Summary : The opportunity validation exercise that every product leader should perform as early as possible. The outcomes of this exercise shape the product strategy, and in turn it’s potential for success.
Related: The Opportunity ‣
The biggest unresolved questions we had were: what is the amount of engagement we could expect from our users based on their natural product behaviors, and would this level of engagement from an online community be an attractive investment opportunity for Venture Capital pre-monetization?
The answer to those questions would be the key to understanding how to develop our strategy, but unfortunately while we were building we never went through the exercise of validating this question, largely because we didn’t know it was possible to do so. But at certain point, you learn enough about your users and their natural product behaviors that you can draw some key conclusions with a pretty high level confidence. At that point, you can apply what you know about your user-base to create broader projections and see if those projections line up with the opportunity size that you are looking to validate.
We knew there was a significant opportunity if we could build this platform to become financially successful, given the severity of the market’s pain-points and potential value of advertising on the platform. (Read more : The Opportunity)
But should we hinge the company’s success on our ability to raise venture capital early on?
(It is totally possible to build a successful tech company that does not end up being a unicorn without raising venture capital… You just never hear about those companies!)
VC’s say all the time that you need to sprint as quickly as you can to gaining traction and if you can, evidence of a product-market-fit. This advice is far too broad to be useful at the earliest stage. I believe now that every entrepreneur or product builder should run as fast as they can towards being able to run a high confidence Opportunity Validation exercise like the one I’ve exemplified in this article. If we had run this exercise early on, I believe it would have saved us our company.
We would have seen that our company would not be attractive to VC’s in this market, and thus not wasted so many resources chasing a highly unlikely target. We could have adjusted our strategy to monetize early on and create a sustainable business so that we could continue on our mission of empowering scientists.
Given our user’s natural product behaviors, how much could we grow the platform’s active users within 2 years?
Our strategy had hinged on growing our community of engaged & retained users ahead of monetizing, and raising venture capital in order to get there. However, VC’s wanted to see 10k MAU before committing to leading a Seed round. We estimated we had about 2 years of runway with our pre-seed funding before we would need a Seed investment.