Saas Startups

Seven Mistakes That Make Startup Software Ventures Unable To Achieve Product-Market-Fit 

In the conception phase of a software startup, most organizations place most of their attention on developing the product (the software in this case). Founders who are either developers or engineers or even if they are non-tech founders that have the product vision, see the product as their baby and hence they tend to care too profoundly for the advantages and features of the software that they are developing. They try all they can to ensure that they get the product exactly the way they envisioned; hence they spend several months or even years developing the software. 

However, when the product is finally launched, they realize that they can’t find anyone to purchase it. This is a result of the company failing to achieve product-market fit. Tragically, the startup is bound to fail since the software is unable to achieve product-market fit. 

This article is the first of a two-part series that explains in detail the seven mistakes that most software startup companies make which prevent them from accomplishing the product-market fit. 

Another article which is part two of this article will discuss the most suitable methods that will help you down the path where achieving product-market fit is easier. 

The following are the mistakes that make most startup software ventures fail. 

1. Inability To Identify Early Adopter Niche 

Failure to identify an early adopter niche will cause a startup to never achieve product-market-niche. The product-market fit is a situation in which a startup has a product that provides a solution to a problem that users in a market will pay to use or get access to. The main proof that a product has attained the product-market fit is when you can sell enough copies of your product at a high price. Also, the ratio of the lifetime value vs three customer acquisition costs is 3:1 or even more.

I will explain more about this number in the second part of this article. 

Without the product-market fit, a startup will be unable to be as profitable as it needs to grow. A lot of startups do not come close to the 3:1 ratio when they do not attain the product-market fit.

The early adopter niche is the set of people who tries the product or software first. This set of people are those that are always looking to use the greatest and latest things and hence they do not care about the risk involved. They are not like other potential customers who are more risk-averse. Those in this early adopters niche provide feedback about the product since they are the first set of people to use the product. They can be seen as a form of testing the early stages of the product. 

Without the early adopters, a startup will be unable to reach the product market fit. This will make the company unable to grow. The startup will also be unable to improve needed the generate the revenue it needs to grow. Without getting the early adapters niche, a software startup will be unable to get the target audience or market for their company. 

An example of a software startup that did not succeed because it failed to identify its early adopter niche is Google wave.

Google Wave is a platform that should have been used for real-time communications like video conferencing and chatting.

However, Google Wave did not succeed in gaining traction with its users. One of the reasons that caused this was the fact that they did not properly identify the early adopter niche. 

Google Wave was unable to meet the early adopter’s needs as they targeted the wrong niche for the product that they have created. 

This is what made the platform fail to reach the product-market fit. Their inability to meet the product-market fit made them shut down eventually. 

The early adopters are really important for a software startup company and without them, they will be unable to achieve the product-market fit. 

The second part of the series will discuss in detail, the effective method to properly identify the early adopter’s niche. 

2. Failure To Form Compelling Value Proposition 

Several software company founders do not articulate a compelling value proposition that fails to achieve the product-market fit. 

This is often a result of the failure to understand the problem that the software is meant to solve, the industry that the software is targeting, or the target audience and customers that the software is created for. 

With no clear understanding of the three things listed above, the value proposition that will resonate with the potential customer will be difficult to create. 

Also, a lot of startup founders underestimate the importance of a strong value proposition. Rather, they pay more attention to the features and functionality of the product. Even with nice, well-functioning software, it is difficult to convince customers to purchase the product without a compelling value proposition. 

It will also be difficult to articulate a convincing value proposition if you do not understand how much the problem that the software is solving will cost. 

The cost equation can differ depending on the niche you are targeting. Without understanding the variation between the potential target niches, you may not be able to get a target niche in which it will be easier to create the most compelling value proposition possible. 

Now you see that the value proposition depends on the niche that is being targeted. 

A good example of a software startup that failed to articulate a compelling value proposition is Vine. Vine is a social media platform that allows you to share short videos. It was acquired by Twitter in 2012. However, Vine failed to communicate a compelling value proposition to its users. This made them unable to achieve product-market fit and this led to their folding up in 2016. 

Now, can you see that the value proposition depends on the niche that you are targeting? 

3. No Sales And Marketing Strategy

Now that you are aware of the importance of product-market fit, you know that it is key to having a successful software startup venture. A go-to-market strategy helps to make sure that the right product is targeted at the right market. With no well-defined go-to-market strategy, it will be difficult to achieve product-market-fit. 

There are several reasons that the lack of a well-defined market strategy prevents software startup ventures from reaching the product-market fit. 

The first one is that the go-to-market strategy helps to validate the concept of the product. With no go-to-market strategy, it can be a bit difficult to identify if the product is solving a problem for the target industry or market.

The second thing is that a go-to-market strategy helps to know the right pricing for the product. You will not be able to know if your product is rightly priced for the target market if you do not have a go-to-market strategy. 

The third on the list is that the go-to-market strategy will help to decide on the proper distribution channel with which you should distribute the product. Without it, you may be unable to determine whether or not the product is reaching the target audience. 

The fourth thing that a go-to-market strategy helps to achieve is the creation of a sales and marketing plan. No go-to-market strategy means that there are no sales and marketing plans. And a business with no marketing and sales plan is doomed to fail as it will be unable to effectively market and sell its product. 

A go-to-market strategy will help to define the best overall business model which will determine how the product will generate revenue. 

Finally, a  go-to-marketing strategy will also help to set milestones and KPIs. Failure to have a go-to-marketing strategy means that the company will have difficulties in determining if the product is on the path to achieving product-market fit.

The failure to have a well-defined go-to-market strategy is one of the main reasons software startup companies fail to achieve product-market fit. A lack of a go-to-market strategy will make it difficult to validate the concept of the product, know the right price, determine the right channel of distribution, establish key partners, define the overall business model, create a marketing and sales plan, and also set milestones and KPIs. 

4. Loving The Solution More Than The Problem 

A lot of software startup companies have failed to achieve product-market fit because the founders tend to be in love with the solution they are creating rather than the problem they wish to solve with the software. This makes them more focused on developing the perfect solution and they end up not understanding the need problem so that they can understand the need of the market and now develop the solution to the need. 

This can cause several problems for the startup. The problems can include developing a solution that is more complex than the problem or failing to even solve that actual problem. 

A lot of times I tell founders that the reason most founders fail is due to features, benefits, and advantages. Companies that record success are those that prioritize and focus on the customers and the problems they have. 

Most startup founders have the mindset to focus on building the perfect solution and automatically, they will attract customers in large numbers. However, they do not know that this mindset rarely leads to achieving success. 

Another cause of most startups’ failure in achieving product-marketing fit is that they pay more attention to the technology rather than the needs of the customers. This mostly leads to the creation of a solution that is even more complex to use and most times does not even address or solve the problem of the customers. 

Startups must focus on the problem they aim to solve and not the solution they aim to provide. Startup founders need to understand the needs of their target audience and create a solution to meet these needs. Only by doing this will they achieve the product-market fit. 

5. Over-engineering The Solution 

More often than not, software startup founders over-engineer the solution rather than paying attention to an MVP. This makes them fail at achieving the product-market fit. You might be wondering why, well here is the reason: 

It is easy to get caught up in the details of the product when starting a software startup company. Founders tend to get carried away with the desire to build the perfect solution. However, one common mistake that they make is that while trying to build a solution with the perfect features they end up wasting several years.

In my conversation with a startup last week, I realized that the startup has spent the last ten years stuck in the education space. When they started, the founder had raised a sum of money that is enough for them to operate for six years without revenue. In the course of the conversation, the CTO told me that the products they created in the first five years were never used and were eventually removed from their product. Only a few startups can be in business building software no one used for that long without folding up. Tragically, over-engineering seems like the norm with software startups. 

The issue with over-engineering in software startups is that you will use a lot of time and resources to build the features that the founder deems worthy of the solution. This will result in a big delay before you can successfully launch the product. When you finally launch the product, your target audience might have moved on. 

So note that the most important thing is not to build a product but a product that the early adopters can easily pay for. After the product is launched you can now focus on the feedback of the early adopters and use it to improve the product.

6. Inability To Get Timely Customers’ Feedback

Regarding software startups, one essential thing to put at the back of your mind is that feedback from your customers is very important. Getting regular and timely feedback is vital to the success of any software startup company. This can be gotten by the timely engagement of the early adopters. The failure to engage the early adopters early enough is what causes the failure to achieve the product-market fit. 

There are some reasons this might be the case. It is important to first remember that feedback is a two-way street. To get feedback from customers you need to be ready to listen to what they have to say. Although it might not be what you want to hear. 

Most often than not, startup founders are too focused on their vision for the product that they pay little or no attention to the customers’ feedback as it may change what they have envisioned for the product. 

Another thing that makes startups get no feedback is that they are scared to ask for it. Some startup founders consider feedback as admitting that they do not have all the answers and hence they do not bother asking. 

It is also important to add that getting feedback is not the main deal, however, inputting the feedback into your product is what will help you. Most times, some startups ask their customers for feedback that is either vague or not relevant. 

7. Validation Of Solutions Takes Too Long

A lot of startup companies fail to get the product-market fit because they do not validate their solution early enough with their potential customers. 

A lot of startups have great ideas, however, a lack of feedback from the actual users of the product means they are just moving blindly. 

This is a big error, as the product-market fit is more about ensuring that the product is solving a real problem with real cost and real impact on your target market. Failure to validate your solution with them can make you end up creating something they do not even need. 

The best way to go about validating your solution is to go out and talk to the people who will be the actual users of the product. Ask them what they think about the product and if it solves the problem. 

You can also try to get early adopters that are willing to try the product. Getting feedback from people that will most likely use the product is important, however, the most important thing is that you implement the feedback you get. 

In the second part of this series, I shall discuss the various stages of development and designs when startup founders should reach out to customers and how to make their feedback highly effective. 

Final Thoughts 

Finally, these are seven mistakes that make a lot of software startup companies fail in achieving product-market fit. They are;

  • Failure To Identify Your Early Adopter Niche 
  • Failure To Articulate A Compelling Value Proposition 
  • Sales And Marketing Strategy Is Missing
  • Loving Your Solution Instead Of The Problem 
  • Over-engineering The Solution 
  • Failure To Quickly Get Customers’ Feedback
  • Waiting Too Long To Validate Solutions

Each of these mistakes can cause harm to a software startup company, however, once you can avoid them, you are on your way to achieving the product-market fit leading to a successful software startup.

Do well to check back for the second part of the series where I will explain ways by which you can avoid these mistakes.