Eric Ries on Validating an Idea With No Money: Measure Behavior, Count per Customer

Key points

1. 1

   Spend only on what speeds up the loop

   Ries answers a 21-year-old with under $1,000 with the build, measure, learn loop. You turn an idea into a product, measure what customers do with it, learn, and go around again. Money that makes a lap faster is well spent. He lists what usually is not: branding campaigns, press, parties, awards, pitch competitions, an office and fancy furniture. With AI tools, he says, you can compete with any company from your couch.

   “Any money we spend in a startup that accelerates time through this loop is good money to spend. Everything else is a waste of time.”

2. 2

   Talk to find ideas, measure to validate them

   Asked how to validate an idea when customers lie, Ries splits the job in two. Conversations are customer discovery, and they produce hypotheses. Validation means watching behavior. A chemist does not ask electrons what they want. The chemist measures them. His example is a product whose conversion rate was stuck. Interviews gave the team new ideas, and only a landing page change that moved the number counted as proof.

   “Validation is about measurement, not about conversation. So, we use conversations to discover what customers might want.”

3. 3

   Count per customer

   A product with 10,000 customers tells Ries nothing. He recalls rival messaging apps that boasted about a billion messages sent. That could mean a billion people tried the app once, or one person used it a lot. He wants numbers per customer: revenue, repeat use, repeat purchase rate, margin, the cost to acquire a customer and lifetime value. From those, he says, you can work out the engine of growth.

   “These vanity metrics are not helpful. What I need to know is revenue per customer. repeat use per customer.”

4. 4

   Growth that lasts comes from past customers

   Ries's law of sustainable growth says new customers have to arrive as a side effect of what past customers do. Any other tactic shrinks as the customer base grows. His example is a famous founder who can get 10,000 people to do anything. That is a lot of growth at zero customers and almost none at a million.

   “It can only be sustainable if the new customers come as a necessary side effect of the actions of past customers.”

5. 5

   Sell one cup before you commit

   Ries tells founders not to quit their job and announce a life mission. Treat it as practice. Sell one, then sell two. If after a hundred cups of coffee you find you hate coffee, you can walk away. Do not commit your life to an idea until you are sure it is right for you.

   “You want to sell crystal widgets, sell one. You want to sell coffee, sell one cup of coffee, then sell two”