Startup Survival. Validating Ideas to Prevent Failure and Save Budget

In the dynamic world of startups, many embark on their entrepreneurial journey driven by a compelling idea and unwavering passion. Teams invest their valuable resources—time, money, and talented individuals—wholeheartedly into bringing that idea to life. However, the unproven road they tread carries inherent risks and uncertainties. Is it truly worth sacrificing one's life savings and devoting endless hours to an idea that may not yield the desired outcomes?

The most common reasons for failure are marketing problems accounting for a significant 56% of overall challenges, with the lack of product-market fit emerging as the most detrimental and widespread issue. As per data, we see 22% of startups get failed due to marketing and because of this they were unable to acquire users. To mitigate these problems, it is crucial not to commit substantial time and resources until there is confidence that there is a demand for the product or service being offered. It is essential to promptly and cost-effectively validate assumptions and be open to pivoting if necessary.

In this recent business case, we highlight the importance of validating ideas before entering new markets based on the example of the gift market in the USA. Learn how careful validation can save you time and money, preventing losses on unproven concepts. Through market research and customer feedback, discover the transformative power of informed decision-making.

Alexander Dvoeglazov, an experienced serial entrepreneur, has a deep understanding of market dynamics. With more than 15 years of experience in the startup market, he understands perfectly well that some ideas thrive, while others fail. While simultaneously developing a green-tech company Ficus, he and his colleagues have developed a truly innovative concept - a subscription service offering regular surprise gifts.

Eager to enter the US market, the idea generated tremendous enthusiasm within the team. Nevertheless, leveraging his wealth of experience, Alexander exercised prudence by temporarily shelving the idea for a six-week period. During this interval, he sought the counsel of the esteemed UXSSR global research team to meticulously assess the concept's feasibility and ascertain the existence of a viable niche. This deliberate approach epitomises Alexander's commitment to informed decision-making and sets the stage for a potentially triumphant market entry.

Research design

The team's hypothesis was that individuals would be inclined to subscribe themselves or their loved ones to surprise gifts as a means to "purchase" happiness and enjoy a surge of endorphins. The key aspect and structure of the idea aimed to relinquish control of gift selection from individuals, incorporating an element of surprise. This way, people would be consistently astonished by the gifts they received within the scope of their subscription. The purpose of the research was to find the product-market fit and potential niche. It was crucial to determine if potential customers shared this perspective of the great idea.

UXSSR experts made a systematic description of the US gift-giving market and consumer profiles, as well as an evaluation of the product offering through the creation and testing of a website. Both sections were based on desk studies, in-depth interviews, and concept evaluations.

Gift Market Insights

It was previously believed, and it has been proven, that having an extensive number of options can cause anxiety and negatively impact purchasing decisions. However, when it comes to gifts, respondents actually feel positively overwhelmed by the variety of options and experience enthusiasm, excitement, and thrill in choosing the best and most suitable gift.

There is a difference in the approach to spending money based on family status. Single individuals or couples without children have more financial flexibility to treat themselves to more expensive items. However, once children enter the picture, participants tend to prioritise pampering their kids over themselves. Additionally, budgets and opportunities for personal entertainment become more limited. For some individuals, self-treats or rewards go beyond mere mood boosters or celebrations. It becomes a lesson in self-love and self-care, helping them enhance their self-esteem and build self-worth.

Interestingly, while gift-giving and gift-receiving are positive topics to discuss, many respondents were modest during the discussion as it required them to be vulnerable. Interviewees felt more comfortable talking about self-treats than admitting their skills as gift-givers. Females tend to be more open and comfortable when buying emotional treats and rewards for themselves, while males tend to be more conservative, either refraining from self-treating or purchasing functional items for the household, or involving their close ones in the self-treatment activity.

Respondents prefer experiences as gifts not only because they are more memorable but also because they can be shared. Some activities are shared on social media, while others are kept more private, only discussed within family and friends' chats. The value of these experiences lies in the time spent together and the feeling of closeness and presence with loved ones.

Interestingly, people employ different strategies to communicate their gift preferences based on the closeness of their relationships. Immediate family members and close friends often give hints to each other and pay closer attention to each other's preferences, eliminating the need for additional assistance in gift selection. On the other hand, extended family members or co-workers tend to exchange wish lists or opt for options with limited personalisation but broad appeal.

Even when purchasing a surprise gift for themselves or someone else, respondents want to see examples or learn more about what is included in the package to evaluate the value-for-money factor. While this deviates from the initial concept, it can be seen as a fruitful gamification mechanism that involves both the gift-giver and gift-receiver in the process. As a result, even a tangible gift becomes a personalised experience, catering to the needs of both parties. Since individuals often encounter unwanted items, they have developed four major strategies to deal with them, listed from most common to least common: regifting, returning, donating, and ignoring.

Why the Initial Idea Would Fail

The research data revealed significant shortcomings in the initial idea, contradicting its fundamental assumptions. The study highlighted two critical factors contributing to the failure of the concept: a lack of autonomy and the disregard for the positive emotions associated with gift-giving.

Contrary to expectations, the data demonstrated that individuals derive primary positive emotions from personally selecting gifts for others (gift-giving). This act of thoughtful consideration and personalisation brings joy and satisfaction to the giver. On the other hand, the negative emotions arise when individuals receive gifts that do not align with their preferences, leading to the challenge of dealing with unwanted items (gift-receiving). Unfortunately, the initial idea stripped away the positive aspect of gift selection, leaving recipients burdened with the task of managing unsuitable gifts.

Additionally, the research findings revealed that people inherently desire autonomy and control over their gift choices. The initial concept failed to acknowledge this fundamental aspect. The purchase of happiness is often spontaneous, driven by personal desires and immediate needs. However, the concept lacked the necessary triggers to entice individuals to utilise the service, as it did not align with their natural inclination to make autonomous purchasing decisions.

Saving Half a Million Dollars and Three Years of Your Life

After carefully examining the research data and gaining valuable insights, the team, led by Alexander, engaged in thoughtful contemplation and discussions. Ultimately, they reached a consensus that deviating from their original idea lacked the necessary drive and viability. As a result, a decision was made to refocus their efforts on other priorities.

This leadership decision exemplifies the importance of making informed choices based on thorough research. Rather than rushing headlong into executing the initial idea, this startup case demonstrated the qualities of a prudent entrepreneur. By conducting comprehensive evaluations beforehand, they were able to assess market resonance objectively. Involving external experts in business research proved instrumental in mitigating biases that may arise from a deep attachment to one's own ideas and ensured an objective assessment.

Thorough research conducted prior to entering a market brings significant cost and time savings across various categories such as pre-trading, administration, website setup, marketing, operations, HR, and payroll. In a specific instance, the research resulted in an annual savings of nearly $560,000 for the startup, while also saving valuable time and avoiding the emotional toll associated with a failed product. This underscores the critical role of research in optimising finances and streamlining operations, ultimately bolstering the bottom line.

Thoroughly testing ideas before venturing into new markets is imperative. It is essential to validate these ideas not only within the internal team but also seek the expertise of external professionals. This collaborative approach helps establish a solid foundation of trust and ensures a product strategy that relies not solely on intuition and passion but also on objective data and meticulous analysis of product-market fit. By following these necessary steps, startups can construct a trustworthy product strategy that maximises their chances of success.