By Josué Gomes
What I hear most often in all the years I've been studying this subject is: "I have a great idea. I invented the Uber of this, the Uber of that." Honestly, without wanting to discourage anyone, that pitch is pretty worn out by now. And, drawing on the experience of many people who have been working with the startup validation process for many years — not just me; I actually learned from these people, as well as from hitting my own walls with my startups — some consensus points are already well established. Let's go over them today so you don't waste time learning the hard way yourself. The words are strong, but the goal is for you not to lose a year or two trying to implement your idea the wrong way (as I did). That can cost you precious time, money — which most startups don't have early on — and worst of all, business timing. What does that mean? You can miss the window of opportunity. The idea may have been good, but because execution took too long, you missed the moment.
Without further ado, here is the roadmap that is already well established and is nearly consensus among the most experienced in the field:
1 – I had an idea and I'm going to look for an angel investor
In the vast majority of cases, this is a terrible idea. Why? You've pinned all your expectations of success on securing an angel investor. A big mistake. "But I have a solid Business Plan in a well-crafted PowerPoint." Let me tell you what I once heard from an angel investor in France: "I'm sorry, with all due respect, but I receive 10 PPTs like this one per day in my inbox."
I don't like plans. I like metrics collected from real-world activity. Even Mike Tyson once said: "Everyone has a plan until they get punched in the mouth." I think that's about right. There are too many variables for us to presume we can control them all. I prefer to act, go to market, test, and course-correct as needed. You craft a beautiful, detailed Business Plan, spend a ton of time on it, go to market, and… none of it plays out as written. The market is sovereign. The market is king. Listen to the market. And that doesn't mean asking people: "Would you buy this product if it existed?" Often, people will say yes just to be polite. Remember: metrics must be real. Be honest with yourself. Don't fool yourself. Build the MVP (minimum viable product), actually sell it, and collect real feedback.
You should focus your time and energy on delivering consistent results. Angel investors very rarely invest in ideas. They say ideas are a dime a dozen. They invest in teams that have demonstrated the ability to deliver consistent results. And how do they know a team has that capacity? Simple — they will ask for the numbers. Which numbers? For example: growth rate, LTV (how long the customer stays on your platform consuming your product), Breakeven (when revenues will cover expenses), CAC (customer acquisition cost), uninstall rate (what percentage of users uninstall your app), how much of your own money you've invested, among others. So, until you have solid numbers, I don't recommend looking for an angel investor — unless the business is highly disruptive, hard tech (a very advanced technology), with a high barrier to entry (making it very difficult for others to copy your business), such as a scientist who has discovered a way to print a viable human organ. In that case, yes, you could likely attract an angel investor without presenting the numbers above.
2 – You have an idea? Great. Go to market and validate it
"But I don't have the app ready yet." Build the app, website, or prototype in the simplest and cheapest way possible, go to market, test it in the real world with potential customers, gather feedback, improve your product, return to market, validate again (preferably with different people to gain new perspectives), and collect the data described in the previous section. Depending on the data, persist or pivot (abandon the current idea and move on to another). There's a saying in Silicon Valley: "If you're not embarrassed by your first product, you launched too late."
3 – Read the book "The Lean Startup" by Eric Ries
This book is required reading for anyone starting a startup. It covers the two previous topics in much greater depth.
4 – "But I don't have money"
This is another point where an angel investor may corner you. If you don't invest your own money in your business, it signals that you don't believe in it all that much and that you want to transfer all the risk to them. "But as I said, I don't have money." Sell your car and invest in your business if you truly believe in it. Or go into your overdraft (something neither I nor Flávio Augusto recommend, even though we've both done it).
I once started a business with R$ 179.00. I created a logo and a website (myself) and sent it via WhatsApp to people I knew, asking them to spread the word. It worked — I got money coming in. It was a course. I identified an opportunity, found some friends who were knowledgeable on the subject, they agreed to teach the course, I built the website, promoted it, charged for it, scheduled the date, my friend delivered the class, I paid my friend, and kept my share. There are websites (Fiverr, for example) where you can find freelancers who charge as little as $5 for a logo, $20 for a website, $100 for an APK (an executable program that installs directly on Android without needing to be published on Google Play). So, not having money is not an excuse.
5 – Co-founders. To have or not to have? That is the question.
If you intend to seek an angel investor and don't possess all the expertise your business requires, having co-founders with complementary skills will score significant points. For example, if your business is technology-based and you don't have a tech co-founder on the team, don't even bother looking for an investor.
Now, if you don't intend to seek an angel investor and have no need for someone with complementary knowledge, running the startup solo can be an option. That said, even in this scenario, if you build a solid company growth program, you will most likely need to offer equity to strategic contributors who deliver results or who were decisive in certain stages of the business's expansion. This is called a "Growth Engine" — when you make people feel like part of the business, or even like owners, and they give their very best.
6 – Ask yourself: What pain (specific problem) does my business solve?
42% of startups fail due to lack of market demand. You think you have a great idea, but when you go to market, you discover that people or companies don't need — or aren't yet ready for — that solution. Research what solutions people or companies are actually looking for. When you focus on the solution rather than the idea, you dramatically increase your chances of success (of startups that succeeded, 10% were idea-based and 90% were solution-based).
You can find insights from friends, family, through market research with potential customers, and through tools such as Google Trends, which shows whether interest in a given topic or keyword is rising or falling. But ideally, you should go out into the field. Look people in the eye. Capture nuances and gather information based on behavior you observe in real time — things that are impossible when you only send out a form. If you can, travel to other countries, preferably more advanced ones; many business "ideas" that succeeded here were actually copied from elsewhere.
7 – Angel investor. To have or not to have? That is the question.
A startup is not required to have an angel investor to achieve success. There are advantages and disadvantages to having one.
The advantages are:
- Smart money (you should look not only for capital but for an investor who can amplify your business, whether through their expertise or their network).
- The capital itself, obviously, which will leverage your business and help you acquire equipment or technology that can make a significant difference in the process.
The disadvantages are:
- You will give up a percentage of your business. Be very careful not to give up a share that leads to demotivation, although most angel investors are aware of this and take care to avoid it.
- You will have to report results to your angel investor and will be held accountable for them.
- The capital. Yes, you read that right. The capital. Why? It can give you a false sense of security — that everything is fine, that you have money in the bank and can invest freely. Big mistake. Money runs out. And if you are not growing consistently and responsibly, the bomb will eventually go off in your hands. What bomb? The moment the money runs out and the numbers are not sustainable, you will collapse. So, as I mentioned at the beginning, track your metrics. CAC must be lower than the profit you are generating from customers — ideally, much lower. To help on this front, be very mindful of retaining your existing customers. Keeping current customers is far cheaper than acquiring new ones.
8 – Non-disclosure agreement
If you've decided to bring on an angel investor and are heading into your first meeting, my suggestion is: don't require them to sign a non-disclosure agreement. They don't like it. They hear ideas all the time. Research them beforehand — check whether they are ethical, whether they have synergy with your business, whether you like how they come across. After all, they will be your partner, and a partnership is a marriage. They are not going to steal your idea (not that I think it's impossible, but I believe it's highly unlikely). They know that an idea without execution capability is worth almost nothing. They are looking to invest and reap returns down the road — not to become entrepreneurs themselves. As I said at the beginning, the team and its ability to deliver are the primary factors in evaluating a startup. Not the idea.
9 – Don't be committed to failure
If after going to market you don't find success — you think you did everything right but it didn't work out, it didn't take off, it didn't fit — you solved a real problem for someone, you built a tool to help people or companies earn more money, gain productivity, or cut costs, you reviewed your pricing, your usability, confirmed the product is intuitive, and still couldn't get off the ground — that's okay. Don't be committed to failure. Learn from your mistakes and move on to the next venture (if you choose to). I don't know a single entrepreneur who got it right on the first try. The vast majority of successful entrepreneurs have failed multiple times. In fact, that is highly regarded in Silicon Valley.