Many entrepreneurs find themselves with a brilliant product (in their viewpoint) but no real market – a product-market misfit. Let’s get this very clear it is about the MARKET and how your product fits into and enhances the value of the market. Let me repeat – it’s all about the market. You can have a mediocre product and sell millions in a big market. If the market fit is wrong, then it will still not sell regardless of how hard you try – even with the best product or best team.
Should you, therefore, start with the market and find a product or the other way around? In most cases it is the other way around. Entrepreneurs sometimes have a great product idea, which they create – only to be later confused about which market to sell to.
Many entrepreneurs do not think about their target market in the idea stage and overlook the importance of having a market that their creation can be used or sold into. They then continue building and testing their idea in a restricted closed market of family or friends who always give positive feedback.
It’s then much later when you are now fully committed at the production stage and Go-To-Market stage when reality hits home – go to what market?
Defining what market and what value your product will bring to the market is critical for any startup to research, test and prototype.
Many products have a niche appeal and not surprisingly have, are only able to be sold within that niche market. If it’s a premium product then sales revenues many make this viable, but if it’s the low end of the scale, then you are probably doomed to fail before you get off the ground as you will not gain enough traction or market share to sell enough.
Look beyond the obvious market for your product or the problem it solves and sees if additional market segments may offer better opportunities or less competition. You know you have a good product-market fit when you can sell lots of products without spending a heap on marketing. The market pulls your product out of its startup phase and keeps selling basically without you doing anything.
Product-Market Fit Example
I spent three years 2003 to 2006, in Silicon Valley with my partner Jay Elliott a former senior Apple executive creating a flash drive sync software product called Migo.
Our initial market focus was developing functions around synchronizing a user’s desktop files onto the USB device to then recreate and work on in a home environment without carrying a laptop between workplace and home. The value adds here was a convenience factor for commuters. The real market evolved when we showed Insurance Agents the Migo, and they found uses for it as a productivity tool to update client policies while on the road selling. Each day delay in updating a policy could cost thousands in annual premium fees for both insurer and Agent – so the real value adds market for Migo was as a productivity application.
We were able to successfully raise $17 million from Wall Street investors to fund Migo’s launch and production.
Product-Market Fit Example
There is also somewhat of a misconception that you must be “first to market”. Both Apple iPhone and Google are good examples of brands not being first to market yet offering significant value add to customers and capturing market share of existing players beating them at their own game.
This is much harder for a startup of course, but there is nothing wrong in entering a market with version one of your product and gaining valuable customer and competitor feedback, first-round it does not have to be perfect. Refine your offering and keep learning and adapting from the pulse of the market to be successful. Let the market tell you what is right and what is wrong about your product and be responsive to this feedback with frequent updates and upgrades.
We tried to convince a small US East Coast company who had a cutely-named electric bicycle strap on kit (ZAP – Zero Air Pollution) to license it to leads we had in China where there were over 700 million bicycles in the mid-’90s. We actually set a number of electric vehicles records in a Japan EV race using this kit and had tremendous Asian interest. Alas, the founder kept saying it’s not market-ready yet and the Chinese will steal the idea – true but what a huge market opportunity even if you captured a mere five per cent. The company folded a few years later, having sold a few hundred only.
Don’t be afraid of competition and copycats. Even patents cannot protect you one hundred per cent, and it’s smarter to continue innovating ahead of competitors and launching your next update than looking backwards continuously to see who is chasing you.
If you can define your market clearly and it’s a big enough or a hungry enough market for innovation, then VC’s are easier to convince for funding. Your pitch should focus on the size and demographics of this market then how your product solves problem A that currently inhibits the market. A pitch deck highlighting a good product-market fit will almost always get funded versus a pitch about how fabulous your product is and how amazing you are.