“I would rather have my name on a $25,000 hole in the ground than a $1 million hole in the ground. For the record, my name is on lots of both.”
Rob Adams, senior lecturer at the business school here in Austin, and director of the newly organized Texas Venture Labs, is preaching the gospel of market validation again (see Rob Adams Wants You to Make 100 Phone Calls Before Launching Your New Business).
Now he is making the circuit with his new book, If You Build It, Will They Come? Three Steps to Test and Validate Any Market Opportunity, an expansion on the idea that companies young or experienced are better served by a Ready, Aim, Fire approach than what Adams says is the more common path of Ready, Fire, Fire, Fire, Aim. Move aim (market validation) up to the front, he claims, and you’ll have a better chance of avoiding the 90 percent failure rate of most new product startups.
Adams admits early on that “there is nothing esoteric or magical about the Market Validation process…but it takes discipline and effort to get it done.” That effort includes investing 10 percent of your product development budget up front to make sure the remaining money is spent right. Using a formula Adams outlines in his book, a startup with a $1 million initial budget would allocate about $500K to product development, and $500K to launch, sales and marketing. That means that 10 percent of $500K should be spent over an intense 60 days of market validation before product design even begins.