Web3 advances at a mile a second, whether it’s the most recent DeFi innovation or a ground-breaking new infrastructural development. Due to the scarcity of both attention and funding, projects that lack product-market fit runs the risk of falling behind.
Compared to Web2 startups, Web3 startups operate in a more intensely competitive and quick-paced environment. Due to the inherent “forkability” of open-source projects, which allows any developer to fork a project’s source code and create a competing project. This difference can be largely attributed to competing demands for liquidity—a requirement for integrating with the larger market.
This puts a lot of pressure on startup teams because they may invest months and valuable resources into creating what they think is the ideal product, only to see it gain little traction, awareness, or adoption.
Startup teams must conduct the necessary research and carefully plan their product’s development in order to avoid over-committing to a vision that won’t work and to develop a key value proposition that can outperform rivals already in the market. Although this is crucial in any startup scenario, there are a few aspects that are particular to Web3 because of its quick pace and special considerations.
Follow the step-by-step guide on generating product ideas to quickly create a valuable product for your Web3 startup.
Step 1: Define Target Markets in Web3
To create a truly useful and long-lasting product, you must first define your target market. The first step for any startup looking to build a successful product is to validate their product ideas with their identified customer base and ask themselves, “Who is facing the problem I am attempting to solve?” One of the most crucial first steps in developing a successful product is providing an answer to this important question.
Make sure you understand your target market’s daily habits, challenges, unmet needs, and preferences. You can accomplish this by taking advantage of the blockchain communities.
Web3 projects have built-in advantages over traditional companies due to the natural buildup of community members in an industry defined by decentralized governance, stakeholder-dependent business models, and permissionless access. These communities are frequently made up of the very people that the Web3 founding teams are looking for—early adopters who are dealing with the problem that they are attempting to solve.
A community can provide valuable insight into both the problem and the solution at every stage, from ideation and finding problem-solution fit (more on this below) to launch the product on the main net. Web3 projects should strive to create a minimum viable community (MVC) that accurately represents their target market and aligns with their ultimate goal.
As a result, one of the most important components for a burgeoning Web3 startup is creating the right community. Web3 startups should consider the most essential characteristics that determine whether a person will encounter the difficulty they’re attempting to solve and strive to attract a high-quality community comprised of dedicated members who fit this profile.
The initial community of a Web3 startup should represent their beachhead market—a small market of users with similar pain points that can be addressed by their proposed solution. Web3 projects have a built-in user base to begin testing their ideas with the right community and constant and effective communication. These dedicated community members serve as the foundation for brainstorming, testing, and iterating on a product.
Step 2: Brainstorm
You can begin brainstorming once you have data to support your ideas. While brainstorming may appear to be an unstructured exercise, there are certain elements that should be left unstructured. It is critical to have a solid and deliberate approach in order to generate the best ideas. Keep the following in mind during the session:
- The session should promote broad, not narrow, thinking.
- Encourage unconventional thinking. Some may appear impossible or even strange, but go into the session with the mindset that “anything is possible.”
- Keep an eye out for and reinforce patterns and themes that emerge.
It is critical to think broadly during this phase. It entails developing ideas that are not based on prior knowledge or mindsets. Later, you can test and narrow those ideas through the process of deduction.
Step 3: Find Problem-Solution Fit
In general, products are introduced to address a specific problem. A problem-solution fit occurs when a startup team can validate both the difficulty it is attempting to solve and that its proposed solution will be effective in solving it.
Consider stablecoins, which are on-chain digital tokens that are pegged to a stable asset, most commonly the US dollar. Stablecoins first gained popularity because users lacked access to stable assets, which was a major issue in volatile market conditions. Stablecoins such as DAI, USDT, USDC, TUSD, and UST represent more than $180 billion in market cap across the larger blockchain ecosystem, demonstrating a problem-solution fit.
Because the market overwhelmingly preferred a specific solution over stablecoins, they are an excellent example of a good problem-solution fit. While the market recognized the need for a stable asset, the solution for the market was a dollar-pegged stablecoin.
When evaluating problem-solution fit for a Web3 startup, it’s critical to determine whether a problem is actually worth solving. This is where a well-defined target audience, usually the native community of the Web3 startup, comes in handy. By conducting customer interviews and community surveys, Web3 startups can validate the existence of the problem and take steps to better understand it, informing the development of the product’s first iteration.
Step 4: Get feedback
Market testing should be the final stage of your new product development process. This can be accomplished in a variety of ways, but the main idea is to effectively quantify the response to a proposed solution.
Begin with a Testable Hypothesis — As much as possible, the goal of solution validation is to definitively prove or disprove demand for a startup’s proposed solution. “We believe that decentralized stable assets denominated in dollars are preferred by users over other fiat-based stable asset alternatives,” for example. Although this is critical in any startup scenario, there are a few aspects unique to Web3 due to its rapid pace and special considerations.
Construct Quantitative Surveys — Writing specific questions in formats like multiple choice or number scale can provide definitive answers to questions about the proposed solution. Giving survey respondents multiple options and asking which one they prefer is one example.
You can ask your intended audience questions, such as:
- What is your first impression of this product?
- What changes would you make? What would you absolutely not change?
- Is this product a solution to a problem you’re having?
- What would you be willing to pay?
Track Native Metrics—Measure native metrics like the number of Discord participants, email subscribers, and beta test signups to determine how compelling the solution is in its early stages.
Use a Large Sample Size—Quantitative surveys, as opposed to qualitative research, are used to find clear-cut answers and prove or disprove hypotheses. Startup teams can be more confident in their results if they have a large sample size.
Use this feedback to improve and expand on your product concept. Then, discover how product development and project management can help you bring your new product idea to life.
If you have any difficulties while generating product ideas for Web3 startups, you can get help from Satom Venture Studio. At Satom, you can be provided with both financial and enabling services to support your Web3 projects.