Could an early market research save 178 Startups’ failures?

Could an early market research save 178 Startups’ failures?

By Reka Esther, December 2016

In a recent “post-mortem” study, “CB Insights” interviewed entrepreneur from 178 failed startups. The study focuses on the Top 20 reasons founders give for their startup failure. 

The number one reason, according to 42% of the entrepreneurs that took part in the research, was the lack of product-market fit or what they called “No market need”. In other words (my words): they skipped or failed in market research.

Many entrepreneurs choose not to conduct market research because it seems overwhelming or because they think they know their market best. But this attitude can amount to a death sentence for their product.

So what is a market, what market research reveals and why is it essential for startups?

A possible market for a new product or service is a collection of the consumers or businesses that would purchase them. They have similar problems and needs.

Market research is an essential tool for any organization in their planning and decision-making process. It can validate key assumptions like consumer identification, market sizing, competitive landscape and value proposition. A well done market research also increases investors trust.

Identifying the market

You must conduct market research to understand who the potential customers are. Identifying the market means finding your client: the people with the same or similar problem or need that are most likely to adopt your new product. Without understanding the market it is impossible to service it.

Sizing the market

You must conduct market research to discover if your business makes sense. Are there enough customers with a similar or the same problem or need? What innovation products did they purchase at the past that might be similar to your new product or service? Is it possible to forecast a successful revenue and profit stream over time? Without sizing a market it is impossible to know if the business has a future, or if it can drive a growing and profitable business, and no one can put a valuation on your company.


You must conduct a market research to find out if you can maintain a sustained competitive advantage. Knowing the competitors means determining why a customer would purchase from you rather than a competitor. Who are the people out there doing similar things to your business? Are they doing it right? Why customers like or dislike them?  Understanding the competitive landscape will give you the better insight to improve your product or service and win the competition. Also very useful way to evaluate your customer is by looking at your competitors. Without knowing the advantages and disadvantages of your competitors you can't tell where your company stands in the overall market, and can't compete in terms of basic factors like price, quality and service.

Value proposition

You must conduct a market research to validate your unique value proposition. By knowing perfectly the target audience it's easy to identify what value your product or service holds for their perspective. Common trap for many tech startup entrepreneurs is to distinguish between what excites them about their new technology and what real value the product actually brings to the customer. Mapping and collecting voice of the customer feedback can clarify the value proposition. Without articulate the product or service unique value it's impossible to drive people to buy it.


A market research is essential to be able to raise a bigger investment by demonstrating that the startup is associated with a lower risk. Most investors like to fund startups only after they have seen extensive and persuasive information that will help them to evaluate the potential and risk. By providing them reliable information you raise the chances to get investment. Without a proper market research with realistic and reliable results you can't prove the commercial viability of your idea.

To summarize:

What are the main issues a startup should search for to better understand its potential market:

  • What are people doing today as an answer to the pain your product or service cure solves?
  • What expressions the potential client use today while talking about that pain or need?
  • What is the size of the market where your product might belong, and what is the estimation of the future growth?
  • How is your market segmented, by product or services, by demographics or by geographic regions?
  • What are the hottest industry trends and future predictions?
  • Who are the key industry  players - profile and comprehensive analysis about their core competencies and positioning

We’ll be sharing more details, tips and advices about how to conduct a proper market research for startups on our next blog post.



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