According to Startup Genome Report statistics, only 3% of startups survive to their third birthday. 95% of new projects don’t make it to the first sales stage.

Very often founders, authors of ideas, and project owners are “blinded” by the supposed uniqueness, importance, and unconditional relevance of their project.

We often hear phrases like:

“There are 8 billion people on Earth if even 0.1% of this number buys a product…”,

“the application market is $1 trillion, even if we get 0.02% of this market, our product will take off…”

And other examples based on our own “desires” and primitive arithmetic of the school curriculum.

We call it the “Bruegel effect,” referring to the painting “The Blind Leading the Blind.”

In essence, the founder leads the project (startup) team into a conditional abyss of financial failure, lack of market demand, and defeat in competition.

To avoid this, it is necessary to make sure that the project is promising BEFORE starting a significant investment of funds, time, and human resources.

“An idea can’t be bad if it can’t be tested.”

This phrase by Bill Frank, the guru of analytics, reflects our approach to validating hypotheses and testing ideas.

The essence of our methodology is as follows: before a project is launched, a research phase is necessary. You need to analyze an idea for its prospects according to a number of criteria.

We have identified five criteria. Each of them is extremely important and cannot be considered on its own, in isolation from the rest of the set of factors.

So, we analyze the following indicators:

  1. Potential market volume
  2. Market dynamics
  3. Complexity of marketing efforts for the company
  4. Complexity of product creation
  5. Complementarity of the product to the current business of the company

Each of the criteria corresponds to a sum of scores that are assigned based on the results of the evaluation of key indicators within each of the criteria.

As a result, the researcher gets a certain sum of points, where 100 is the mark of an ideal project from the point of view of attractiveness, and 0 is unattractive.

Let’s look at the criteria by which an expert or a team of experts assesses the attractiveness of a project.

1. Market size

This is a measure of how large the potential market for a new product is. The scoring is based on the subjective amount that each company considers attractive to it. In our example, the desired market size is between $50bn and $100bn per year.

For a small company, this amount can be tens or hundreds of thousands of dollars. It all depends on the market, product, business model and stage of development of the product and company.

This figure corresponds to the SOM value from the TAM-SAM-SOM framework. Depending on the data obtained, an expert or a group of experts assign a certain number of points.

For example, here is a breakdown of the scores from our clients’ projects.

Market size:

0-5 — up to $1bn

6-10 — $1-10bn

11-15 — $11-50bn

16-20 — over $50bn

2. Market dynamics of the market

The potential market’s size and dynamics are also important. If the market does not grow or grows slowly, it may indicate that it is saturated with supply or that the product group itself is in a stage of decline in the life cycle. On the contrary, high growth rates of 10% or more indicate that the market is promising, not oversaturated, and open to new players.

Market dynamics:

0-5 — up to 3% per year

6-10 — 4-15% per year

11-15 — 16-30% per year

16-20 — >30% per year

3. Complexity of marketing efforts for the company

The most difficult situation for marketers is when the potential target audience is not familiar with the problem that the product is intended to solve. In this case, marketers need not only to tell about the product and convince the potential user to buy it but also to convince the target audience that they have a problem. This requires significant financial and, most importantly, time resources.

The situation improves considerably when a set of potential users know about the problem, which means that they have already formed a pattern of consumption of an entity that solves this problem or at least there is a working substitute or a request for it.

Contrary to popular belief, the situation when there are already successful existing players in a market is not bad. On the contrary, for marketing it is a matter of little else. Identify the weaknesses of competitors, determine what is important for customers, and based on this form unique offers for the target audience.

The situation becomes almost ideal when the company planning to launch a project has a recognizable and defined audience in a given market. Here it remains only to inform potential customers about the new product, to show its strengths. Brand awareness in the current market will act as a locomotive in this case.

Marketing complexity:

0-5 — potential CA is not aware of the problem that can be solved by the product being developed

6-10 — potential CA is aware of the problem that can be solved by the product under development, but there are no similar services/products that are already popular among CA at the moment

11-15 — the potential CA is aware of the problem that can be solved by the product being developed and knows how to solve it, and there are successful examples of projects on the market that solve the same problem.

16-20 — the same as the previous + your company is already working in this market, knows how to promote in it, and has technical and marketing capabilities that can be an additional advantage.

4. Complexity of development

Time is the most important resource and the faster a company overcomes all the difficulties of product development up to MVP, the more attractive the project implementation becomes.

If it takes more than 2 years to develop a product to the MVP stage, we consider such a product to be the most difficult to develop by the company. Therefore, it will get from 0 to 5 points according to this criterion.

And vice versa, if the development will take up to 3 months, then this product is the most attractive in terms of the time of its implementation, and therefore, the least complex for development.

Creative complexity:

0-5 – technologies and resources allow realizing the product up to the stage of MVP stage within more than 2 years

6-10 – technologies and resources allow the realization of the product up to the MVP stage within 1–2 years. 

11-15 – technologies and resources allow the realization of the product up to the MVP stage within 6 months to 1 year.

16-20 – technologies and resources allow the realization of the product up to MVP stage within 6 months to 1 year MVP stage within 6 months

5. Complementarity with the company

It is extremely difficult to realize a project that is not related to the market of the company in which it carries out its main activities. The most positive and high in terms of evaluations is the fact that the company realizes a product in its industry, supplementing the existing range of products, without requiring significant changes in production technology.

Complementarity to Company:

0-5 — the product is not related to the current market of the company

6-10 — the product idea is related to the current market, but it is not related to the main product of the company.

11-15 — the product is related to the company’s current market and complements the company’s core product line. The product is related to the company’s current market and complements the company’s core product line, forming a potential upsell.

16-20 — the product is related to the company’s current market and complements the company’s core product line, increasing monetization within the existing business model.