Mastering the Art of MVPs: Test Your Startup Ideas Fast

Hey there!

Want to learn how to test your startup ideas without breaking the bank? We are diving deeper into the build, measure, and learn system we discussed yesterday. In this newsletter, we'll cover:

• The story of Facebook's early days and their value and growth hypotheses

• Leap of faith assumptions and why they matter

• Five types of MVPs (Minimum Viable Products) you can use to test your ideas, with examples for each

📚 Estimated Read Time: 5 minutes

Facebook

Back in 2004, three college sophomores hit up Silicon Valley with their new college social network. It had just a few features and only 150,000 users, but they somehow managed to raise $500,000 in venture capital. And yeah, you guessed it – they were Mark Zuckerberg, Dustin Moskovitz, and Chris Hughes of Facebook. What really wowed investors was their value hypothesis and growth hypothesis.

Now, you might be wondering, "What the heck are those hypotheses?" Well, let me break it down for you. The value hypothesis is about proving that customers find your product valuable. For Facebook, that meant more than half of their users came back every single day. Impressive, huh?

The growth hypothesis, on the other hand, is about how fast your company can grow. Facebook nailed this one too. In just one month, almost three-quarters of Harvard's undergrads were using the platform without spending a dime on marketing or advertising. Talk about insane growth!

Back then, some folks thought Facebook's early investors were crazy, like they were going back to the dot-com era where companies with little revenue raised massive amounts of cash just to "get big fast." But Facebook was different – they had a different engine of growth. They didn't pay for customer acquisition, and their high engagement meant they had tons of customer attention, which was super valuable to advertisers.

Leap of Faith Assumptions

Alright, so every business plan starts with a bunch of assumptions, right? We create a strategy based on those assumptions and then show how we're gonna achieve our big goals. But since these assumptions aren't proven (they're just assumptions, after all), we gotta test 'em out ASAP as a startup.

Traditional business strategy is really good at helping us see what assumptions we're making. The first challenge for us entrepreneurs is to build a team that can test these assumptions systematically. The second challenge is keeping our eyes on the prize while we do that testing. We don't wanna lose sight of our vision.

Now, a lot of assumptions in a business plan are your everyday facts – stuff we know from past experiences. Like with Facebook, it was clear that advertisers would pay for customer attention. But there are also those bold assumptions that we gotta say with a straight face: we think customers really want a product like ours, or we think supermarkets will carry our stuff. Believing these assumptions and acting on them is like a superpower for entrepreneurs. They're called leaps of faith because our entire success depends on them. If they're true, we're golden; if not, our startup might crash and burn.

Types of MVPS

Alright, let's dive into these five types of MVPs (Minimum Viable Products) that can help you test your ideas. I'll give you some examples and tips for each, so you'll know how to start testing your own ideas.

1. Smoke Tests: This is where you create an AdWords campaign with a landing page to see if people are interested in your idea. For example, if you've got a cool new app idea for dog owners, you could set up a landing page with some basic info and see if people sign up to learn more. If you get a good response, it's a sign that your idea might have potential.

2. Sell Before You Build: With this approach, you launch a crowdfunding campaign among potential clients and use the money you raise (if any) to build your product. Let's say you've designed a new type of eco-friendly water bottle. You could create a Kickstarter campaign to see if people are willing to pre-order it. If you reach your funding goal, you know there's demand for your product.

3. Concierge: Here, you provide the service completely manually for every client to generate ideas and see if they're ready to buy. For example, if you're thinking about creating a meal planning app, you could start by offering personalized meal plans to people and manually creating them based on their preferences. This will help you understand what your customers want and whether they're willing to pay for it.

4. Wizard of Oz: With this method, you fake the supposed automatic features of your product by doing them manually to test your product hypothesis. Imagine you're developing an AI-driven chatbot for customer service. Instead of building the AI first, you could have a human operator behind the scenes answering customer questions. This way, you can test if customers find the service valuable before investing in the AI technology.

   

5. Single-Feature Product: In this approach, you build your product with only one feature or minimal functionality to get early traction and validation. Suppose you're creating a project management tool. Instead of launching with a full suite of features, you could start with just a simple task management system. If users find that helpful, you can add more features over time based on their feedback.

By using these MVP strategies, you can start testing your ideas and getting valuable feedback from potential customers. This will help you refine your product and increase your chances of success. Good luck!

Best,

Camillo