When PayStack’s founder – Shola Akinlade – put out an essay documenting how his company became the first Nigerian startup to ever be admitted to the prestigious Y Combinator incubator program in 2015, two years after the fact, he hinted at the importance of moving fast in innovating in any industry; especially in ones where your offering represents the first of its kind in that space.
“When I founded my first startup in 2010, we needed a way to accept payments online, there was no solution locally, we had to work around using Avangate BV and creating accounts in the UK. 5 years later, there’s still no easy way.
I spent the entire 2014 implementing payments and disbursement solutions for Banks and I realized that most of the infrastructure needed to build a full stack payments API already existed, and it just needed someone to do the hard work of putting it all together and doing all that is necessary. I finished the engagement in Nov. 2014 and immediately created Paystack.”
Today, It’s not enough to have an idea that could change the world; a lot of people have variants of these ideas already and some even better. These days, more important than they have ever been are what we have tagged “The Golden Rules Of Idea Validation”
These golden rules are what make the difference between spending half of your life building a company that will never scale, versus building a successful company in record time.
1. Make absolutely sure your idea is first in class
This is an idea-validation exercise that anyone with a sudden seemingly brilliant idea should engage in – you will be shocked at the number of us that just fail at this. Agreed, no idea under the sun is new, however, there is always a new value to add and innumerable problems that require innovative solutions.
However, what we find is that very few of us engage in validating our ideas, and this is evident in the number of kind businesses around; everyone is doing what everyone else does.
Your fintech loan making app is gaining traction? Oh well, you can be sure someone’s starting theirs tomorrow too.
When Paystack started out as stated in the above quote, its founder made sure to address a problem that up until its existence had not been addressed or even seen as a problem: recurring and one-click online payments.
A probe into some of the most recognisable and profitable companies in the world – Apple, Facebook, Instagram, Google, Tesla etc – will reveal to you how important it is for an idea to be distinguishable.
The idea behind the modern day phenomenon of Instagram is particularly interesting in this regard. Who would have thought sharing one’s picture openly online with a large number of unknown people would receive so much acceptance? Certainly not us. What we all know though was that the idea was unique in its time.
Same for Apple with its introduction of the iPod.
Before the advent of the mp3 music playing device there were a number of other mp3 players and Sony’s walkmans CD player that most of those born in the 80s used. It was a massive success in its time retaining more than 50% of the US market in the late 90s. But still, in the eight years succeeding the launch of the iPod in 2001 it sold way more units than the walkmans or any of its competing mp3 players in any single year.
Here is why:
“Apple waited, and then waited some more–until it finally made its move, putting the last two pieces in place to create a winning innovation: an attractive, simple device supported by smart software. Steve Jobs knew that, on its own, the mp3 player was useless. He understood that, in order for the device to have value, other co-innovators in the mp3 player ecosystem first needed to be aligned… Despite being available only for Mac users, the iPod was the fastest selling mp3 player to ever hit the market…” – From The Athlantic
You may ask: how do I know if my idea is first in class?
A great first step would be to research the industry, research existing competitors and research who your likely customers are. There is almost always a unique problem to solve and this problem rears its head to you when you carry out proper and in depth research.
Find out what problems your likely customers are currently having with the existing products. What target audience has been left out? What demography is not catered for? What is the competition already doing and what are they not doing?
An idea that is first in class is an idea that is first of its kind or unique. But, if you want a more concrete answer listen to Paul Graham’s advice to YC applicants on the importance explaining one’s idea clearly:
“It’s a common mistake to say the distinctive thing about your solution will be that it’s well-designed and easy to use. That is not an insight…So you have to be more specific. Exactly what are you going to do that will make your software easier to use? And will that be enough?…We don’t mind if you’re doing something that will face serious obstacles. In fact, we like that. The best startup ideas are generally outliers that seem crazy to most people initially.
So, that’s it. If your idea doesn’t sow doubt in your mind; if it doesn’t keep you up all night thinking about how it will work or if it ever will; if it doesn’t make you realise how little you know, then maybe that idea isn’t first in class.
2. Solve my problem, take my money
“If I had asked people what they wanted, they would have said faster horses.”
This is a popular Henry Ford quote about consumer needs that we’ve all come to love, although a lot of us have misinterpreted it such that it affects our decision on which startup idea to build a company from.
While it may be true that consumers seldom agree on the best way to solve a pressing communal problem they face, they are often aware that there is indeed a problem and can almost always agree on what the problem is. For Henry Ford’s customers it was wanting to get somewhere faster.
As a potential startup founder, your job is to ask, observe, probe and do whatever you can to ensure that you’re birthing an idea that solves a real problem people have.
That problem gap for Paystack was making it easy for merchants to receive online payments without having to set-up a branch in a foreign country complete with a bank account. Before Paystack, merchants only used payment processing gateways that supported those countries and later found ways to send their sales proceeds back into the country. It is easy to imagine how big of a problem that would have been prior to Paystack’s existence.
When asked how he knew people needed what he was making, the payment processing startup founder, Shola Akinlade, replied:
“…we haven’t done any PR or Marketing and we’re growing our waiting list at 10x monthly, just from word of mouth. I’ve personally spoken to over 150 merchants and everyone is excited and waiting. Our pilot merchants need it so much that they started using it without a settlement system, so they did not mind leaving their money with us for over 6 weeks”.
So yes, when you have a winning idea like Paystack founders did years ago, getting people interested in it will be as easy as easy can be. And although people may not be able to conceive what your solution to their problem will be, think of having an electric motor rather than the faster horse you had hoped for like in the case of Ford’s, they would love every bit of your company if it indeed solves their problem.
Like the mantra of the popular startup incubator that propelled Paystack to greater heights, I would end by saying this: build what people want.
3. Go fast, real fast
The time between Paystack’s $120k YC pre-seed funding and its $1.2M series A raise was a mere 10 months; highlighting the speed at which the company is innovating and improving its products for greater satisfaction and even more market penetration.
When Michael Seibel, co-founder of Twitch which sold to Amazon for $900M, was asked to give his take on whether it is important for a startup idea to be ‘great’, his reply was a pointer to the history of his own startup and how the original idea behind it had morphed over time to what was now Twitch.
He highlighted how their main idea to create a platform where people could broadcast their daily life in a reality TV form (JustinTv) changed to what is now the video game streaming platform that is now Twitch.
The idea behind Paystack itself was by no means great. In fact, their first version would undoubtedly have been basic in comparison to what their current product is. But since Paystack’s founder knew that people truly needed a seamless way to receive money online, he went real fast in implementing that first version that finally evolved to what Micheal calls a ‘product market fit’.
After validating your idea, the point of going fast is so that you can be absolutely sure, like the founders of Paystack were years ago after the launch of their MVP (minimum viable product) that indeed, your product is a keeper.
What we have learnt from Paystack’s rise is that where any startup has enjoyed even a moderate level of acceptance and popularity, it has been because of the combination of these factors and a relatively ideal market condition.
It is easy to come up with ideas and as the saying goes, ideas are dime a dozen. However, what really makes successful startups are the things that must have been a pointer to the concreteness of the idea that a company was borne out of in the first place; these are the things that we just took the time to list.