How To Spot A Startup That Lacks Product-Market Fit

This article talks about how experienced founders and investors can tell if a company has yet to reach product-market fit.

5 minute read

Key Quotes

“5 tell-tale phrases that suggest their startup’s product-market fit may not actually exist”

“While speaking to potential customers is an essential step to determining their pain points, hearing that they like an idea does not necessarily mean the proposed solution will solve an actual market need, or that they would pay the necessary price for it.“

“Having product-market fit means moving from a great idea, or nice to have, to a place where the startup’s customers express that they definitely want to exploit the benefits of the product, and will realize tangible returns in doing so.”

“Often people might say that they like an idea to avoid the discomfort of the truth, or because they do indeed “like” it, but don’t really “love” it.”

“The danger for startups juggling limited cash runways and an (understandable) overconfidence in their own solutions, is that they often start aggressively selling or marketing to customers – and stop listening to what those customers are actually saying – too early. The founders may blame their market for having notoriously lengthy sales cycles, however the underlying issue may actually be that their solution lacks product-market fit.“

“As an entrepreneur there’s always the temptation to grow the sales team at the first sign of revenue traction, but there is always the danger that this early traction is coming from the subset of the market that are early adopters and not the actual market itself.”

“In established markets, the reason for a solution not existing is more likely to be that is not something the market needs (or perhaps something that the market has already left to wither and fail before).”

“An interesting observation related to product-market fit, is that often it isn’t the “first mover”, but the “first to product-market fit” (or beyond that, first to “product-market scale”) that wins out in the end.”

“Facebook wasn’t the first social network, Google wasn’t the first search engine, and Apple wasn’t the first computer company, but all demonstrated an unmatched ability to serve their market with what it needed, which definitely proved to be a superior approach to generating growth.”

“It doesn’t take much beyond a few friends at the right media outlets, a moderately sized digital advertising budget, or a clever influencer marketing campaign to gain initial traction. However, just because a few vanity metrics are high does not mean that a company has product-market fit.“

Bottom Line

“They say that you can always feel product-market fit when it’s happening, but for a young founder who’s never experienced it before, or for someone so close to the company that they’re caught up in the emotions of it all, it’s simply not black and white.“