Evaluate your Startup Idea with an effective 4-Step Approach!

how to evaluate your startup idea

Learn the process of evaluating your startup idea

Evaluate your startup idea by asking the right questions

Do you want to get stuck with an idea that you put all your time and effort into only to find during the later stages that it’s not profitable or scalable? Well, certainly not!

So all you need is a way to evaluate your startup idea quickly and efficiently and decide whether the idea deserves any further investment of your money and time.

Many times, entrepreneurs have too many ideas to run after. But they face difficulty in deciding which idea to pursue.

Well, this article is all about a systematic approach to evaluate your startup idea and move ahead with confidence.

There is one common thing among all the startup ideas and that is they are built on hypothesis. The evaluation is all about using the parameters to decide whether the hypothesis is correct or needs to be changed.

This whole article is divided in the form of questions that you need to answer. By answering each question step-wise, you will gain clarity on your startup idea and become confident in deciding whether to move ahead with the idea or pivot.

A 4-step approach to evaluate your startup idea, Image Source: raondigital.com

All questions are covered under the four main heads as follows:

  • Problem
  • Behavior
  • Solution
  • Unfair Advantage

Let’s take each one by one.


Is the problem that you are trying to solve big enough?
Many times, the problem is only faced by a handful of people i.e. the size of the problem is too small to be seen as a business opportunity. In other words, this question helps you to evaluate your startup idea by asking you whether the market size is large. There should be millions of people who have a problem you are trying to solve.

Is the problem growing?
The market should grow at a rate that makes it lucrative enough for a startup to scale. If the market is not growing, it’s an indication that the opportunity is diminishing and this could be due to several reasons like the availability of better alternative solutions, a shift in consumer behavior, etc. A growth rate of 20% or more can be called as lucrative.

Is there an urgency of solving the problem?
If the problem is to be solved on an urgent basis, it’s an indication that the seekers of the solution or the customers will most likely pay for the solution.

Is the problem expensive?
An expensive problem is the one that requires a lot of time, effort or money to be solved. So if you can solve such a problem while saving resources, the chances are that you will be paid heavily by your customers.

Is the problem recurring?
If the problem is recurring or frequent, it forces the solution seekers (your customers) to look for solutions. So if you can solve such frequent problems, customers will quite likely pay you for your offering.  

If your answer to at least one or more of the above questions is ‘yes’, you are ready to move to the next step in the process to evaluate your startup idea. Here, the answers to most of the above questions are based on assumptions that the startups make during the very initial stages. These assumptions or hypotheses need to be tested and validated.

Your’s & Consumer’s Behavior

Do you have the motivation to solve the problem?
If the problem you are trying to solve is also related to your motivation or something that truly interests you, say, technology, environment, etc., then you can work on your startup idea without losing focus. If you do not have the right motivation to solve the problem, you cannot change your consumer’s behavior for adopting your solution.

Do you have the right ability to solve the problem that you are focused on?
This ability to solve the problem is based on your startup idea itself.

Do you have an emotional connection to solve the problem?
If you have an emotional connection to solving the problem, you can associate yourself more deeply with it.

Does your offering trigger a need in the mind of the consumer?
If your offered solution can trigger a desperate need for your customers, it’s an indication that they will pay for your solution.


Did you start with a solution or problem at hand?
This question might look awkward to you at its face value but most of the first time entrepreneurs commit this mistake especially if they come from a technical background. Since they are very passionate about the technology related to their field of expertise, they develop a solution (technology) and then search to see what problem they can solve with it.

This is an inefficient way of working on a business idea since most of the time is spent in knowing the market for the solution. Also, there could be chances that your addressable market size turns out to be quite small and you learn about it during the later phase of your startup journey.

Does your solution provide 10X better experience or value?
This could be saving time, reducing the cost, or improving the revenue of your customers, ten times in comparison to what is currently available to them. Though practically, it’s sometimes quite difficult to get 10X reduction in time or cost, the idea is to make the overall experience for the customer ten times better. This question helps you to evaluate your startup idea based on the value which is going to be delivered to your customers.

Your value proposition should be unique and strong enough to convince your customers to choose you over your competitors.

Unfair Advantage

It simply refers to answering why you are going to grow faster than everyone else in the competition. As Kevin Hale of Y Combinator puts it, there are different types of unfair advantages:

Founder – Ask yourself if you are among the top experts for solving the problem that you are trying to solve.
Though you don’t need to be one of those experts, it certainly helps if you are the one. Here an expert is not just the knower of the solution to a problem, but the one who has a proven career in his field of expertise (a Ph.D. will be an advantage) or having a patent in his name.

Market –Ask yourself if your market grows at the rate of 20% because the market growing at such a phenomenal rate will automatically help your startup to follow the trend.

Customer Acquisition Ask yourself if you can grow your company through word of mouth. Acquiring customers through paid advertisements is fine if you are already funded. But during initial days of starting up when almost all the startups lack funds, it is extremely important to devise ways in order to sustain only through word of mouth, blogs, etc.

Monopoly – Ask yourself if you can build a sustainable competitive advantage over time as you grow. It should become more difficult for competitors to copy you and the value of your offering should grow as your company grows.

It’s always better to have more than one unfair advantage, but you must have at least one. If the market is your only unfair advantage, you should look for another one too; simply because you do not have control over the market growth.


It’s important to know that the product or technology is not the only thing but just one of the many things that matter in the startup’s success. Apart from finding honest answers to the above questions, designing and implementing a well-thought business model is equally essential to succeed in your startup journey.

Do you feel there is something more to be included? Kindly write to us. We will be more than happy to consider your valuable suggestions.