A bone to pick: not enough product-market fit
How often do we hear this, “We’ve just raised a small seed round and are using it see if we can gain product-market fit.”? In other words, they’re spending time and money without any inclination that there is a market available. I’ve not done the research, but at what point in history did this become a good strategy for the founders involved? The odds of success are tiny.
Building a startup with a huge market available to it is hard enough. Building a startup and trying to create its own market is a disaster waiting to happen. Far too often, I see startups trying to do the latter. You are wasting your time if you don’t start with an idea that has product-market fit from day one.
I’ve often heard people say that Apple created an entirely new market when it introduced the iPad. Same with the iPhone when the app store was launched. This isn’t true though. The ‘market’ already existed, it was the media/entertainment market. The iPad was just another device to leverage that market. Apple knew what it was doing.
I mention Apple, because they are a good example, for this specific case, in knowing your product-market fit before you even begin. For startup companies that manage to raise a small seed round (<$500K) it means you’ve been given a chance to demonstrate that product-market fit. For the Angel(s) involved, that’s great if you go on to prove that, and if not, well, they’ve invested in enough startups to hedge their losses. For >95% of startups though, you will never achieve that product-market fit if you don’t already have it from the start.
The best way to tell if your idea/startup has product-market fit is to ask yourself what other companies are successful and doing what you are thinking of doing. By success, I don’t mean raised a round (or even multiple rounds), I mean profitable and a staple in a large portion of people’s lives. If you can’t name several companies in your area, then 1) you don’t have enough knowledge of your area or 2) your idea doesn’t have an audience.