe Courses helped me get a practical feel for the importance of idea validation and assumption management with concrete test examples and methodologies. But I’ll be honest. It’s still challenging for me to stick to this realization when being confronted with new assumptions to test. After all, it’s a question of changing your habits and possibly your mindset – and that’s never easy.
Starting up is hard. There are so many things you need to get right at the same time, and the odds of success are stacked against you. It’s critical to get a good foundation by learning to master proven growth and product strategies. If you want to avoid common pitfalls, it’s essential to work on the right things at the right time and with the right approach.
