The data is damning. Most startups fail within their first five years. The country of origin, territory and sector do not matter: the failure rate is above 80% according to trusted sources such as Forbes.com. How can this be possible in the modern world? Why do so many people put so much time and money into failed startups? Why are they failing?

These questions can be partly answered by our desire to launch our dreams and concentrate on the ‘sexy’ parts of starting a business: like choosing a name, developing a brand, and speculating about how much money the company will make. The ecosystem also fails them, as ‘Silicon Valley’ is the prevailing role model of how to launch a business, with its heavy emphasis on raising investment. Business schools, universities and incubators all follow this model by making the end goal for their programs making a pitch to investors.

As a result of this approach, founders think the best way to start a business is to raise investment. When I ask a founder how I can help them as a mentor, in most cases they will say: “I’m looking for investment”. I decode this to mean: “So you’re looking for somebody else’s money to fund your great idea for which you can’t prove there is a need.”

In effect, the current system directs founders to launch products to investors, as if the investor is the customer – and the business plan and pitch deck are what investors want to see. The bad news rarely articulated is that most investors will not invest in an idea that doesn’t have customers or data to prove customer need. They may invest in people they believe can make a business work (and who will eventually find an idea that works), but they much prefer to take on lower risks by investing in scaling a business that has customer traction already.

If you delve deeper into the data about startup failure, you find the top reason for failure by a long way is ‘no customer need’, meaning that there is no viable market for the goods and services the startup is selling. Once your friends and family have stopped buying your product, or your early adopter market has been exhausted, there are no more people interested in purchasing your product. What is clear is most founders spend their time on the ‘sexy stuff’ and look for funding (rather than customers) to launch an idea.

Fortunately, in this digital age, we can communicate ideas to our potential customers and validate them before building a product. You don’t need a Minimum Viable Product (MVP) to find out if there is customer interest. There are clever ways you can make pre-sales without building anything first. The age of ‘fail fast’ is over: an age of idea validation has begun.

Idea validation is the number one skill entrepreneurs need to learn in this internet age. It goes to the heart of the biggest reason for startup failure: no market need. Simply put, idea validation involves finding out if there is a customer need for your idea and collecting data to prove it.

This is the scientific part of entrepreneurship, which starts with an idea and a hypothesis that it solves a problem people are willing to pay for to be solved. What follows is a three-stage process of ‘feasibility’, ‘viability’ and ‘desirability’. Instead of a complicated business plan, which is normally a fantasy document for investors, you start with a one-page canvas that captures the overall business. Personally, I prefer the Lean Canvas at this stage, but many people use the Business Model Canvas.

Stage 1 is the Canvas about the overall idea and identifies customer profiles, followed by stage 2 that involves diving deeper into these customer avatars to understand their motivations and touch points. Once these have been developed, stage 3 is all about experimentation and running validation experiments. At this stage most founders make the mistake of sending out surveys to find out what people think of their idea. Surveys can be very misleading if they are not conducted by a professional survey organisation. People tend to lie and tell you what you think you want to hear or simply just try to get through it as quickly as possible, ticking boxes without giving them much thought. It’s much better to run experiments on people who don’t know they are being tested. These can range from weak validation techniques – such as putting a landing page up on the web and asking people to type in their email addresses to be sent more information, which establishes a level of interest – through to strong validation such as pre-sales, where people actually order and pay for a product before it has been actually built because they want to be at the cutting edge of trends and tastes. There are a range of experiments in-between with names such as ‘broken promises test’, ‘mock sale’ and ‘fake door test’.

The wonderful thing about idea validation is that the process not only validates the idea with customers, but it also validates the founder as having the entrepreneurial skills to launch a business in an environment of high risk and uncertainty. Founders who take this approach are much more likely to avoid the biggest reason for startup failure.

If you want to find out more about these new approaches to idea validation in this digital age, feel free to contact me. I’m part of a philanthropic organisation called The 12Ronnies Foundation, which has a core mission to help startups to launch in the right way for long-term success.