When searching for serious capital investments, it’s important to understand whether a) the product fills a need, and b) if there is a market demand for the product. The best product, the most innovative, and ingenious will fail if there is no audience to buy it.
What is product-market fit? It starts with the “why theory.” Why would a customer buy your product? The answer to the why theory clarifies what features are important for your product, who your audience is, where are your customers likely to purchase your product, and what’s the best business model to bring your product and the buyer together.
There is some disagreement among venture capitalists about what’s more important to success: the market or the company’s management team. Many great products didn’t start with great management teams but the intensity of the consumer’s pain point drive their businesses. But there is a process.
Companies need to adopt a scientific method mindset. You create the hypothesis, test it, and examine the results. If the results are positive, you plan the next steps. If not, you modify the original hypothesis or move on and develop a new one. Don’t short change yourself or your potential investors by skipping this step.
During the why theory process, you must determine if there’s a solid market for your product. The best product in the world will fail if no one wants it, or if it’s not the right time for it. That’s the product-market fit. You can tell when it’s working and when it’s not. If it’s not working, product sales will be sluggish, no press will come knocking and there will be no word-of-mouth groundswell to spread the word.
Conversely, when you find that product-market fit, your product will be flying out the door, demand will exceed supply, customers will spread the word and the press will want to get in and find out all about it. That’s when you know you’ve reached the elusive product-market fit. A good product in a good market, with plenty of customers ready to buy, is a good fit. Investors want to see that fit before they invest big capital dollars in a startup.
GSX Ventures is an experienced consulting firm. We’re experts when it comes to identifying the right product-market fit to generate sought-after return-on-investment. Contact us today at gsxventures.com or call at 410-230-0003.