A CB Insights study found that 35% of startups failed because they launched a product with no market need. It’s one of the main reasons cited why startups fail.
As Sean Ellis, founding Dropbox marketer and “Hacking Growth” author, put it:
“Scaling growth before having product/market fit is the fastest way to kill your startup.”
Finding product/market fit (PMF) has become part of the standard VC checklist to evaluate new ideas. The concept of PMF originated with Sequoia founder Don Valentine and Benchmark co-founder Andy Rachleff, but was famously popularized by a16z co-founder Marc Andreessen in 2007. In a post called “The Only Thing That Matters”, Marc wrote:
“The only thing that matters is getting to product/market fit ….
“Product/market fit means being in a good market with a product that can satisfy that market …
“In a great market — a market with lots of real potential customers — the market pulls product out of the startup.”
I think this simple principle can apply beyond the startup world to any form of innovation, including products launched by large organizations. Lack of product/market fit contributes to massively funded flame-outs like Quibi to last week’s shuttering of CNN+ by CNN. Caught up in the momentum of the hype and the team, it’s easy to overlook or ignore early warning signs that there’s no market need. The path of least resistance is to continue to throw good money after bad.
Sean Ellis created “The 40% Test” to help gauge product/market fit. The main question of the survey simply asks customers of the product how they would feel if they could no longer use the product: “very disappointed,” “somewhat disappointed,” or “not disappointed.” Once 40% of customers respond “very disappointed,” Sean believed that a product was on its way toward scalable growth.
I think that’s an interesting question to pose any new product we launch — not only is it something customers may want, is it something customers won’t want to do without?
Here are a few related cartoons I’ve drawn over the years: