What kind of market research is needed for a tech startup?

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    Did you step out of the shower this morning with a truly great business idea? Did you read back the notes you scribbled on your notepad in the middle of the night and did they finally make sense?

    If you have come up with an amazing idea for a product or service, congratulations. This could be the start of a great adventure.

    But to start a business set up for success, don’t create that website or launch that prototype just yet.

    We’re here to give everyone who’s thinking about founding a startup a piece of simple, yet powerful advice: take the time for proper market research. We know, it might not seem as exciting as elevator pitches and guerilla marketing campaigns. But read this guide on how to do market research for a startup and you’ll thank us later.

    What we’ll cover in this article:

    • What is market research all about? It’s more than a formality. This step could determine how far you can take your business. We’ll tell you what good market research looks like, and what it can deliver.
    • Why market research for startups is as important as it is to every type of business.
    • How do you conduct market research for startups in a way that’ll give you actionable data?
    • And we’ll finish off with some examples of how market research changed the course for several startups – ones you know.

    Ready to find out if your big shower idea is viable? Let’s get started.

    What is market research?

    Market research is about analyzing the market you are in or are about to enter. You look at market trends, industry trends, market dynamics, your target audience, and other potential customers. You’ll do a competitor analysis to see your competitors’ offerings, and even identify direct and indirect competitors

    Based on your findings, you will make business decisions. That’s right: it isn’t about creating reports. It should influence your actions.

    Market research has been around for decades, and companies got better at it over time, but the term has been used rather loosely. It shouldn’t be conducted to simply confirm that your idea is good. If you do that, you’ll steer it in a certain direction, and with a blurred vision and will look only at data that speaks in your favor.

    Real, good market research is about listening to what’s happening in a market. What’s happening in the minds of consumers? That input could change the direction of your startup, or stop its journey altogether.

    Why is market research important for a startup?

    For a startup, researching your market is crucial. It’s easy to get blinded by the potential of your big startup idea. Your product or service might seem great on paper or even as a prototype, but without proper research, it could flop rather quickly.

    Startup founders should get as much detailed information on their potential market as soon as possible. Here are the two main reasons why:

    Startup market research will help you test your ideas

    There are several things you can and should find out about your product through research. The first question to answer: is there a demand for your product?

    It’s not true that if you make something and promote it hard enough, people will eventually start buying it. At least, not enough people, and not at the price you need to break even.

    It could very well be that the product you have in mind would be in demand if you chose a different target group. Often, timing also plays an important role.

    That doesn’t mean you can’t produce anything that hasn’t been done before – you simply have to do it better. When Apple entered the market, there were computers already on the market. They just found a different spin to it.

    Apart from the product and its features, you’ll also gather important information on prices and costs. This will help you determine whether you could keep this project alive in the long run. And money is also what gets us to the second important reason market research for startups is a must.
    Startups need to test their ideas to make sure there’s a viable business opportunity there

    Conducting market research is important for attracting investors

    If you want to impress potential investors, you’ll need more than a shiny prototype. What investors care about is how likely it is that they will make money out of this. And for that, they’ll need to see research that backs up your claims. A big part of your business plan should therefore be market research.

    Investors and the business world love good market research. First of all, it makes their decision-making process easier. If you have data that shows you’re very likely to make a good amount of money, that will put their minds at ease.

    Furthermore, it shows how invested and committed you are as an entrepreneur. Market research isn’t the most fun, and it’s certainly less fun than creating the product itself. Demonstrating the fact that you take the time to do it properly and take it seriously will benefit you when it’s time to pitch.

    Last but not least, it makes it easier and faster for investors to get on board. They’ll need to conduct a due diligence process, and you can take some of the work out of their hands with your research process.

    Discover how market research can help your brand, from reaching the right customers to testing creative assets

    Why startups fail

    That all sounds pretty straightforward so far, right? Then why do startups still fail?

    The top answers for this underline the importance of market research once again. Because at number 1 in the list of reasons why startups fail, we find ‘no market need’. In 42% of the cases, there’s simply not a big enough demand for a product or service – no matter how innovative it is.

    Number 4 on that same list is being crushed by the competition. Competitor successes, or even worse, ignoring your competitors accounts for 19% of startup failure.

    Of course, market research isn’t a crystal ball and can’t predict the future entirely, but when it’s done properly it’ll give you and your small business the tools you need to get a head start.

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