In 2018, Crunchbase published the results of a study that found 42% of startups fail because they don’t have product-market fit. What does that really mean, and how would you go about the task of figuring out if you have it?
Product-market fit is typically a phrase used in tech to indicate whether a company has a product or service that there is true market demand for (that means people want and/or need it) that can be delivered at a price point that makes it valuable. Said another way, do people want or need what you’re trying to sell them enough that your price makes the buy a no-brainer.
To figure out if you have it, start by exploring the following questions.
What’s the problem you are solving?
Do you understand the problem you’re really solving? Oftentimes great ideas are sparks based on something we think we understand. However, if you haven’t talked to a lot of people other than yourself and the people who love and support you (no, your mom’s opinion on this really doesn’t count), then you probably haven’t had enough conversations about the problem itself to understand it fully. Full understanding can only be achieved when you get lots of different viewpoints and you take your own bias out of the equation. So be rigorous with yourself in these conversations and get curious about uncovering what you didn’t know you didn’t know about what you think you’re trying to do with your idea.
Who are you solving it for?
Who are the people who experience this problem the most? If you can identify your target users and develop personas from those users that categorize who would be your ideal buyers, then you can start to uncover habits and personality traits that will tell you who you should be selling to and how many of them there are in the world.
This step answers two different, but related, questions, both of which are critical when seeking funding for an idea: 1) Who is your ideal user?; and 2) How many of them are there? The first speaks to sales and business development strategy. The second speaks to market size and market cap. Understanding who you are selling to and the potential size of your business is incredibly important.
How do they relate to the problem?
Now that you’ve identified who your target user is, you should be talking to a bunch of them to hear how they experience the problem you’re trying to solve. This is similar to the first step, but you’re no longer having shotgun-style conversations with anyone and everyone. Rather, you are focusing in on talking to people who would actually be potential buyers and users of what you are trying to build, and getting their insight into everything ELSE you didn’t know you didn’t know about the problem you are trying to solve. Again, the more perspectives you hear and the less biased you are in your conversations, the more likely you are to solve real problems for real people. Which means a real business venture for you.
Is it painful enough that they will spend money, change their habits, or ideally both, to solve it?
As you’re having all of these conversations, you should be figuring out if what you are doing is meaningful enough in people’s lives that they are desperate for, or searching for, a solution. If they seem ambivalent, dig in and find out why. Is there some tangential problem that’s far more important that you could be solving instead? Or have you not honed in on the correct target market and you need to do more work and research in that area? If people won’t change their habits and spend some money to solve this problem, it likely won’t lead to a profitable (or fundable) business.
Does your solution resonate?
Once you’ve had enough conversations that you feel reasonably confident you are solving the right problem for the right people, create a drawing or wireframe of your idea to share with some more people. This should be super simple, made with something like Balsamiq, or even good old pen and paper. You don’t need a designer, just some thoughtful time with your idea and a basic workflow.
Once you have something simple that communicates the core concept well enough, go talk to some more people, show them your drawings or wireframes, and get more feedback.
Again, always make sure you are taking the bias out of how you are asking your questions, and listen far more than you are talking. Be open to shifts and pivots, because you never where the “ah-ha” piece that moves your idea from so-so to so-unicorn may come from!