Test Your Value and Growth Hypotheses

The leap-of-faith assumptions: test your value and growth hypotheses.

Part of developing a product is the leap of faith: a founder believes in the future success of the product she wants to create, even though there’s no proof for this yet.

To quickly close the gap between believing and knowing, every founder should formulate and test two fundamental assumptions:

The value hypothesis assumes that a product will deliver value to its customers, i.e. that early adopters will find and embrace the product.

The growth hypothesis states that the product will not only appeal to the small group of early adopters but will also find a bigger market later.

Both assumptions must be tested as soon as possible. Only if they can be validated is it worth investing the time and effort into developing the product.

Take a look at Facebook: they managed to validate both the value and growth hypothesis at a very early stage when the social network had only a few users.

First of all, the registered users were very active in the network. More than half logged in at least once a day – impressive proof for the value hypothesis.

Second, Facebook had sensational user-activation rates, meaning it gained market penetration very quickly. In colleges where Facebook had been introduced, three quarters of all students signed up within one month – without the company having spent a penny on marketing. Thus, the growth hypothesis was proven as well.

Such impressive data made investors strong believers in the future success of this new social network, leading them to invest millions at a very early stage.