What are the biggest challenges facing start-ups? In our blog "The Top Reasons Why Start-ups Fail," we discussed some of the main reasons start-ups fail. A common theme that caught our attention and was one of the main reasons for failure was the lack of a proper go-to-market (GTM) strategy and product-market fit.
Go-to-Market Strategy & Product-Market Fit are the two core components that investors should consider in order to reduce investment risk:
When framing a go-to-market strategy, it is important to assess whether a company is focusing on the right target group and entering the market at the right time and whether the market is saturated. The last thing you want to do is invest in a company launching an unprofitable product. Similarly, product-market fit describes how well a company's target customers buy, use, and tell others about a company's product in sufficient quantities to sustain the growth and profitability of that product. Achieving product-market fit is the key to a successful business. This means that there is a market demand for the product and people are willing to pay for it. Eric Vest delivered his keynote address at the May 2022 Keiretsu Forum Northwest & Rockies Roadshow, discussing the go-to-market strategy and scope of emerging start-ups. With over 25 years of entrepreneurial experience, the core theme of his presentation is understanding how to reduce risk in a portfolio through go-to-market strategies and product matching from an investor's perspective.
Simply put, a go-to-market (GTM) strategy is a step-by-step process of introducing new products and/or expanding existing products into new markets. Any good strategy should be able to answer the following questions: What are you selling? Who are you selling it to? What problem does it solve? How and where will you sell it? In which markets will you sell it? What are the needs? Who are your competitors? How did you get interested?
Bringing a product to market can be challenging, no matter how advanced the technology or how good the team is, developing a strategy that considers every possibility is the only way to ensure that you avoid mistakes and create a strong path to success for your company and investors.
Go-to-Market Strategy Framework
An efficient go-to-market strategy should include the following:
Defining the Ideal Customer Profile (ICP)
As an entrepreneur, the first and most important step is to figure out your overall target market. You need to define who your target market is, what problem you are trying to solve and create the ideal customer profile (ICP). It is important to create a more specific target audience who will gain value from your product and will eventually become the driving force for company sales.
Once you have an idea of your target market, you need to dig deeper into your new market strategy and look at the competition and underserved parts of the market. When you do, you'll also begin to understand whom you can actually compete with and how to effectively differentiate yourself from them.
Develop your messaging
A good messaging strategy includes many key points that provide information about your business and the value you add to your customers' lives. Once you've identified your market, created the ideal customer profile, and researched your competitors, you need to develop a messaging strategy for your business. Your strategy should include your positioning, value proposition, and mainly should align with the company values and the strategic narrative you have decided upon. The company messaging while strongly related to your brand and product should be distinctive enough to be differentiated from your competitors.
Setting your targets
All good GTM strategies have clear models. You can build these models within the capacity/budget you have.
Choosing your tactics
To implement ICP, you need to use multiple strategies at the same time. This includes data, marketing strategy, content planning, and partnerships. These 4 components must be further developed according to your strategy.
Establish feedback processes across all marketing, sales, product development, and other core departments to ensure key learning outcomes are implemented into the GTM strategy. To create this cycle, you need to hold individuals in your organization accountable for different parts of the strategy. If these people report their progress in regular meetings, you can overcome stumbling blocks together.
Eric now says he sees start-ups from an investor's perspective, and he sees them very differently. He believes that good strategies come from experience. All components of an entrepreneurial strategy are mostly based on theory, and only an investor with experience in the field can judge whether the strategy is good or bad. Simply put, a GTM strategy is a roadmap that measures the viability of a solution's success and predicts its performance based on market research, past examples, and competitive data. Finally, he points out that good product-market fit plays an even more important role if investors want to reduce the risk of investment failure.
Eric explained that in his experience, it all boils down to the product being a good fit for the market. Whether it's a group of founders or young entrepreneurs, as an investor, you need to take a close look at their deck and examine many different areas to see if it makes sense. They need to assess whether the business model is good, whether the market is large enough, and whether they have a competitive advantage.
What is it?
Product-market fit happens when you successfully identify your target customers and offer them the right product. After the product-market fit is achieved, the next step is to scale by researching to find more customers in the target market. Establishing product-market fit is a critical task for a new start-up.
So where does this concept lie?
Entrepreneur and investor Marc Andreesen, who is often credited as the developer of the concept, believes that product-market fit means finding a good market for a product that can satisfy that market. See the pyramid below to see how product-market fit connects the two sides of a company.
How can an entrepreneur achieve a good product-market fit?
- Make sure the strategy is well thought out
A key element of a go-to-market strategy is that it must make sense as a whole. Eric explained that the distribution model plays an important role in the overall strategy, but it is a component that investors often overlook. Especially when it comes to selling, it is important to keep friction as low as possible
- Learn how to achieve product-market fit
Learn how a team or individual entrepreneur will achieve product-market fit. It doesn't guarantee overall success, but the right product-market fit can help reduce the risk for emerging businesses.
- Teams that focus on product-market fit are more likely to succeed
Achieving product-market fit and winning customers should be the goal of everyone in the company. Everyone from the CEO to the team that interacts with customers should work together to find the right product for the market, as this ensures a great chance of success.
ABOUT THE SPEAKER
Eric Vest is a strategic and M&A advisor, specializing in laboratory informatics and all technologies related to biotech, pharmaceuticals, clinical trials, public health, and healthcare. He has a unique skill set that combines deep domain expertise with:
1) 25+ years as an entrepreneur, operator, and board member with three verifiable exits.
2) Rich experience working with private equity and venture capital (buy-side and sell-side).
3) Many years of fundraising at seed, early-stage, and growth-stage levels
He works as an advisor or board member, mainly assisting private equity firms, their portfolio companies, and other growth-stage organizations who are trying to plan for an exit, raise capital, or make acquisitions.