Why Lacking Product-Market Fit Causes 42% of Startups to Fail

startup failure - no product-market fit

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Chapter 1: No Market Need (No Product-Market Fit) (42%)

These are excerpts of the first chapter of the book I’ve been writing (soon to be released) called Startup Survival Secrets. It goes through the top 20 reasons why startups fail, the root causes to those reasons, and what you can do to prevent them. I wanted to make this chapter available to anyone because it addresses the #1 reason for startup failure and I’d love to help others prevent this cause for failure from occurring. I hope you find this enlightening.

Root Cause 1 / Overall Root Cause: No Product-Market Fit

When you build a product or service that’s exactly aligned with what your target customers need and want, then you have what’s called product-market fit (PMF).

The number one reason startups fail is that they don’t have product-market fit.

42% of companies reported that their customers had no market need for their products!

So it would make sense that before you start building your product, you’d want to make sure it’s something that your target users want.

If you build a product that people want in your target market, then all you have to figure out is how you present it to them, which is usually by experimentation. And then you have to retain them once they’re customers.

But if you don’t have a product-market fit and you build a service or product that nobody wants, then your business will ultimately fail.

Like displayed in the Venn diagram below, you need the market opportunity (a hole or gap in the market), a product that you can build, and the demand for it (this can be created over time through experimentation).

This, however, is an oversimplification.

If you have questions on this topic or want to learn more about PMF, then I’d suggest you check out this complete guide to product-market fit with everything you need to know and explains how you can get it. I think you’ll find it really helpful.

Otherwise, why would you waste your time if you don’t meet these requirements?

We all have ideas about things in life but we don’t have to act on them.

product-market fit model


What to Do Instead

Instead of building a startup based on an idea without substantiating whether it’s good or not, you should always go through the following process of initial idea validation:

  1. Build a customer profile or multiple customer profiles.
  2. Do your market research to gain insight into the market size, statistical segments, and search for any [more] gaps in the market to use as unique selling propositions.
  3. Perform a thorough competitive analysis.
  4. Develop a marketing strategy which includes and shows your user/customer acquisition channels and/or distribution networks.
  5. Create a business model that will indicate how the company provides value and solves a problem its target users face and how it will be fiscally sustainable.
  6. Collect feedback from people who are in your target market. When asking them, tell them that you noticed that they were in xyz space and that you respect their opinion and would like to get some feedback from them about an idea. If they say yes, then ask them for their honest opinion if your product/service idea is something they would use and buy. Why or why not?

Doing these activities are the process of idea validation and they’re absolutely necessary for every startup to do to achieve product-market fit.

Section Conclusion

You won’t regret doing the above activities because everything above that you do will be very helpful for you down the line.

You’ll need access to that same information for creating materials like your pitch deck, executive summary, pricing page, and your website in general.

To reiterate, the above activities are part of the crucial building blocks of your startup. Make sure you do them!


Root Cause 2: Founders Aren’t Experts in Their Target Industry

the very best startup ideas - paul grahahm

When the founder(s) aren’t well-versed in the field they’re trying to make their product or service in, then that inexperience usually causes them to build something that the market doesn’t want.

Each work year is 2048 hours. It’s said that mastery of a subject takes 10,000 hours of time. That’s approximately five years of full-time work.  That’s a lot of work, don’t you think?

Naturally, some people have talents which may make their learning process easier, but major hard work is still necessary to become an expert in any industry.

If you’re trying to break into an industry you’re not familiar with, then read as much as possible about the industry until you become well-versed in it.

And then keep up with weekly reading/learning to keep you sharp and to continue your progression to become a great startup founder.

Additionally, you should talk to people in that industry for better insights and try to get a mentor that’s willing to teach you more about it.

Moreover, it’s important to do this before you start building your startup.  You’ll probably come up with even more ways to improve upon your idea after learning more about that industry.

What to Do Instead

If you’re trying to break into an industry you’re not familiar with, then read as much as possible about the industry until you become well-versed in it.

And then keep up with weekly reading/learning to keep you sharp and to continue your progression to become a great startup founder.

You should talk to people in that industry for better insights and try to get a mentor that’s willing to teach you more about it.

Moreover, it’s important to do this before you start building your startup.

You’ll probably come up with even more ways to improve upon your idea after learning more about that industry.

However, just remember that pursuing a startup idea may not be worth your time if you aren’t knowledgeable about the industry.


Root Cause 3: People Can Be Arrogant

People can be arrogant and entrepreneurship doesn’t always attract the best of us. Some think their idea is amazing and their startup idea will be a hit without doing their research and they’ll just build their product anyway. If you do this, you’ll probably fail.

Even if you have solid experience in your target market, your target customers might not think the same way you do, and it’s very possible they won’t care about your product or service.

Additionally, there may be competitors that you don’t know about.

It’s imperative to do market research, competitive analysis, and customer discovery so you can determine if you’re even close to product-market fit.

You must do these things. If you don’t, then you’ll likely be wasting your life on something that nobody wants.

I’ve seen what this arrogance has done to people who haven’t done any research and it practically destroyed them. Not only did their startup fail, but they wasted so much of their time developing to find out that nobody wanted their product. It ruined relationships because of it, too.

Arrogance can lead to lying to cover your own tracks, and this will create an impossible situation that’s no good for anyone.

If you don’t set your arrogance aside, then you can be seriously damaging people’s lives, such as any employees you may have or co-founders you’re partnered with.

For Example:

When I had my idea for my startup, StartupDevKit, I spent two full months of idea validation doing the following:

  • Researching statistics
  • Finding data on market size
  • Finding out the rest of the issues startups face that I didn’t already know about and if the issues and problems were being solved by a company already
  • Looking to see if my idea was unique or already done
  • Learning about potential competitors
  • Identifying all of my competitors’ pricing and their success levels
  • Researching all of my competitors’ marketing activities on search engines and on social media as well as signing up to their email lists
  • Organizing, collecting, and writing down all of the information I found
  • Creating business models including pricing models for StartupDevKit
  • Talking to target customers, asking them what they thought of StartupDevKit, and if they’d buy any of my kits.

Section Conclusion

Everyone’s time is precious. Value your time and that of others and take the idea validation process seriously.

Do your research, competitive analysis, create your business model, talk to target customers, and validate or invalidate your idea.

You can then, and only then, be truly informed about how to make the best decision whether to move forward or not.

Don’t let arrogance cloud your judgment and ruin your startup.

Root Cause 4: Fear of the Unknown

Customer discovery is so important, yet some founders are afraid of what answers or objections they might find.

So, because of fear and cowardice, founders don’t do the legwork and wind up not knowing whether people would use their product/service or not.

Fear is a natural emotion. But we don’t have to embrace it.

Everyone has fears in their life, but giving into fear prevents people from moving forward.

Sometimes it’s hard to spot within yourself. And sometimes it’s quite clear that you’re afraid of something. Some people rarely think introspectively, and some people maybe too much.

Either way, what matters is what you do once you have the realization that fear is holding you back from something.

What to Do Instead

If you approach lots of your target customers about your startup idea and nobody likes it, then that’s great, because it’s better to fail early on prior to investing your precious time, money, and energy into building it.

Instead of letting fear take you over, have the courage of a victor to meet fear face-to-face and overcome your mental obstacles. Don’t let fear take you over.

Our accomplishments as humans are because of the obstacles we’ve overcome, not what we’ve failed at doing.

Every person is innately capable of doing amazing things if we are determined and if we put our minds to a task. This applies to anything in life.

Target customer discovery is so important during your idea validation process.

If you can’t approach people in person and online to talk about your startup idea, then you are going to miss out on a lot of great opportunities. You miss 100% of the shots you don’t take.

A good startup founder has to be the leader that leads by example and serves as a role model for the rest of his/her employees.

A CEO of a startup or of any company is a public-facing role.  You don’t want to be the “Richard Hendricks” of your startup (from HBO’s Silicon Valley) that’s too afraid to say what needs to be said, and too afraid to do what needs to be done.

You’ll have to pitch to investors, lead meetings, talk to press, work on new business development, etc.

How do you overcome your fears of the unknown?

You can start by writing your fears down on paper.

Think of what’s holding you back?

This requires you to be brutally honest with yourself, however, it’s really important for making yourself the best person you can be and for winning with your startup and in your life.

The next step is the realization that in startups and in life, if you want to advance in anything, then you’ll have to become comfortable with going out of your comfort zone.

Eventually, with practice, those areas that were once out of your comfort zone become part of your comfort zone.  And then you keep progressing forward and winning at life.

The next step for you is to research and learn about best practices regarding what you are afraid to do. When you become educated about it, you’re much less likely to be scared of it.

This applies to your target customer discovery.

Research who your target customers are and learn about them.

Make several hypotheses about who target customers are.

Then you’ll be able to experiment and see which audience fits better with your product or service.

Then, when you learn about how to approach people and how to pitch your idea, and you practice it on your own, then you will become more confident in actually doing the approaching. Finally, all you need to do is test your hypothesis and talk to people!

I have applied this to my own life many times before and it’s worked quite well for me.

A short story about how I overcame my fear of heights:

I love rock climbing and I was once really scared of heights, but I wanted to do taller climbing routes.

I was scared climbing up hundreds of feet of rock.

But before I did, I educated myself about the strength of the gear and that I should trust that the gear will not fail.

However, I learned about the level of experience that the guides had and that became reassuring to me that I was in safe hands.

I trusted my skills and that I was more than capable of climbing the routes that we picked, based upon skill level.

Then when I successfully climbed up and sat on the ledge looking out, I realized that I was safe. I trusted the process and people.

The enjoyment of climbing and the amazing views were more than worth the anxiety I faced.

Since then, I’ve had no problems climbing 200-foot rock faces.

Section Conclusion

Through experimentation, analysis, realization, learning, practicing, and finally doing — you can get better at anything.

Don’t give into your fears. We as entrepreneurs must have courage. We must be bold and daring. Every day we have to keep pushing our personal comfort zone to go where we’ve never been before.

But you will enjoy it once you get used to this type of behavioral shift because you’ll notice how fulfilling it becomes.

I hope you can have this paradigm shift about fear because once you do, you can truly win with your startup and in your life.


Finding product-market fit comes from a combination of knowing your target market’s problems and needs, as well as through experimentation to find the right mix of features, communication, price, and product positioning for your product/service.

If you would like to learn more about how to get product-market fit, I suggest you read this article I wrote called Product-Market Fit: What it is, Why you need it, and How to get it.

What’s your experience with working towards product-market fit? Has it been a struggle? (Scroll all the way down to leave your comment)

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