As a startup lawyer, this is a question that I hear very often, and the fact that you are talking about validation is already a great start. I’ve seen so many startups invest time and money, only to find that no one wants/needs their product, or that they only want a certain aspect of it (whilst the startup spent money developing a whole bunch of other features), or that the clients aren’t willing to pay the requested price – making the business not profitable. So you’re already one step ahead.
Also, the sooner you validate your product, the better! That said, the version you are validating needs to be representative of the end product, or else the validation isn’t reliable.
So, how should you validate it? The best way, is to see whether people are willing to pay for your product/service.
This is how you find that out:
Create a lean model canvas, or a business model canvas (which is a very basic and more dynamic type of ‘business plan’ ), then Setup a Wix or WordPress website (this can be done for free / very low costs) or if your venture is a mobile app, then create what’s called a Clickable Prototype (“CP”) (a visual of the app in which the images change when you click – you can do so using the Apple Keynote tool or Microsoft PowerPoint). On the website, or the download page for the ‘app’, don’t forget to include the price of the product/service, and enable people to order it (YES, even if it doesn’t really exist yet!). I am happy to explain how this can be done whilst still being fair to your potential customers (the people who click the “buy/download” button).
Determine your target market/customers.
Spend a small amount marketing what you created.
This way, after only spending a very small amount, you will be able to know (assuming that you did it correctly):
a) Do people like your product.
b) Do people want/need your product (not the same as ‘a’).
c) Are people willing to pay for your product? (this being the most important stage)
d) How much are they willing to pay? (you can check this by having 2-3 landing pages with different prices on each).
2 last important points:
a) In order to rule out external factors like an unattractive landing page or advertising campaign, and assuming you have the time, create multiple landing pages / advertising campaigns, with different designs.
b) During the above process, don’t forget to check how much it costs you to get each user/customer to click the “buy” button. If for example each click on your promotion/advertisement costs you $2, and only every 10 people who click go on to the “buy” page – that means each sale is costing you $20. Then check what your average profit per sale is, and then you’ll know if your service/product is worth pursuing (obviously there are additional factors like return customers, referrals etc, but you will get a good estimated/validation of the idea/business).
If in doubt, consult with a startup lawyer 🙂
I’ve been working as a startup lawyer for over a decade, and if it’s one thing I’ve learnt (by seeing founders constantly fight amongst themselves), is that you should really try and avoid a 50%-50% split. This is a very common cause for confrontation and stagnation in making decisions and moving the business forward. Rather make it so one founder has more shares, and accordingly, more voting rights. If you’ve already agreed on a 50%-50% split, then at least make sure you have a good arbitration/mediation clause and a designated third party who acts as a ‘tie breaker’ in the event of deadlocks. The third party can be your lawyer, accountant, or anyone else that you trust.
Yes! One of the most common documents that I’ve drafted (for clients who either didn’t have a startup lawyer before me, or had inefficient counsel) is a ‘separation agreement’ between founders / partners.
According to research done by CBInsights, the top 3 reasons that startups failure are: no market need, ran out of cash, and not the right team.
There is a reason “not the right team” is #3, and this is a strong indication as to why it is important to have a founder’s agreement (yes, even if it’s your best friend from kindergarten, your father or your spouse).
If you don’t have money to pay a lawyer to draft one, then either use something from the internet*, or draft your own – but make sure that you cover the below points (*Clarification: I am not encouraging the use of legal documents from the internet, because each document should be tailored to your specific needs by a startup lawyer who knows what your business does. That said, if you don’t have any agreement in place, and don’t have money to pay for one, it is better that you have something, than nothing – at least for now. A very partial list of subjects that need to cover:
Allocation of shares – how many shares each founder gets and when (it is very important to include a vesting period (meaning the allocation of shares over time) and a cliff period).
Who does what and by when (deadlines / milestones / minimum of monthly hours)
How are decisions made and what happens if there is a ‘tie’ / deadlock (assuming you have an even number of decision makers).
How you fire / terminate employment of a founder?
Arbitration / Mediation clause.
Although I’m sure you could find a template founders agreement online, or even ask ChatGPT to draft one for you, this is the one agreement that I strongly advise that a startup lawyer with experience draft for you. You will thank me later.
Not necessarily. The answer depends on the legal jurisdiction (the laws) that apply in your country (or the place in which the transaction took place), and the specific facts (for example: what was agreed between you and the developer, and how was it agreed – verbally? In writing?).
The copyright laws of many western countries usually state, that the default status is that the person who creates the ‘work’ (in this case your website), is the owner of that creation (assuming he didn’t copy it from someone else). Therefore, in the above example, the programmer will be the owner of the rights in the website.
That said, there are a few exceptions:
If you, the client, order a ‘work’ (i.e. a website), and agree (explicitly, and in some cases also implied) that you will own the rights, then you will in fact own the rights despite the above mentioned default.
If the website was created by an employee during, and as part, of his ‘day job’, then his employer (his boss) may own the rights to the website – unless agreed otherwise. For example: if your programmer works for IBM, and whilst at the office he takes some time to create your website, then his employers (IBM) may own your website seeing how it was created by their employee who is under contract with them.
There are other exceptions and exclusions, which is why it is so important to understand all the facts and the specific situation and consult with a startup lawyer. This type of consultation shouldn’t be too costly.
It depends on the local laws, and also on the what your employment contract states. Some laws state that any ‘creation’ (for example you mobile app), created during and for, your employer, will be owned by your employer – unless agreed otherwise. Additionally, and even if such laws don’t apply, many employment contracts, and especially those in high-tech companies, might not permit you to work on other projects whilst being employed by them, and/or state (in your employment contract) that such work is an infringement of your employment agreement. Additionally, even if your employment contract doesn’t prevent you from working on other personal projects, it may state that the ownership rights to whatever you create, will be theirs (your current employer) – which is obviously something you want to avoid (which you can). There are some fairly easy ways to avoid this. If you are in doubt, it is best to contact a startup lawyer or a commercial lawyer and consult.
I’ve been working as a startup lawyer for over a decade, and honestly believe that your success is my success! I’ll help you find a solution to all your legal and business needs in a patient and professional way.