Demonstrating Product and Market Validation

Funding

When talking to potential investors for your startup, the first questions you get will invariably involve product validation and market validation. In other words, investors want to know if your product works and if someone will buy it. Investors will need to see evidence of validation before they move into further diligence, so it’s important to be prepared to show product and market validation in your pitch.

Beta users are a great way to demonstrate that a product works and has customer interest. In many cases, the product is a website providing some value in the form of data storage or analysis. More than likely, you will get the product up and running—but will someone use it, and more importantly, pay for it?

Customers who pre-pay for it check the market validation box. It demonstrates you are solving a real problem. If you don’t have anyone paying for it, then you’ll need to resort to pipeline metrics showing the number of downloads, trials, and pilot programs.

While not the same as a paying customer, these metrics can give a leading indicator that customers are likely to buy. It’s also helpful to illustrate the funnel that prospects go through when engaging with your product. This includes lead generation, qualification, closing, trials, pilot tests, and signed customers.

Investors will look for a consistent signup percentage on the leads going through your program. While the absolute number of signups may not by high, the repeatability of your model can be compelling to the investor

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