How Evaluation Works

IPESSI DiagramSo far in the IPESSI process, you started with Ideatation. You might have come up with a hundred different ideas from a variety of sources:

  1. You looked for problems and pain points in your own life
  2. You may have talked to friends and family about problems and pain points in their lives
  3. You may have read books like The $100 startup, which has dozens of startup examples in it
  4. You may have interviewed people in a particular industry (or several) looking for industry-specific or activity-specific pain points
  5. You may have typed search terms like “startup ideas” or “ideas for starting a business” into Google
  6. You might have looked at existing products for spinoff ideas or variations
  7. You may have watched things flow through Kickstarter to see what is popular right now
  8. And so on…

Then you picked one of these ideas, and proceeded to Prototyping. In this phase:

  1. You interviewed people – perhaps 50 or 100 people – in your target audience
  2. You came up with a business model canvas filled with hypotheses and started testing them to see if they are true or false
  3. You built some sort of MVP prototype that you can show to people
  4. You may have built landing pages, or sent traffic to your MVP, to see if people would respond to a call to action
  5. You might have done some formal beta testing
  6. You have tested your price point and looked for a reproducible business model
  7. You may have applied to an accelerator
  8. And so on…

And now you need to make a decision. Should you proceed forward with this idea, to the SSI portion of IPESSI? Do you want to spend more time, energy, money and resources on this idea? Or is it time to kill off this idea and move on to a new idea, by going back to Ideation?

In other words, it is time for Evaluation

You really should make this a formal part of your journey, because it is easy to get into a place where you are not really making a lot of progress, but you are not failing either.

You might actually be making money, but not a lot. And you are seeing slow or no growth.

To put it another way, especially if growth is weak/slow, ask yourself this question: would your time be better spent working on a $50,000 startup, or is it time to reboot and put your energy into designing a $1 billion startup? You are going to be putting in the hours either way, so why not work on something rewarding?

What does “rewarding” look like?

  1. Most importantly, your sales (if you are directly selling a product/service) or web traffic (if you are delivering content) is growing spontaneously, primarily through word-of-mouth. Or you are running ads and people are responding.
  2. When you interview potential customers or existing customers, their response trends toward positive excitement rather than boredom or complaints.
  3. Journalists/bloggers/thought leaders in your space/industry pundits/etc. are writing about your thing spontaneously.
  4. People are talking about you, recommending your thing, etc. spontaneously on social media.
  5. When you run ads, people actually click on them, and when the click lands them on your landing page, a healthy percentage of them buy (or take a desired action).
  6. You are able to charge a profitable price for your thing, and people are not constantly complaining and pushing back on the price.
  7. You find it easy to locate your customers. It is not taking you a huge amount of effort to find people to advertise to, pitch to, etc.
  8. If you go to a trade show, people come to your booth and they are genuinely interested in what you are talking about.
  9. When you apply to an accelerator, you get accepted enthusiastically.
  10. When an accelerator or mentor introduces you to an angel investor, the investor responds with enthusiasm.
  11. When you ask people to be on your board of advisers, they accept rather than thinking of excuses.
  12. And so on…

Things like this are happening for you.

It feels incredibly good to wake up in the morning and to work on your startup when traffic/sales are growing, and people are talking about your thing spontaneously, and people are positive and happy about what you are doing, and there is media attention, and people are clicking on your ads, and you are getting a lot of suggestions for new features and improvements.

If you are a year or two into your startup and none of these things are happening, it is time to honestly assess your situation. Is there anything that you can do to change your situation? If not, even if there is some positive cash flow, it is probably time to stop working on this idea and start working on a new one.

You may be able to assess things even earlier – in your initial interviews with potential customers. This is before you have an MVP or landing pages or anything else. You are simply exploring the potential of an idea by interviewing people and talking to people. There are several possible responses you can get from early interviews:

  1. People will tell you straight up that it is a dumb idea. Why is it dumb? It might already exist in the marketplace and you didn’t discover that. It might be a problem that no one really cares about. There might be a free alternative that is “good enough”, and therefore no one is going to pay money for your idea because your idea is not significantly better than the “good enough” free solution. Someone might have tried the idea 2 years ago and it failed miserably because of X, Y and Z. Things like that.
  2. People might be lukewarm to your idea. They just sound bored and non-committal when you talk to them. This often happens for the same kinds of reasons as in the previous case. Or your idea is too small to excite people. Or your idea is addressing a pain point that is not very painful. Etc.
  3. People might not like your idea so much, but as you talk to them you realize that there is a related pain point that is a real problem that people can get excited about. You talk to them about your idea X, and when you do people often end up mentioning their pain point Y. Maybe Y is a better thing to work on.
  4. People grab you by the collar and scream “I need this product right now!” or “Here, take my money and give me this product today!” or “I need this product so bad – when will it be ready?!” or “How can I help you get this product to market?!” or “This is a brilliant idea – why didn’t I think of this?!” or something along these lines. People are excited and passionate when they hear about your idea.

In cases #1 and #2, you need to abandon the idea, come up with a new one, and restart the interview process on the new idea. Go back to Ideation. In case #3 you need to pivot to the new, related idea that people are excited about and talk to more people about that idea. In case #4, obviously you should consider bringing this product to market if that is possible.

What you are really looking for are ideas that fall into category #4.

Vetting your idea

Try to talk to as many people as you can about your idea, and gather as much data as you can. You can talk to them in person, arrange a phone call, talk to people at events or gatherings or public places, do surveys of people, etc. Do a lot of interaction like this. Set a goal of talking to 100 people about your idea (see this page for how to interview people), and spend a month doing it. You will be amazed at what you learn. If you do not see a very positive response, or do not see some way to pivot, then consider trying a new idea.

Let me also mention again that it is sometimes easier to think about “an audience” rather than “a product”. For example, let’s say that your audience is farmers, and you want to make their lives better/easier/less complicated/whatever. Farmers have hundreds of problems that you could solve, hundreds of pain points that you could address. Maybe your first idea for farmers does not resonate, or does not have a strong enough value proposition. Then look for other problems farmers have and try again.

The Sunk Cost Fallacy

“Killing your startup” can be a very difficult decision to make. You may have invested a lot of your time, energy and money into your current startup. And this investment can lead to something called The Sunk Cost Fallacy. Read more about it here:

But if you are working on a startup that is not growing and not showing you multiple positive signs of future reward, it would be better to kill your current idea and explore a new one. Talk to your mentor(s), talk to people you trust, and seek their advice as well. If it is time to start over, start over. If it is time to move forward, start the SSI part of IPESSI.