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4 Tactics to Help Your Company Avoid the Top Startup Killer Startups fail for a lot of reasons: a lack of money (duh), poor marketing, a pivot gone awry, legal challenges. But another, different reason tops the list year after year.

By Zach Ferres Edited by Dan Bova

Opinions expressed by Entrepreneur contributors are their own.


Startups fail for a wide array of reasons: A lack of money (duh). Poor marketing. A pivot gone awry. Legal challenges.

Related: Beware of These 6 Assumptions in Your Startup

Outside of those common issues, another, different reason manages to top the list year after year. Analytics firm CB Insights recently found that about half of startups fail because of inadequate market need. A similar study uncovered the same lead trend in 2014.

Post-mortem essays by startup founders provide color commentary to go with these statistics. HelloParking founders have said they regret not spending more time getting to know their target users. 37coins has pointed to not being able to find product-market fit. In hindsight, Treehouse Logic leaders said they recognized the problem they were solving simply wasn't widespread.

There are more case studies, but you get the picture. Going to market with the wrong product is the most common reason startup ventures flounder rather than flourish. So, don't let this be you; here's how.

1. Assume nothing.

Let's start by breaking down the "no market need" issue. There are essentially three components at play: the market, the need and the product. When founders say there's no market need for their products or services, they're basically saying their assumptions were wrong in one or more of these areas.

If there's one universal trait across startups, it's that most first releases fail. Founders don't like to admit it, but their go-to-market strategies are often a giant tangled ball of untested assumptions.

A lot of companies start from their "great idea moment" and jump right into building the masterpiece product of their grand vision. If -- and this is a big if -- the product is released, it's often late and over budget. Then the market doesn't react as expected, which makes it easy to blame the market.

What's more likely is that the product does not clearly solve a specific need, or the targeted market segment is faulty. In their post-mortem assessments, 42 percent of founders said they had developed solutions for problems that interested them, not necessarily because they were inspired by a validated market need.

Unfortunately, product visions don't always fit the market need like a glove. So, involve your customers in the journey of establishing your product vision, and keep an open mind along the way. Your customers will be the judges of whether your product meshes with the market.

2. Focus on viability.

Regardless of the reason for any disconnect between product and market, the result is the same: Many startups don't determine the viability of their products until it's too late.

You might have the best concept in the world, but you need to first consider whether there's a market. Here are four tricks to determine whether your brilliant idea is feasible:

1. Do your homework. Set aside some time to study other startups that have already tested some of your assumptions. Start with a Google search to gather as much information as possible to learn from others' mistakes and successes. Seek opportunities to talk with founders of companies in similar markets and use them as advisors whenever you can. This will give you some valuable data that can reduce the number of untested assumptions in your plan.

2. Get out of the building. Before you build anything, validate the market by spending time interacting with it. Online resources such as QuickMVP, Bubble and Wix make it relatively easy and inexpensive to build experiments that you can take to market. Talk with potential customers to truly understand and assess an opportunity. This can be a time-consuming process, but it's absolutely worth the investment.

Getting a firsthand view of customer problems and validation (or not) of your idea will hone your solution and provide a foundation for discovering markets, identifying customers and, eventually, scaling the business.

Related: 3 Tips to Align Your Startup's 'Core Value' With Customers'

3. Plan to fail.

It's highly unlikely that you're going to get it right on the first attempt. Even Thomas Edison failed a few times before he found the right filament for the lightbulb. Try to change your own definition of a startup, which can dramatically alter how you think about your company. Steve Blank defines startups as "temporary organizations used to search for repeatable and scalable business models."

Approach the process as a series of experiments -- failures included -- that will lead you to product-market fit. When you do ultimately fail, you won't spend all of your money (or ramen stash) on the first release. Most importantly, risk failure only if you're willing to learn from it and make changes.

4. Build just enough.

Your first job is to form some hypotheses based on your core underlying assumptions. If many of the assumptions relate to whether a problem exists, you might be able to get by with a simple experiment. The next step is to figure out how to build a minimum viable product that will allow you to test those assumptions in the real market without a heavy (and expensive) product build.

Explore manual automation hacks that can help you build the product you envision without fully automating the process from the start. It's a quick and practical approach that gives you the flexibility -- and budget -- to iterate.

Leaders sometimes fall back on a "build it and they will come" assumption; they believe their idea is so good that there is no need for any customer discovery. But that's not likely to work.

Related: How Working for 8 Failed Startups Catapulted My Success

Instead, investing the time to listen, learn and test from the start is the best way to ensure that the product you deliver matches the reality of your market.

Zach Ferres

Advisor, Board Member & Investor

Zach Ferres is a serial entrepreneur, speaker and technology executive passionate about developing entrepreneurial communities around the world. He built and sold his first tech company at 24 and was the CEO of Coplex for eight years, where he supported the creation of over 200 startup companies.

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