Nathan Sykes

March 27, 2021

The Race To Validate In 5 Days

I'm sure everyone and their mother has heard the traditional Silicon Valley jargon, usually a quote like "move fast and break things", signifying that the way a startup is to succeed is by trying new things and validating at the speed of light. At first, I was all over doing stuff like that. I like to break things! Show me where to break things!

Unfortunately, a crucial detail was left out - the startups doing the breaking were playing with other people's money, typically through venture capital investments. I'm sure breaking things and experimenting is an excellent use of your time and energy when someone else is footing the bill. But in a private equity firm that only has one principal investor (me!), using valuable resources that way didn't put the same kind of smile on my face.

You rarely hear about a PE firm, even a micro one, going and starting their own companies. Traditionally, PE firms use other people's money to buy existing companies, and grow them substantially larger. But my house, my rules. Most of our money is indeed spent on acquisition of existing companies. But I think it's incredibly important for us to be able to experiment and validate offerings of our own. The notion allows us to do a fair bit of discovery outside of our circle of competence, and even if an offering doesn't take off (which probably 95% of them don't), we're left with a treasure trove of information and data that helps us make decisions about that industry in the future (if, for example, we're looking at an acquisition deal in a similar area).


When you're starting to offer things from scratch, you need to validate your product or service. Everyone has to do it. Startups have to do it, usually through some convoluted/stupid way like prospecting interviews or surveys. Dropshippers have to do it, by testing dozens of different products and scaling the ones that work. When it comes to the way that we validate products, we're more on the side of dropshippers - there's no better way to validate your product than to get paying customers asking for it.

When we're developing an offer, we have excellent Standard Operating Procedures that document how virtual assistants are supposed to create the collateral, websites, and everything we need to officially "sell" the product. They're able to create these digital environments that make it look like a prospective customer is walking into a small business that's been owned and operated for many years, not one that just popped up last week so some private equity firm can validate whether or not they can make money. It helps build trust, and, if we're going to take the business further, eliminates a lot of the logistical legwork we have to go through as we begin to slowly scale.

Most companies, however, don't make it to this stage. They're given five days to determine they're worthy of survival before they're killed off. We push a fair amount of traffic their way, normally organic. Cold emails, Linkedin messages, voicemail drops, text message pushes, and other organic ways to get folks into our sales funnel and through our straight line. At this stage, probably 80% of these offers we're trying to validate don't have any merit, and are immediately shut down (usually before day five). If it's easy for us to fulfill whatever offer we're selling, then we do so. Otherwise, we issue refunds to all of our customers who purchased.

Of the 20% that do survive that first cut, we push the envelope as hard as we can to make sure that they can stand the pressure of being systematized, and scaled a little more. We eventually knock out about 2/3 of the companies that make it here, choosing only to continue scaling and working with the offers that have the biggest, most obvious positive reception, or once-in-a-lifetime cases. Haven't had any of those, yet!