Poor Product-Market Fit

What does poor product-market fit mean?

Christoph Janz (Partner of Point Nine Capital) defined poor product-market fit as when a product failed to solve an important problem — without custom work and better than existing solutions — for a significant number of independent customers in a large market.

According to David Feinleib (2012), many startups never achieve the elusive product-market fit, even though the market need is there, and the product is compelling, but they just simply cannot reach their customers.

He added that many companies were trying to target the small-business segment have failed because of this.

But worst of all is achieving product-market fit only to discover that the actual market is very, very small (Feinleib, 2012).

David Feinleib also commented that companies targeting small markets are more susceptible to failure than their big-market counterparts.

Definition of product-market fit

According to Andy Rachleff (Co-founder & CEO of Wealthfront) who coined the term, he explained that by identifying a compelling value hypothesis is what he called finding product-market fit.

A value hypothesis is an attempt to articulate the key assumption that underlies why a customer is likely to use your product.

It identifies the features you need to build, the audience that is likely to care, and the business model required to entice a customer to buy your product.

Companies often go through many iterations before they find product-market fit. If you managed to address a market that really wants your product, then you will succeed.

According to Clément Vouillon (Senior Research Analyst of Point Nine Capital), product-market fit happens when the product (a set of features that have a clear value proposition) resonates with customers (which are of a certain type and have defined needs) that you know how to reach and convert (through marketing and sales).

Return to Glossary of business failures or read "Poor Risk Management".

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Last edited on 6 January 2022.