We’ve all had those lightbulb moments, lying awake at night, in the shower, or even just emerging spontaneously mid conversation.

Airbnb founders Brian Chesky and Joe Gebbia had their lightbulb moment after hatching the idea to rent out an air mattress on the floor of their apartment. Uber founder Garrett Camp’s lightbulb moment came in the back of an $800 private hire cab. Every founder has that moment, often the result of a process of thinking and problem solving, at which point a business starts to take shape. But what happens next?

Taking an idea and building it into a business is a long, thorough process of validation, verification, and testing. Richard Dana, co-founder and CEO of family money lending platform Tembo, will attest to the fact that it certainly doesn’t happen overnight.

Richard tells us the story of how Tembo grew from an idea into a business plan into a fully formed startup through the Founders Factory Venture Studio.

Step 2: Validating your idea

If you’re considering whether your business idea is worth pursuing, the next step you need to take is to verify your idea. At Founders Factory, this is a key part of building your business case (deck) for the investment committee which evaluates if your idea is suitable for venture building.

One of the first tests is whether the idea is big enough in scope. “We might determine ‘big’ as a future unicorn, a market defining company, or leader of industry disruption,” explains Paul Egan, Founders Factory CTO. “With certain companies, a leap of faith is required, especially if you’re creating a new market.”

Tembo easily passed this test. Thorough desk research, as well as bouncing scenarios and ideas off his colleagues at Founders Factory, suggested to Richard that there was a big market for Tembo. Moreover, there weren’t any identifiably strong competitors in the space.

Beyond the initial property concept, the wider picture of intergenerational wealth imbalance presented a huge challenge that could be addressed. The idea went into a ‘pre-studio’ phase with Aviva Ventures, one of the Founders Factory corporate partners. Strong feedback from Aviva revealed the vast potential of the concept, stretching beyond just mortgage and into areas like pensions and life insurance. “Even capturing a small part of that opportunity was always going to be huge,” Paul says.

You also need to see whether people want to use it in practice: this is where the rubber meets the road. This phase required first-person research, putting together focus groups with parents and children and distributing online surveys. They discovered that while a small percentage might have been reluctant to lend or accept the money, the majority were more than willing to take part.

So over the course of verifying the idea, what emerged was that:

1. There was strong market demand

2. There was no major notable competition

3. It had wider potential beyond the initial concept

4. People want to use it

After presenting the deck to the investment committee, the green light was given to start working on Tembo in Summer 2020.

Step 4: The product design phase

The next phase of the venture studio process is all about the immediate first phase of the product, what should it be, who are the key stakeholders or users, and what should it do for them, and these answers are found mainly through a problem/solution fit process.

Part of this involves identifying and interrogating the project’s riskiest hypotheses through a series of workshops with the product coaching team. This takes many of the questions posed in the investment committee deck, understanding what has been learnt, and what you might still be unsure about.

“When you’ve passed the investment committee, that doesn’t mean that it's a validated opportunity—there are still many questions, and at no point do we think ‘job done’,” Paul says.

Most importantly, they needed to test the hypothesis (there’s a difference between asking in a survey, and users actually putting their money where their mouth is): would parents actually be willing to lend money to their children, and would children be willing to accept this?

This stage also involves a great deal of prioritisation mapping. Knowing what to prioritise is one of the biggest challenges that founders face. “Early stage startups are awash with uncertainty,” Paul explains. “There’s a temptation to resolve every unknown, but you have to aggressively prioritise and know what are the things that could kill your business.”

The Founders Factory Venture Studio has now built over fifty ventures from scratch. That, combined with the team’s individual entrepreneurial experiences, gives the team a good indication of what’s worth prioritising.