The Fastest Way To Validate Your Idea Is To Go And Sell It: Dan Martell
Dan Martell is an award-winning Canadian entrepreneur and founder of Clarity, a venture backed startup that makes it easy to connect with top business minds over the phone which was recently acquired.
He previously co-founded Flowtown, a San Francisco based social marketing product which raised funding, grew to over 50,000 small business customers and was eventually acquired by Demandforce (NASDAQ: INTU) in 2011. In 2012 he was named Canada’s top angel investor having completed over 33 investments with companies like Udemy, Intercom and Unbounce.
I spoke to Dan some time back on making his first million dollars, how to validate an idea, what to do when one has many ideas, critical first steps when starting up and much, much more. Here’s an excerpt:
Q. When you made your first million, what was the first thing you bought or did?
Dan: I was 27. It actually hit me by surprise. I was driving and talking to my accountant on the phone as we were reviewing our year end for my company Spheric Technologies. That’s when I realized that I was a ‘Millionaire’.
The only thing that changed is that I decided to start looking at other companies and the potential to invest in them. Back then I didn’t call it angel investing – it was more just me thinking “I like this entrepreneur and the business and I think I could add a lot of value to it – maybe they would take some of my money to have a small part in the up side.”
This is probably the first time I’ve ever told anyone this – it was never a big deal for me. I’ve just always felt blessed to be able to work on an idea I’m passionate about and get to work with amazing people everyday. That first and foremost was my goal in life.
Q. Do you think you would have done things differently if you were in the Silicon Valley? Do you think Silicon Valley has something unique to offer to aspiring entrepreneurs?
Dan: Silicon Valley is a magical place. On a whole, things just work at a different pace there and the mindset is way different than any other place I’ve visited. Having built and sold a company in Canada (Spheric), then doing it again in Silicon Valley (Flowtown) I’ve gotten that perspective.
I don’t think you need to live somewhere’s to be successful – that comes from within. However, depending on your industry and your goals (what you want to accomplish & how fast), it certainly makes sense – if you can – to live in the epicenter of that industry. In Tech, that’s Silicon Valley, for finance, that would be New York, etc. Regardless, you can move faster and build bigger companies because everyone understands the industry and there’s an overwhelming amount of people looking to support you.
The biggest thing I learned in Silicon Valley was to think $100 million company within 7 years. Anything less and it’s just not interesting enough – cause it’s possible and people do it every year there.
Q. You are an angel investor in a number of companies – Foodspotting, Udemy, Unbounce, among others. How involved are you in all of these ventures? How do you prioritize and balance this so that you maximize each one’s probability of success?
Dan: I feel honoured to be involved in those companies. Each one of them have an amazing founding team and that’s essentially what I invested in – the people.
The way it works for me, is that it usually means more time up front then later on. Most of the companies I invest in have about 16 months to find product/market fit, scale growth and then raise another round. Once they close their next round of funding, my involvement is more to help with key hires, or be a sounding board for the founders.
In the early days, I love to spend at least 2-3 hours per month talking through the product, strategy and growth tactics that’s going to lead to a successful next round of funding. Sometimes we do scheduled meetings every 2 weeks, for others, it’s a phone call to sync up monthly.
At the end of the day – it’s their company and they need to make their own decisions – all I do is try and share some lessons learned from past experiences and make introductions to people I think can be of help.
Q. Entrepreneurs constantly have ideas. How can an entrepreneur get a fix on one and go ahead with it knowing that will make it or break it?
Dan: Having a lot of ideas is great – some people actually don’t have any. My suggestion would be to just move any of them to the next step of validation. I think it’s ok to have 3-5 ideas for a business but the next important step is to take action.
That might mean you should call 10 potential customers to get their feedback, or maybe try and sell 3 customers the idea before you build or do anything. That’s what I do, especially if I’m not a potential customer (i.e. solving someone else’s problem).
However, you’ll always hear people say – and I totally agree – it’s best to solve your own problem, one you have yourself, as well as one you’re passionate about – something you would want to work on even if you’ll never make any money from it (because the probabilities are you won’t).
Q. Success and failure is a part of entrepreneurship. How can entrepreneurs stay motivated through the lows of the business? How did you overcome this?
Dan: If you stay in the game for a while, you’ll learn that it’s actually VERY normal to have the crazy highs, and the super lows. What helps me today are a few things.
1) I don’t associate my personal self-worth to the success of the company, only the problem that the business is looking to solve. Even if the company fails, I feel great that I tried and worked on a problem that I loved.
2) I’m grateful. Honestly. I’m grateful to be in a position to be faced with those kind of challenges. Things like hiring an amazing CTO, closing a major partner or raising a round of funding – those are all HIGH QUALITY problems and I’ll never complain for having them. I’m blessed to be in a position, no matter how small the challenge, to have them – because most people don’t.
Q. What advice can you give a young entrepreneur who is in the midst of turning a concept into a business? What are those first critical steps that need to be taken?
Dan: Get paid! The fastest way to validate that you’re idea actually solved a problem that someone has and is willing to pay for, is to go and sell it. No excuses. You don’t need a website, or a product – just go out there and sell … if you can’t, then you should really take a hard look at the business. Too many entrepreneurs start companies that are like vitamins (nice to haves), not painkillers (must haves) .. must have businesses are the ones that create real success.
Q. You’ve received a $100 today, and that’s all you got to startup with. What will you do with this money to startup and turn it profitable?
Dan: I don’t need a $100 dollars. So I would give it to someone who needs it more than me.
To start you just need to find a problem that you have, that others have, and see if anyone wants to buy your solution. There’s 1000’s of problems in the world that people would pay for .. they usually fall into one of 3 categories. They help them get paid (make more money), made (get famous) or laid (self explanatory). I would focus on the first two, and then find a potential customer and talk to 10+ of them in a day – not a week – in a day.
The key to success is learning faster than your competitors. That’s why startups are able to out innovate the big guys like Microsoft or Facebook – they learn faster and can make decisions faster. That’s the only thing they have at their advantage, so don’t waste it.
Q. What is most important aspect of a company that determines its success?
Dan: Truly understanding your customer. I mean REALLY understanding your customer. If you haven’t asked your customer to watch them work, or surveyed them to better understand their needs – then you don’t get it. The more you learn about their reality and the things that frustrate them and cost them money, the better prepared you’ll be to create a solution to a problem that creates a lot of value for them, and money for you.
That’s probably something I do better than anyone I know. I spend a ridiculous amount of time talking, learning, and understanding my customers. It’s in that work that I come up with ideas that turn into big companies.
Q. What is your sales strategy advice for startups who are entering a space dominated by giants?
Dan: Start with a Niche and become world class at what you do for that segment of customers. If you were a social media consultant, do that for barbershops until EVERY barbershop knew who you were. The more you focus, the more it’ll expand. It’s a powerful thing that requires faith in the approach but works miracles when done correctly.