# How to Validate a Business Idea (Tips from a 7-Figure Startup Founder)

Channel: Noah Kagan
Video: https://www.youtube.com/watch?v=BwbtSPQ8jAY
Duration: 26 min
Language: English
Words: 4792
Transcript page: https://viewrankai.com/tools/youtube-transcript/BwbtSPQ8jAY

---

[0:04] yo how's La doing good how you guys doing in the back how the people doing over here all right here's what I want you to do is everyone here have a smartphone no does anyone not I met someone yesterday it was weird what I want you to do is turn around and take a photo of the person behind you or next to you that you do not know and tweet at them and now you have a new friend so take 2 minutes and do that right now make a new friend you take a photo with your phone and you can tweet to each other and now

[0:32] you guys are besties you can do it on the side don't be too cool come on meet this guy do you guys know each other dude come on La make some relationships maybe they're power Brokers yeah take a photo of them make it awkward oh just getting warmed up go find someone new go find someone new

[1:01] did everyone do it is there anyone alone is anyone all right all right you guys all do the photo thing did you guys do it over here all right bring it back bring it back good so I want to get a a understanding of who's here and I'll start with the real basic stuff so if you are male raise your hand okay good ladies Make Some Noise there's a few there's a few too it's good if you have hands raise your hand [ __ ] come on really okay if you have hands raise your hand be cool all right if you are starting a business no one everyone here's yeah oh

[1:45] [ __ ] I thought I was in the wrong place okay if you are already really rich that's what's up single single and Rich come put your hand up put your hand up oh you're like rich in life and that blah blah blah [ __ ] that so all right so I got to tell you guys something there's something on my mind I get the clicker do you guys want to know what it is do you want to know what it is all right fine I'll tell you it's the what is the meaning of life right and that's what I'm here to talk to you guys about

[2:24] today is that what you guys are here for see yeah [ __ ] no so we're not going to talk about that that's good this is me in India doing like a guru spiritual thing two months ago do you like the beard no God la come on now all right so here's what we're going to do tonight are you guys tweeting you guys texting what you should really do is make really funny ones so that you guys can all laugh if you get bored and zone out so my objective tonight is that each one of you go home literally I don't want you to go to the Afterparty sorry

[2:56] uh don't go to the Afterparty but I want you to go home and if you're trying to start a business if you've been struggling with your business or if it's already working I want you to go work on it right cuz the Afterparty while you're at the Afterparty your competitors or other people are working right who said that's right yeah Make some noise that's what people do good so the objective that I want you guys to have tonight is that I want you to go and do action so I'm not going to he get up here and uh keynote right I think that is that what you guys wanted me to do that's

[3:29] what you wanted me to do but I'm not going to do it no what we're actually going to do tonight is we're going to start two real businesses because I think that'll be the best way that you guys can actually learn how to start a business and so yeah who I love you come up here it's like my cheerleader you're like what's the guy David Letterman who's his like you're Paul every time I'm struggling I just need you to start what are you doing on the computer dude are you Tweeting me oh cool take your time so that's what we're going to do tonight do you guys want to do that like

[3:59] actually see how to start a real business okay and so we've spent at appsumo docomo okay let's do the reverse who doesn't know appsumo [ __ ] I've done a shitty job okay [ __ ] well check it out abo.com you got them smartphones uh it's a pretty cool website and so the thing that we've been focusing on is we've helped over a thousand people starting their business and that's one of the main things that we're really working on so we've seen a lot of things about what's going wrong what do people need to do and and how do we make it happen and so what we'll do

[4:28] tonight is we'll start two real businesses but we need to practice right I can go I'm not even getting paid for this come on I can be home making more money do you guys want to do it in the back you guys just don't care do you you're just like oh shut up [ __ ] all right I'm gonna have fun up here too but I want you guys to have a good time so remember the objective you guys remember what it is hustle I want you guys to go home and make some things happen so here's what we're going to do when you're starting a business there's three

[4:58] phases so you have to figure out the the magical idea which never exists then you have to validate it and see if it's a real business and then you have to grow it it's pretty simple so let's just practice wow I'm going really fast I can slow it down maybe we'll do four businesses tonight we'll see how it goes so if you are going to start Airbnb tonight tonight and that's one of the key things for entrepreneurs and people starting businesses they say oh I have to wait for the development how many people here have been waiting for development or a designer or co-founder I know you're

[5:28] embarrassed yeah right right right I know I know all the excuses I've gone through them I've done them myself and now I'm helping others not do them so let's do this let's start Airbnb tonight what would you do I'm not going to give you the answers otherwise you're not going to learn it so in the back the quiet people how would you validate that people want this service tonight what does that mean boring so how do you validate that it's a real business tonight not I I'm going to insult you a little bit but it's tough love okay no someone who's gonna don't raise your hand just shout oh [ __ ] that sucked

[6:07] you okay now we're starting what are you going to do right here okay see put a hey clap for this guy put a clap for this guy everyone no not a shitty clap a good clap good yes and and here's the here's one of the really fascinating things as people start businesses they over complicate it and they outthink it oh man this idea and then this person and then this other thing and then this other thing and then nothing happens and what you just said right there I don't know if you want to put out a sign that's kind of like was that that church group that's creepy um

[6:45] but what is another way let's do one more on Airbnb what is something else you could do tonight if you wanted to validate that people actually wanted I don't teach any of the other like strategies I just actually see if people want it the customers will tell the truth

[7:04] that's too far too far one that's a lot of work which I don't want to do right but I think you're you're you're getting close and you really hit it but there's another way besides you wanted to hold a sign here's a lot of people okay that's good what else come on yeah and then what do you do when you find that friend and how well let's start back how do you find that friend okay Facebook I Facebook is good but it's actually it's uh reactive you like put it out there and then you find out that you have no friends that's what's up right so

[7:41] Facebook is okay but it's better to actually just call call in person at work you have a lot of colleagues right I hope what else so you've called someone or you've emailed someone and you found out that you have 10 friends with houses what do you do next though you pay them to sleep there that could be a start but you could also just post that on Craigslist for them right and you manage all of it so you had a build you guys realize what we just did like you just validated Airbnb which is now a billion dollar company this is one of the companies that most people thought

[8:13] would fail and so the point is when people email me they're like do you like my idea and I always just say no but you know who will like your idea what do you guys think what do you thinks yeah customers that's what they're called right I mean you call them whatever the hell you want I call them customers so you find the people who have houses and what if you don't have a house you find your friends who have a house you say let me rent it out and make you money okay you guys want to do a few more practice rounds you guys don't okay okay we'll do

[8:45] it we'll do it I like this guy Netflix you guys familiar with them they're pretty big all right kind of familiar okay so on this side how would you guys validate Netflix how would you actually see if people want so this is the problem with pitching in a lot of the businesses today we go through iterations we go through market research and if you don't if you can't actually do it yourself within a 48 hour window there's something wrong it doesn't need to take that long and if it's taking that long you're making excuses and adding barriers to your business right you really need to figure what is the core of what I'm

[9:18] solving so let's someone on this side you guys let's let's party what about this guy playing on his phone I know it's weird huh re a red relabel a red box on go on go on I don't know I'm curious to see what you're going to say let's do Netflix in the beginning in the old school days what's up bro what well I'm just saying the Netflix with mailing DVDs which is what they started out how would you validate that how would you know that you have a business that people want no that's creepy I don't teach creepy that's not that was last year remember the beard

[10:02] thing no come on guys one more

[10:19] time dude you're really are you rich yeah brother I like it good good I think you could do it a little bit easier than that but I think that that's the right mentality so do you guys did you guys catch what he was saying what do you guys think in the back exactly how do you guys think you could validate if people actually want this ask them how many times have you asked someone for something and they followed through how many times have they not followed through right just because I get your business card does not mean we're friends right how many business cards have you gotten that don't respond to

[10:56] your email no one responds to my email that's why I call them then I show up what's up 10 minutes holy [ __ ] left or that's how much we've done damn okay let's go Netflix basically that's exactly it Netflix what they actually did they went and manually bought DVDs and then just found their friends that wanted DVDs and shipped it to them manually that's exactly what they did no website no coding no market research they validated that people actually want it immediately all right Taco Stand I'll just tell you because that we we only got 10 minutes I want to get some two businesses going if you're

[11:26] doing a taco stand it's very simple you make tacos you invite your friends over and you ask them to pay for the tacos then you keep doing that until you can't handle the amount of friends that want your tacos right I know you're wanting something really complicated and very magical and iterative and big buzzword that I'm just not going to help you with last one square what it's very cool thanks Paul so how would you guys validate square right it's Hardware you can't validate it right you guys want to cheat you want me to just tell the answer I I prepared this speech I know it so the easiest way I think you could

[12:08] validate scare and there's probably other ways just what I say it's not the ultimate one if you go to your Farmers Market put a sticker of MasterCard on your cart and see if people ask you for credit card payment you didn't build anything you didn't have to do any market research you saw are people going to say are people additionally now saying can I pay with a credit card did you guys follow that in the back yes are you guys waiting for the Afterparty okay so real quickly why does there any of this matter who cares if we validate why do we validate the ideas we have

[12:40] instead of just like playing business making websites getting cards why do we do this we do it to make money but why do we do the validation and we do the validation specifically for two reasons time and money you'll never get this time back you're sharing it with me and that's the same thing that I've spent months and years and hundreds of thousands of dollars that I'll never get back and it was a complete failure and so that's why I teach this and that's why I show people what's worked for me so what I want to yeah buddy so who here does not have a dollar in their

[13:16] wallet do you guys have credit cards who here does not have a dollar or a credit card look around the room look around there's no hands up there's no hands up why is it though that we're all looking out outside the building for all these random people when we have people here that could be our potential customers right I got a room you I don't even know bro your customers are all around you and if it's really hard to do your marketing or your business it's probably because your validation your product sucks marketing is hard when your product sucks that's a fact the reason mint did well is because

[13:54] it's a great product so let's jump in it let's go how much time do we have this is going to be the fun part this is where you guys are gonna have some breakthroughs seven minutes I've never done it in seven minutes oh actually no sexual jokes uh oh all right oh excuse me who here's an engineer who's really smart in the back okay awesome are you guys where are you at with your business we're going to validate your business do you want to come on bro it's live do you guys want him to do it through peer pressure stand up I'm on stage it's nervous for me up here

[14:32] W all right put a round of applause for them good all right so we're going to validate I this could be a total flop I I don't know them what's your names Drake and Jake and Jake and Greg perfect and so what problem are you solving really right that's why it's hard to validate and like I'll what I'll bet someone $10 who wants to bet me $10 0 on something anybody I'll do it you'll do it sucks to suck sucks to suck for you you've been working on your business for longer than a month and you've made zero doar you owe me 10 bucks how do you

[15:13] think I knew that damn that was good that was pretty good once in a while I have moments that's my only one for the night exactly exactly so what's the problem you're solving the fact that you can't explain your business in two sentences is the problem yeah right so what's the problem you're solving don't look at him tell

[15:44] me okay what does that mean in English look this is going to help you I know it's a little awkward it's awkward for me because you guys might say some weird stuff which is then funny but so Driving Experience what do you mean um we want to

[16:04] no shy a shut up so I said that with love though let's just ask a quick question Who here in this room drives a car raise your hand raise your hand High higher higher highest good wow you have a lot of potential people here does anyone get what they do okay so let's work on this again okay so what people drive and they have I mean LA traffic we all know that stuff it's an old story so what problem are you solving for these people or what solution are you providing that they didn't know

[16:55] about okay this is good but this is what they need right this is what everyone is facing when they're at their computer working when if you just said with met with people that are around you in this colof cross campus.com right that was a nice plug for Dan if you just ask them when they're driving what their actual problem is so you're saying that the problem is that they don't want to look at their phone or they don't have GPS okay so you have a lot of people who drive let's sell someone what you're doing so there's two ways to validate an idea you either get three paying

[17:27] customers even with iPhone apps don't build it don't build it get people to pay for it before you make anything and say honestly hey I'm working on this I'm going to give you a great price I want to make sure that people want it and I need your money if you're serious remember the business card thing that's what's up so people here who drive are you selling them a hardware or is this software all right don't no stop okay it's just it's going to fail uh oh burn but let's work on something right everyone here drives right so what is something with driving that we could

[18:05] solve what sucks about driving what do you guys think traffic what was the other ones what's that other drivers parking waste of time road rage naig bad do you guys hear there was like 10 real business ideas of paying points that people actually have right what was that cops the cops so and what you need to do is validate around something that people have a pain around versus you just randomly making something because most people have smartphones and the GPS is there and I'd say I you know that's just me right but you talk to someone like this who else what did you say I want someone

[18:49] Reserve yo bro get up here get his email so here's the thing how many people want to make parking and look this is the thing with validation if it fails it's good I know I'm up here and I'm trying to validate if it it's awkward if it fails because it makes me feel like a failure okay and I've got a mom and so the point of validation is that youve saved the time and you have saved the money for the month that you have nothing to show for really and you have no profit but you could have easily solved this problem with parking so let's just stick with this one for two

[19:19] seconds or like 30 seconds so if you want to do how many people here it's like we can ask but then it's the it comes down to like give me money or give me your email address to stay involved with this how many people here want help with finding a parking spot why'd you sit down stand up oh God he's so mean no no stand up it's cool so if they have trouble finding parking spots how many people here have trouble finding parking spots in Santa Monica okay so what's the actual problem don't know where Val are don't know structures are full don't know where are

[19:51] that only have 10% okay and how much time do you spend so this is where you connect money how much time do you spend valet looking for parking CES okay so we're I know guys this is weird right how's this feel you guys it's fun because it's not you How do you guys feel I know so but connect the money for this guy this gentleman I want you guys to do it so how much time do you spend looking for parking an extra 10 minutes an extra 10 minutes and how much do you make an hour 25s now that's it you're looking for a job work for me I like

[20:29] so if you can save him $22.50 this is good then it's worth his time to pay for it you see how I connected the money with his time but what you do then is you say Hey you need parking in Santa Monica you email me any time this is what I would do what's up five minutes I could five more minutes thank you are you oh can I do a timeout real fast it's okay have you guys learned something in the back if it's okay say no it won't hurt my feelings that much is there anybody here who can't realize like oh maybe I could do

[21:03] something quicker I can't get to the core and the essence of what I'm trying to accomplish you haven't no

[21:13] good yep yeah so this is one of the common I'm not calling you a wantrepreneur but this is a common wantrepreneur and a commonality and I think when you realize that there's commonalities it helps realize that you don't have to deal with it and you're like it makes you feel better knowing that there others so There's 7 billion people in the world how many people are now like 10 million there's a lot of people out there don't worry about the competitors just don't because trust me it's never going to be an issue and I hope it becomes an issue so what you do then is if it's parking

[21:45] for this guy everyone here is in Santa Monica you put them on your email list you say hey anytime you're come to Santa Monica you tell me and I will get you the parking spot it's $10 $10 parking.com Noah's $10 parking.com right email me when you come to Santa Monica then what you do is you don't code that's a common engineer problem that's why I called Engineers up here right because you want to code because it's scary to talk to people and ask for money and start a real business so get a piece of paper out if you need if you want help with parking in Santa Monica get a piece of

[22:16] paper out go find one is this too mean should I be nicer softer I'm just checking I need to be conscious of who I am and how I treat others what's that time Li type it oh no no I want him to do it now see this is the thing type it let's go home let no now yeah so come around no doing your phone come around get this guy's email address and anyone in Santa Monica who wants parking help it's $10 and what you do I'm just giving you an example but get their emails seriously come up here this is what you do yeah put it up

[22:53] for these guys

[23:00] all right because they're good sports they get appsumo exclusive t-shirts two sumos there you are bam extra extra large no no get their emails so if you have parking no there's more people that drive get pass this paper around and at the end get their emails yes so here's the point next time anybody wants parking and this is up to them if they want to do it and maybe this is not the idea and you could do it through validation you email out and you say anytime you're come to Santa Monica it's $10 I get you a guaranteed parking spot within 15 minutes of that email and what

[23:35] do you do then you go out on your ass and you stand and you do what homeless people do or you hire a homeless person right but that's what you do are you guys texting numers on that's cool it's at Noah Kagan um so with these two gentlemen they just they haven't built anything they've got all these people that want the service maybe or maybe not and they go out and do it manually is there any any butts in the audience like but what about this but what about that it's fine any butts maybe that's extra so that's where you can probably it's more of the minutia of the details

[24:15] I wouldn't actually be too worried about that I would say we do anywhere in downtown between these streets from these hours or maybe they want to do a premium service for $30 right but that's something so what they do though is that they say email us anytime or text us and after that becomes so annoying that they can't manually handle the email that's when you build a website the website's only purpose is to help you leverage your time right so many people get so excited about having a website having social media whatever that means but the whole point is what so what are you helping these people with

[24:49] how are you creating value and making their lives better and that they want to give you money for okay so how much time do we have one minute one minute all right so I actually did you know I've started a lot of businesses and I've had a lot of failures that's how it's you know easier for me to get to the core and talk about the stuff with these two guys which is a little awkward but at the same time you learn how do you break it down to really what you're solving how do you limit yourself to 48 hours so with a business person it's a similar thing I need a

[25:14] developer I'm waiting on my idea right what are you actually trying to do what are you really trying to do so I I actually did this uh a month ago where I started a business in one hour and I made a hundred bucks right it was doing disc golf I I spoiled the surprise I might have made a business doing it but if you go to apps.com tacos enter your email I'll send it to you so you can actually see other techniques and strategies for how do you start and validate your business cool how you guys feeling perfect thank you very much [Music]

---

About this transcript
Read from YouTube's own caption track and laid out by ViewRank AI (https://viewrankai.com).
ViewRank AI finds the videos already beating a creator's own average on Instagram, TikTok and YouTube Shorts, transcribes them from the audio itself in more than 60 languages, and turns what worked into new ideas and scripts.
Free transcript tools, no account needed: https://viewrankai.com/tools
How to read any video this way: https://viewrankai.com/llms.txt