4 Easy Steps to Understand The Fail of “No Market Need”.
According to CB Insight, 42% of the startups fail because no market need.
Wow, that’s almost half of the reasons to avoid failures. Is CB Insight telling us this is the main reason of startup fail? Actually, by statistics, it is the main reason. This article is part of the other top 10 reasons why startups fail.
So, let’s work on this failure step by step. I made these 4 easy steps in order to understand these big problems.
What does it mean no market need?
It means, your solution doesn’t cover any current needs in the market or expressed in a different way: The market is not requesting or looking for the needs covered by your product or services.
Why is this happening? Unfortunately, many startups and companies are launched without a previous market analysis and deep testing.
This problem can be divided into two reasons: “Not filling a gap in the market” and “No market for this specific gap”.
Not filling a gap in the market.
The market is overcrowded with companies or solutions doing the same or fixing the same problems in the same way. So, how we can fill a gap in the market?
Examples of filling a gap in the market.
You are able to fill a gap in the market in the following cases:
After Uber launched the services in the United States, they were filling a gap in the market with prices and quality services of the taxi’s ride. They were unique in the world.
However, some entrepreneurs took this idea to their local country with their own name and very similar services and they founded their own company.
This is an example of filling a gap in the market by location, where didn’t arrive to the local country.
By new technology.
I have cooperated with a cybersecurity startup offering new technology. I scaled up this new technology to some countries where any vendor was offering this type of solution in the same way as they were doing. Therefore, here it comes by new technology with some specific features point of view and at the same time by location.
By disruptive prices.
At the time of writing this article, I am cooperating right now with Datos101 (Cloud Backup Storage Vendor). They provide disruptive prices in the market. From this point of view, they are filling a gap in the market with many companies they are not able to pay high prices for this specific solution.
By process simplification.
In the past, it didn’t exist a specific web application to compare flights prices and connections. When the first web application arrives at the market, they simplified the process of researching the most economic or fastest flight connection for business and personal trips.
As you can see in the previous examples, you need to offer something different or you need to target a market not covered yet.
On one hand, filling a gap in the market is a key factor for your startup success.
On the other hand, be aware, you may have a perfect idea or solution and this doesn’t warranty your success. One of the main reason behind your failure after filling a gap in the market, it is because there is no market for this gap that you are filling.
Not market in this GAP.
Filling a gap in the market doesn’t warranty itself the success. You also have to find a market for this GAP. Without customer willing to buy your solution, your startup won’t survive.
I will give you a few examples with real business and a technology startup vendor.
A real example of Business: Umbrellas and sunbeds on an empty beach.
On this beach, there was a gap in the market. Any company was offering umbrellas and sunbeds. So, they decided to make a business based on this market gap.
However, there wasn’t any potential customer asking for this. In this case, it is an extreme example because there is no customer at all on this beach.
Examples of market demand for a specific gap market.
Example of low-cost companies in Europe.
In Europe, the low-cost concept was originated with the introduction of easyJet and Ryanair in 1995 (Source: http://aviationknowledge.wikidot.com/aviation:low-cost-airlines:a-brief-history-the-current-state).
- The concept was the same. The flight was still transporting from one location to another.
- Till this date, take a flight was only affordable for wealthy families.
- They cut off all prices possible in order to make more economic and more affordable to the rest of the population.
- After this, a massive public began to use the plane.
They filled a market gap, there was a market for this specific gap.
Example of startup filling a gap in the market
Here, it comes again the example of a Cybersecurity Spanish Vendor:
- They are located in Spain.
- Only 10% of the Spanish small and medium business were using this type of solutions. It means, 90% of them don’t have any type of solutions.
- The main reasons for this market gap are the current expensive prices and computer security costs awareness.
- This Startup launched disruptive prices.
Thus, they are able to fill a gap in the market, and the market is asking for this type of solutions because of law compliance and business reasons.
Conclusion and Javier Nieto’s tips.
The purpose of this article is to understand better the reasons why startups fail. After understanding these reasons, your chance of success will multiply. This is the end-conclusion:
- It is needed a previous market analysis before you launch a startup.
- The two reasons of no market need fail are: “Not filling a gap in the market” and “No market for this specific gap”.
- You are able to fill a gap in the market by offering a new service or solution by location, new technology, disruptive prices or/and process simplification.
- You should find what type of current problems your audience have, in order to have a market demand for a specific market gap.
I hope this article helped you to overcome one of the main reason why startup fail.
This chapter is part of the other top 10 reasons why startups fail.
Javier Nieto León