During investor outreach, startups often forget the investor's perspective. Changing this point of view can increase a startup's chance of getting...
Common Pitfalls to Avoid with Startups Problem Statements
Find out why startups struggle with problem statements, according to investors, and learn how to fix that.
One of the first things we investors want to understand is the problem the startup is solving. Why?
It’s because we cannot evaluate the solution, the market or the competitive advantage of the startup if we don’t know the context. For example, is a bicycle better than a bus?
From a sustainability point of view, a bike might make sense. But, what if you need to evacuate as many people as possible from an earthquake area? The answer will be very different, and both solutions have their use cases and competitive advantages.
Context is key.
The problem statement must account for that. After reviewing more than 2000 startup decks, these are the typical issues we found:
The problem is not defined
It’s easy to think, if we create a bicycle with some amazing specs, then some will want it. Or the investors will find us the customers. They are business people right? No.
It’s the job of the startup founder to define the problem they tackle. They are responsible for running the day to day operations. If the founders can’t define the problem, they easily end up making a bicycle with 4 wheels and 30 seats… Which eventually nobody wants.
The problem statement is too high level
Startups often define only a high-level problem or a megatrend, like “Unsustainable food production is causing climate warming” or “Social media is making us unable to focus”.
Both of these claims are megatrends, and it’s good for the starting point. But most often these megatrends they consist of multiple subproblems and the startup can tackle only small amount of the subproblems with their limited resources.
So if the problem is not narrowed down enough, the startup will easily fall into same pitfalls than in point 1.
Additionally, when the problem is narrowed down, it also narrows down e.g the potential competition and thus makes it easier for the investors to evaluate the competitive advantage of the startup.
The problem is validated with a very small quantity of end users
Startups often forget the meaning of “the exception proves the rule” by finding a problem, but failing to validate if they found the exception or the rule.
This is especially common in large scale B2B ventures like factories. Now, factories always have issues to optimize. One factory is struggling with the issue does not mean there is a market for it.
So, you should always validate that the problem exists in a statistically meaningful number of your prospects.
The problem is not worth solving
Another classic is to find “nuisances” or “irritations” which aren’t big enough that your customer is actually willing to solve. If the problem is not a) frequent or b) having a major consequence, then most likely your target prospects are unwilling to put time into solving it.
How to fix them
We curated some good resources on how to pick and define the problem the startup should solve:
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