Evan Carmichael discusses validating business ideas before investing heavily. Richard Branson and Richard Reed wait until an idea is about 70% validated before moving forward. Crowdfunding platforms like Kickstarter let founders test concepts with real customers, gather feedback, and iterate without giving up equity.
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Palvinov, who's asking, how do you validate the idea before spending time building it?
I think, yeah, first of all, come up with an idea and it's normally a pain point. There's a lot of examples where you in your lives will know a frustration of a consumer. You look at actually which Richard Branson, we've just announced him for Sage Summit. He's an innovator, he's a disruptor. He's probably one of the greatest world entrepreneurs. And he's tried a lot of ideas. Some have failed and he's left them behind. He's failed fast and then moved quickly. But he always looks at kind of where's the gap in the market, whether it's travel, whether it's music. What is it that we can create with our idea that's going to change the world? And it comes back to what value we create and who we serve and what problem we solve. And I think the key thing is there's a guy as well, Richard Reed, who started a big, um, smoothie company called Innocent. And he said, you know, all you need to do is be 70% sure of your idea and then just crack on and, and get your idea out there as a business, because you will evolve it. And I think the worst thing you can do is sort of analysis paralysis, try and come up with the best idea in the world, and, uh, because that's not real. What you need to do is shape your idea sufficiently, go and, uh, meet friends, meet, uh, buddies, maybe angel investors, when I've aimed to invest in a lot of companies, people have said, look, I don't want you to invest today, but I've got an idea. I might come back to you in 6 months' time when I've got a kind of couple of trial customers and I ask you to invest. But today I just want to test drive the idea and kind of you kind of bat it around, you reshape it and you let me think about it and then I'll go away and build a business based on that. So I kind of think the key thing is think about those key questions, those trends. Like what's the audience you're serving, what value you're providing, how are you going to make a difference, and kind of what is the thing about your idea that is going to be life-changing and provide massive value for hopefully millions of people.
I love it. It's never been easier to test drive an idea with, with services like Kickstarter out there where all you need is an idea or a prototype and then make a video and tell people about it. It's never been easier to go out and get customers before actually having a launch and then going to manufacturing. I just ordered a little nano drone that fits in the palm of your hand and that uses GPS to follow you around while you're like running or skiing or whatever, and it records it and then uploads it to the cloud. And I bought that off of an Indiegogo campaign, and they raised over $3 million to create this nano drone, and they may not have Knowing if it was a good idea or not, they may have jumped in too soon, they may have had to test and tweak along the way, but this is validation, and now they have the money they need. That's all marketing dollars, that's not even getting investors into their business. They're not giving up any equity, and they raised $3 million in money to be able to build their product. And so it's never been easier to use the technology today to test drive and see if there's an appetite for your product, and if not, then maybe you need to tweak it. Because rarely is the idea that you start with where you end up. There's always tweaks and changes. And so having market feedback as soon as possible, you're not just creating the vacuum, can be really helpful.
Yeah, I agree on Kickstarter. You know what, they've raised $2 billion, 10 million backers now, 100,000 projects. And I think you're right, Evan. Not only is there's never been a better time to have an idea, there's never been a better idea to do things like crowdfunding. I think the key thing is you need to own your idea. You need to— and it comes back to Evan's tagline— believe. You never want to abdicate kind of responsibility for your idea, but don't be kind of too precious about your idea because take feedback, especially from early customers, and improve your idea all the time. Improve your product, improve your service. Because as Evan said, I, again, I'm in to invest in a lot of companies. And when I've seen the first business plan and some of these companies have grown to like valuations over $100 million. The first business plan and what they ended up with was pretty radically different. But boy, oh boy, did they test drive and find out what worked before they really scaled it up. And then they iterated it all the time. And I think the world is perfectly tuned to that in terms of speed of execution, the speed of now.
Yeah. You know, you look at BMW, they started as an airplane manufacturing company. That's why their logo is a propeller still. Lamborghini started off in tractors and then went into cars when he bought a Ferrari and Ferrari told him, you know, don't tell me how to make a car, you stick to making tractors. And he said, I'm going to make a better car than you. Got into Lamborghinis. And so it's a great point and your business will change. My business has changed. I don't know how much Sage's business has changed from the start point to where it is now. I know you just made that huge announcement and you're all in on the cloud and You know, business will change from the original idea to where you end up going, what will make you successful.
