Why more funding won’t help you find product-market fit

From Nine common things that start-up founders tend to underestimate or overestimate by Boris Wertz:

No amount of money in the world is going to get you to product-market fit. And raising too much money before you find product-market fit will usually kill your start-up.

(1) Why is it that more money doesn’t help you find product market fit? Because building your core product and understanding your customers’ needs are best done by a small team. Small product teams work better because product innovation requires brainstorming and collaboration, and they are easier with fewer people. Hiring more people doesn’t help.
(2) This is why startups beat large companies. Having a larger team doesn’t help you with core product innovation.
(3) If you expand your company before finding product market fit, you’ll pay the price in two ways: (i) your burn rate will increase, (ii) it will actually be harder to find product-market fit because you’ll be distracted by other activities. This is a common mistake made by some VCs — after investing in a company, they push to expand headcount without verifying that the company has found product-market fit.
(4) Cf. Why you shouldn’t raise too much money in your early funding rounds.

One thought on “Why more funding won’t help you find product-market fit

  1. David Snowden (who developed the Cynefin framework) believes that innovation requires time pressure, starvation of familiar resources, and a shift in perspective. He has a good post on it at https://cognitive-edge.com/blog/culture-and-innovation/ where he argues “there are three necessary, but not sufficient conditions for innovation to take place. These are: (1) Starvation of familiar resource, forcing you to find new approaches, doing things in a different way; (2) Pressure that forces you to engage in the problem; (3) Perspective Shift to allow different patterns and ideas to be brought into play.”

    I blogged about it here http://www.skmurphy.com/blog/2010/06/10/innovation-needs-starvation-pressure-and-a-new-perspective/ that includes a link to https://youtu.be/IlmesbbPqtU a video he made that uses the ad hoc redesign of the carbon dioxide filter on the Apollo 13 mission as an example.

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