⚰️ How (Not To) Find PMF

The three core reasons why startups don't find PMF.                                                                                                                                                                                                                                                                                                                                                                                                                 December 07, 2023 | [Read Online]( [fb]( [tw]( [in]( [email](mailto:?subject=Post%20from%20Failory&body=%E2%9A%B0%EF%B8%8F%20How%20%28Not%20To%29%20Find%20PMF%3A%20The%20three%20core%20reasons%20why%20startups%20don%27t%20find%20PMF.%0A%0Ahttps%3A%2F%2Fnewsletter.failory.com%2Fp%2Fnot-find-pmf) Together With Hey — It's Nico. 34% of startups fail due to lack of PMF. In Failory’s newsletter, you’ll learn how to avoid that. Here's what I’ve got today: - 🔗 Weekly Picks - 💡 Insight: How (Not To) Find PMF - 💀 Failed Startup Story: ZestMoney - 📈 Trend: Open-Source Startups - 🚀 Strategy: Positioning When Selling B2B Software - 🧠Framework: Outcomes Over Features This issue is brought to you by [ContentShake AI]( (by Semrush), the all-in-one AI content writing tool. 🔗 Weekly Picks Founder shares insights on scaling an API Fintech product ([Link](). Ramp’s head of growth shares PLG lessons ([Link](). Openview Partners shares 8 B2B marketing trends to watch ([Link](). Learnings from different onboarding strategies from top startups ([Link](). How Warmly went from 0 to 100+ paying customers in 2023 ([Link](). 20+ founders explain what’s important when bootstrapping ([Link](). Power your growth with content marketing: Boost organic traffic with ContentShake AI Struggling with time-consuming content creation? [ContentShake AI]( makes ranking in Search simple and quick. It combines ChatGPT’s capabilities with Semrush’s SEO data and an intuitive interface. Slash the hours spent writing content; this tool suggests content ideas and crafts ready-to-publish articles in a single click. You can then send them directly to your WordPress site. Maximize efficiency, minimize effort, and let your website thrive—bringing in more traffic and leads. [Try it for free →]( 💡 Insight: How (Not To) Find PMF [tw profile: Harry Stebbings] Harry Stebbings @HarryStebbings [tw] From 140 seed investments over 9 years, the three core reasons startups don’t find product-market-fit: 1. Founder breakup. 2. They don’t ship fast enough. Speed = learning. Learning = customer ❤️. 3. They don’t create something people care enough about. Nov 19, 2023 228 Likes 38 Retweets 24 Replies When analyzing our interviews with failed startup founders, we found out that [34% of them]( had failed due to a lack of Product-Market Fit. This is why PMF is the only thing to worry about in the first years of a startup. From Harry Stebbings’s tweet, you can see there are some requirements needed to find PMF: - A good relationship between the founding team. - Fast shipping and pivoting. - Building something people are willing to pay for. [Check the tweet →](​​​ 💀 Failed Startup Story: ZestMoney Refer Failory to one friend to unlock the weekly failed startup story. Here’s your referral link: 💀 Failed Startup Story: ZestMoney You’re viewing this story because you’ve referred one friend to Failory. Thanks! ZestMoney, a Buy Now, Pay Later startup based in Bengaluru, India, announced it will [cease operations]( by the end of the month. India’s low credit card adoption limits traditional banking scoring methods as most lack the credit history that banks use to evaluate lending risk. ZestMoney aimed to tap into the country's large unbanked population by using alternative data to build consumers’ credit profiles. The startup found early success with its model, attracting over [$60M]( in funding across several rounds and reaching a peak valuation of $450M. However, [following the departure]( of its founders in May after failing to sell the company, the new leadership team could not sustain operations. Although the new leadership hasn’t yet commented on the shutdown, an [analysis]( earlier this year highlighted a few key factors behind ZestMoney's difficulties. The main one was that the company faced high losses and growing bad debt despite the pandemic growth in demand for short-term credit. In FY22, losses tripled year-over-year due to service deficiency from bad loans. ZestMoney targeted underbanked, low-income youth without access to traditional credit. They tried to tap an immense unserved market. However, catering to this high-risk demographic with limited incomes and thin or no credit history also exposed the startup to above-average loan default levels. Moreover, they focused on rapid expansion over sustainable growth, which led to aggressive lending practices and inadequate risk assessment. Looking for a way out, ZestMoney tried to merge with PhonePe. However, this deal fell through due to concerns about ZestMoney's diligence processes and the condition of its loan book. [Read more →]( 📈 Trend: Open-Source Startups Open-source is a version of existing software open for public use and modification. This trend is not new but is gaining momentum, challenging the dominance of tech giants. [A recent in-depth analysis by Abel Samot](, a Tech Lead at Red River West, claims new open-source startups are emerging as competitors to major established companies like Zapier, Airtable, Slack, and Firebase and are taking significant market share. Areas where open source is making a significant impact include: - Developer Tools - Cybersecurity - Application Layers - Artificial Intelligence - No-code/Low-code Applications The challenge for new market entrants is drawing users away from established players with loyal customers. However, open source offers an exciting path forward - by providing transparent and customizable options, open-source startups can create trust and cultivate a community around their product. [Baserow]( demonstrates this by addressing gaps in Airtable, like capping row counts. Open source becomes a marketing engine and a jumpstart for network effects through engaged communities. [This website]( highlights the best open-source alternatives to the most used software. If some tool is missing open-source alternatives, there’s an opportunity to build them. [Read the article →]( 🚀 Strategy: Positioning When Selling B2B Software When selling B2B software, customers have to choose between three options: - Stick to their current solution: Even if it is inefficient or costly due to the complexities of adopting new solutions. - Choose a new solution: Between a list of possible solutions evaluated. - Do nothing: Usually due to a prospect's indecision, driven by the fear of making the wrong choice. [According to April Dunford](, to win a B2B software deal, you must position against all three options. To position against customers who want to stick with their current solution: - Demonstrate value: Highlight the benefits your solution offers over current methods. - Ease the transition: Use tools, guides, and services to simplify the migration process, making adoption less daunting for the customer. To position against direct competitors: - Showcase your differentiated value: Emphasize what sets your product apart from competitors, focusing on unique benefits. - Selective targeting: Understand and target prospects who will value your unique offerings. Disengage with prospects who don't align with your value proposition to avoid wasting resources. To position against do-nothing prospects: - Boost decision confidence: Educate customers about their choices, helping them understand the pros and cons of different options. - Direct recommendations: Proactively offer your opinion on what that buyer should do. - Decrease deal risk: Implement strategies like money-back guarantees, phased deals, and proof-of-concept projects to reduce perceived risks. [Read the article →](​ 🧠Framework: Outcomes Over Features [Bill Binch from Battery Ventures shares insights on effective product selling](, inspired by Sanjay Dholakia, ex-CMO of Marketo. Bill mentions a typical startup error in their sales pitches: focusing only on product features rather than the solution it offers. He reminisces about his time at Marketo, recalling their feature-centric sales pitches that failed to connect with the customer's needs. For instance, Marketo’s initial pitch spoke about their software’s capabilities, like building landing pages and other great features, but it wouldn’t link to the buyer's business problems. Here’s an example of how they’d often go: “Hi Stacey, this is Bill from Marketo, a marketing software company. We help companies build landing pages, create nurture campaigns and score their leads. I’d love to show you a demo, please call me to arrange.” As you can see, it’s too feature-centric. Here’s a pitch that focuses on the customer instead: “Hi Stacey, this is Bill from Marketo, a marketing software company. I was researching your website last week and downloaded an eBook, signed up for a demo, and registered for a webinar…. Yet, in the last week, I haven’t heard back from your organization. That’s a business problem that Marketo helps our customers solve.” So, how can you do this? A sales pitch should always answer three critical questions: - Why buy - what are the costs of not addressing this problem? - Why buy now - what urgency or growth opportunities are being missed? - Why buy me - how specifically is your solution the best fit? [Read the article →](​ 📰 Classifieds 💡 Struggling to validate your startup idea? [I've created a course]( on how to use pre-sales to validate it. 📈 Struggling to achieve PMF? I've [written an eBook]( about the exact strategies used by Slack, Intercom, and Airbnb to achieve it. 💰 Struggling to raise funding? I've curated lists of [2,100 accelerators and incubators]( and [1,000 VC firms](. 👂 How Was Today's Newsletter? - [🔥 Great]( - [😒 Meh]( - [👎 Not Interesting]( 📊 Looking to get in front of +40k startup founders? [Sponsor this newsletter](.​ That's all of this week. Cheers, Nico Update your email preferences or unsubscribe [here]( © 2023 Failory 1309 Coffeen Avenue Ste 1200, Sheridan, Wyoming 82801, United States of America [[beehiiv logo]Powered by beehiiv](