Why So Many Startups Fail

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why so many startups fail - SME Digest

There is no end to the obstacles you have to face when you’re getting a startup off the ground.

But there’s one specific step that’s particularly troublesome. And part of the reason why it’s so vexing is because of its subtlety.

You can think you’ve nipped it in the bud, move on to the bazillion other tasks you have to attend to, fast forward a few months or even years… and that’s when it hits you.

That’s when you realize you didn’t do that step correctly. And by then, all your efforts could be squandered. Everything you’ve built until that point could be for naught.

You probably know what I’m talking about by now:

Product-market fit.

Far too many startup founders and entrepreneurs forgo the due diligence necessary to ensure their hard work and effort actually carries economic merit.

What I mean by this is they don’t clearly identify if or how their product provides value or solves a problem in need of solving.

Basically, many founders build a product or service based on their own personal biases or needs.

They assume that if they have this problem, then of course plenty of other people do!

After accepting this logical fallacy, they don’t bother with scoping out the addressable market. They don’t research how people interact with and utilize their product. They don’t… well, you get the picture.

They don’t do a million tasks related to product-market fit. And more often than not, this snowballs into one colossal compound effect:

They don’t survive.

Failing to identify your product-market fit almost always leads to disastrous consequences. Without carrying out this crucial step, you never figure out if your work actually resonates with your audience.

This is the main reason why the vast majority of mobile apps languish and receive fewer than a thousand downloads after launch.

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It’s safe to say that if you haven’t found your fit in the marketplace, you haven’t found a sustainable startup.

Sounds straightforward, right?

But to see why this simple fact explains how some startups thrive and others perish, we must dig deeper into the concept of product-market fit.

To do so, let’s start with a definition:

Marc Andreessen of venture capital firm Andreessen Horowitz defines product-market fit as “being in a good market with a product that can satisfy that market.”

It’s an easy concept to understand, but not exactly so easy to implement and your success depends on you doing so!

So, no pressure, right?

By now, it’s normal for you to wonder, “How do I make sure my startup is making something with a great product-market fit?

But it can also boil down to another simple-to-understand yet not-so-easy-to-implement concept:

Your perspective determines your startup’s success.

Your outlook on a situation dictates your outcome. Put another way, how you approach a problem determines how you solve it.

You can view a problem through a billion different lenses. But only a few perspectives yield the optimal outcomes you’re after.

How you solve a particular problem must align with your audience’s particular needs.

This carries a few nuances you should be cognizant of.

To elucidate them, let’s take a quick field trip around the Internet. Browse some of the most successful startups that come to your mind.

Here’s what you’ll discover:

Many successful startups are based on ideas you wouldn’t call revolutionary. But how they perceive the market and solve the problem is!

These companies saw their situation clearly and objectively. They identified a tangible, substantial problem. Then they solved it gracefully.

It’s not as simple as just solving the problem. You must solve it gracefully.

To see what I mean, let’s visit the other side of this equation.

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There are many startup concepts that sound absolutely game-changing on paper. But they never gain enough traction.

Maybe they were solving a problem that didn’t exist.

Maybe their founders’ perspectives were skewed.

Either way, their solution to a problem did not resonate with their audience. It wasn’t truly conducive, convenient, elegant… however you want to describe the mere fact that their solution did not ‘gel’ with their customers’ needs.

This sound blunt. Maybe even brutal. But the truth is often hard to accept.

Perspective on product-market fit is profoundly powerful. Seeing eye-to-eye with your potential users and being aligned on their actual issues means you can actually build a solution.

This is why I encourage all startup founders to get feedback on your product-market fit as early as possible.

Do it before you even start building your product if you can!

This substantially increases your chances of success. You’ll find out if something works before committing more time and energy than necessary. And you’ll be able to pivot.

Without this clarity on what your product fulfills, you really can’t have clarity on where your startup is going.

Test your assumptions. Rapid prototype your solution. Validate it. Iterate from the lessons you learn. Then repeat.

Keep in mind that this is a continuous process. It shouldn’t be stopped after you launch your product.

You must hold regular check-ups with your team and yourself to validate your product’s value and improve its standing.

Continuous course correction is needed to get where you want to go.

If you remember who you’re building your product for, this audience will remember you in return.

Always remain open and receptive to feedback. It shines a light on your product-market fit and gives you priceless guidance.

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