Startups fail for several reasons: They run out of money, the founders have a fallout, the team burns out, etc. But the number one reason? The biggest underlying reason that startups fail is that there is no market need! According to a report by CB Insights of over 280 post-mortem startups, 42% of the founders point to “No Market Need.”
The reason this happens is because founders often have untested beliefs (invalidated assumptions) about their customers’ needs and behaviors that they take to be fact. Then, those founders build a product based on the invalidated assumptions (read more in Assumptions ). They spend thousands of dollars and, more importantly, thousands of hours working on a product or service that doesn’t have a market. In other words, not enough people are willing to pay for that product or service for the company to be able to stay in business.
Top 10 Reasons Startups Fail (CB Insights)
“I realized, essentially, that we had no customers because no one was interested in the model we were pitching. Doctors want more patients, not an efficient office.”- Founder of Patient Communicator
To help you successfully navigate the company-building journey and avoid this common startup pitfall, our E-Book builds off of the following two principles:
We will work through a useful framework for understanding your customers, their problems/needs, and behaviors called Customer Discovery. Customer Discovery is the idea that before building your business, you have to deeply understand the person who will be using your product or service. Through the process of Customer Discovery, you will continuously question the assumptions that you're making about your business opportunity and test them by talking to and getting feedback from customers.
Similarly, another popular methodology, Design Thinking, also positions the people that you're creating for at the center of the problem-solving process. By building empathy, design thinking puts forth that you can uncover more in-depth insights about your customer.
Being customer-focused enables you to avoid your own biases and generate evidence for smarter product and business model development. By implementing our framework and applying it to your business idea, you will identify your customers, understand their thinking, and build for their specific behaviors and pain points 😡😤😥.
Becoming a founder may feel like it requires a whole new skill set, but we believe it's more about tapping into something that we all did very intuitively as children. As kids, we are all natural experimenters, continually trying different things, unafraid to get messy, and watching for feedback as we test how far we can push the boundaries. While perhaps rusty from spending time in structured school and work establishments, we're going to practice and re-master these experimentation skills to generate customer feedback from which we can learn.
The most popular method for experimenting in startups is the Lean process of build-measure-learn, coined by Eric Ries in his book Lean Startup:
One superpower of small startups is that they are small and scrappy ("lean") and can perform this loop faster than large bureaucratic companies. The faster you are at spinning this wheel, the more likely you are to arrive at the right solution.
Throughout the E-Book, we guide you on how to experiment around every aspect of your company building process. These experiments include doing customer interviews, testing our marketing language via advertisements, and publicizing different prices to see which ones get customers to bite. By getting feedback directly from customers, experiments generate validated learning, which allows us to eliminate uncertainty as we build our business.
If you want to learn more about Customer Development, Lean, or Design Thinking, you can find some videos explaining each concept: