How to Find a Market Fit for Your Startup?
Author: Elena Obukhova, Founder & CEO at FAS
Product-market fit (PMF) is one of the crucial aspects of the project success and finding it can be quite challenging.
Let’s start with a simple equation that a startup founder should keep in mind:
A right product at a right market equals an opportunity, opportunity to succeed. If we add to this equation team and timing we can start talking about project success. But going back to the product and market, there can be 3 unpleasant outcomes for the startups with the wrong PMF:
wrong product + right market. You come to the market where you have great connections, experience and/or an expertise with an offer that market doesn’t value. You use your connections and experience to build a sales funnel but unfortunately it never scales. Whether your customer base doesn’t grow or you fail to retain the existing customers. That might be triggers to realise that you don’t actually solve the problem at this market.
right product + wrong market. You might have a perfect solution but you’re trying to sell it to wrong people. Spend some time on understanding the market and your target audience to ensure that you pitch to people whose problems you solve.
wrong product + wrong market. This can be the case when you’re selling a wrong product at a market where you don’t have expertise and connections. In this scenario you won’t be able to collect any helpful feedback and data from your potential customers in order to work on your solution. You need to rethink your business and find the way you can address the problems existing at the market.
Market and target audience analysis is crucial to get the basic understanding that you’re moving in the right direction as well as helping you to minimise any of the mentioned outcomes of wrong PMF.
Why is market validation so important?
Time. You spend a lot of time on preparing a dream MVP or even the whole project and then find out that it didn’t fit the market. The time that you spent appeared to be wasted and that one of the precious resources that you cannot earn back. To prevent it, you should act quickly, launch now with a simpler product/MVP, go to market and start collecting the feedback.
Money. In the same way you are loosing your time, you are also loosing money by trying to build something perfect. To prevent it, you should spend wisely. Develop step-by-step and concentrate on the core aspect of your solution. Think of the way how you can get the highest ROI from the money you spend on development.
Energy. The last important point to mention here is that you spend a lot of energy on the development and preparation. If your solution appears to be not a good fit for the market, you are left with all your and your team’s energy wasted and lack of motivation to pull yourself together to start over. In this case it’s more difficult to get back on track.
No one was perfect in the beginning and no one expects you to be.
Twitch (Justin.tv)
Look how Twitch started. It all began from Justin.tv (the way Twitch was called back then) with only one available channel that shows the everyday life of Justin. The video quality wasn’t ideal and there were no other options and no other streams. The team started with Justin.tv and found out that there is a demand for video streaming and the project started evolving.
Airbnb
Above you can see one of the earliest versions of the Airbnb website. There was no map to see where your apartnemt is located, no additional filters to sort out the options on the websites, no airbnb experiences and other features that all of us are used to. The team spent a lot of effort to build the core of their business — the hosts community to make the project work.
Finding a PMF can take some time. For example, Weebly, e-commerce and website builder solution, spent nearly 1.5 years to find a market fit. The team was trying different approaches and was constantly analysing the market and the feedback they were receiving. Later on they were sold to Square for US$ 365 million.
How to be smart with you time, budget, and energy?
As it was mentioned earlier, you need to find the core of your project, the main feature that already brings the solution to the problem existing at the market but without any fancy add-ons. Reach out to your target audience with this core and start a conversation to ask their opinion and feedback. At the end of the day, you’re building this solution for them, not for yourself. Collect and analyse all their feedback. Start incorporating it, and only then continue building something new and fancy. This should be a continuous process of building, talking and analysing to make your project meet the market needs.
Step-by-step
Research your market and target audience. Do a preliminary research on your market and target audience to learn the problems existing at the market and see if people need your solution. It’s also important to know your competitors and all existing alternatives. You can be determined that your project is unique and it might be unique indeed, but if it solves an important problem on the market then there’re always other solutions that were used before you came to the market. You need to know the whole picture to learn how to address the needs of your target audience.
Find the test market. Find a small community /group of people with who you can do the testing without harm for the business. It can be a Reddit community or university group that has your target audience. You will be surprised how many people are willing to try a new solution and give you a useful feedback. Important to note, that you need to build a testing methodology that fits your project in order to get a useful feedback for your business.
Run testing. Once again think carefully about the ways you’re going to collect the feedback to get all the useful information you need. You can use a questionnaire, interview, focus group, or any other way you think might work better. Start gathering this information.
Analyse. This is the process that should never stop throughout the lifetime of your project. It’s crucial to get this feedback to enter the market and you will always need to be updated on what your customers want.
Launch. That’s the happy ending of your hard work.
If you need any help on this journey - feel free to reach out to our team. Good luck!