The single most critical step to take before you start your business.

By: Jacob Varghese, Startup Activator

You are an ardent moviegoer who makes the weekly pilgrimage to the nearest cinema but it’s a hassle for you to check all the different cinema websites for times and bookings. You’re a coder by day and maybe you could develop a common booking platform for all multiplexes in New Zealand. It’s a million dollar idea you’re sure, so you start building the platform in every bit of spare time you’ve got. Your plan is to quit work in a few weeks and then live off your savings while you wait for the sales to stack up.

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Sounds like a million dollar idea, but will it fly?

Before you dedicate 100% of your mental capacity, energy, and spare time into building your dream – the biggest question you need to ask yourself is whether your target customer will buy your product at a rate that can sustain a successful business.  The startup graveyard is haunted by million dollar ideas that bombed and took their entrepreneurs down with them.

A Harvard Business School study found that 75% of VC backed startups eventually fail.

We can assume that these VCs did extensive due diligence before the investment decision was taken. So at least a good majority of them had the right people with the right capability at the helm.   So, what happened? A lack of robust customer and product validation is a major contributor to these failures. ‘’Build it and they will come” works if you’re Kevin Costner and it’s the movies but – when you’ve quit your job and invested your savings in your entrepreneurial dream – you’re best off leaving nothing to chance.  The first rule of product and service development is to identify your target customer and test your solution directly with them.

 A great example of a product being developed along these lines is ‘Rent the Runway’. Rent the Runway is an online platform that rents designer dresses and accessories for a fraction of their purchase price to an upmarket and professional female target customer.  The company has a valuation north of $ 700 million and 3.5 million subscribers to its portal. Their business idea is very simple. After all, men have been renting tuxedos for high school balls and weddings for decades. But, co-founders Jennifer Hyman and Jennifer Fleiss, were two Harvard graduates that took that concept and applied it to the world of female fashion.


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Co-Founders Jennifer Hyman and Jennifer Fleiss

They didn’t start by building a web portal and stocking up on inventory.  They started with pure customer validation right out of the Lean Startup playbook.  With the initial concept of a dress rental platform the Jennifers started testing whether there was an appetite in the market for a dress rental service.

The business model was based on two assumptions:

1) That women will rent dresses online; and,

2) They’ll rent those dresses without first trying them on.

To prove that these assumptions were right the founders reached out to students at Harvard and Yale. There was good engagement and test customers rented the dresses without trying them on.   Tick. The next test they ran was to mail images of dresses to 1000 women in New York City, 5% of them rented the dresses they saw in the images. Now that they had proved their business models two most basic assumptions, Rent the Runway built and launched their website. Within two months, they had 100,000 members.


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Rent the Runway
Rent The Runway Website

With their validation methodology, the Rent the Runway co-founders proved that their value proposition had traction with their target customer.  Only once they had that proof, did they take the leap and invest in their business. This is a great case study that illustrates the value of customer and product validation for an early stage startup.


According to the Oxford Dictionary, Validation means, “the action of checking or proving the validity or accuracy of something.” In a business context, Validation is ensuring that your idea solves a burning customer problem.  It’s really just plain common sense. After all, how can you build a product or develop a service without checking in with the potential customers?

  • These are the key steps you need to take to validate your idea:

    1. Identify your target customer and get clear on the problem you are attempting to solve

    2. Talk directly to your customers ( e.g. how big is their problem, how do they solve it at the moment, what is the value of your solution to them)

    3. Develop a value proposition based on this initial customer feedback

    4. Develop a minimum viable product

    5. Test it with your a small set of target customers

    6. Optimise your product, your value proposition, and your business model accordingly

Remember, this is not necessarily a linear process.  When assumptions are shot down or when customers are unhappy with a prototype, you’ll need to pivot and start from the top again. Validation and optimisation is a continuous process. It is critical to follow robust customer validation processes if you want your startup journey to be successful. Developing a deep understanding and empathy for your customer will allow you to build a product or solution that your customer truly needs and will pay for.


If you would like to take the Customer Validation journey together alongside a group of like-minded entrepreneurs and under the guidance of an experienced business leader, you may want to check out our next Deep Dive Validation session.

Click on this link to find out more.