13 Dec The Holy Grail for Early-Stage Startups: Product-Market Fit
In recent years, startups—especially in healthcare—have improved significantly in achieving problem-solution fit. Identifying the pain points of users, such as patients or practitioners, and developing effective solutions is a crucial first step. However, the true challenge lies in achieving product-market fit, particularly in healthcare, where strict regulations, complex payer structures, and the distinction between B2C and B2B markets create unique hurdles. To delve deeper into this topic, we spoke with Niklas Laasch, a coach at Vision Health Pioneers Incubator, to get his insights on navigating these challenges.
Q1: When it comes to competitor analysis, what specific data points or insights should early-stage founders focus on first to quickly understand the competitive landscape without getting lost in too much information?
Competitor analysis, and acting on the analysis, is one of the most important aspects of being a successful startup founder. Some founders avoid it because they’re worried about feeling overwhelmed or discouraged by how much competition there is. But competition is actually a great thing—it often means you’re in the right market, and investors are already sensitized to your topic.
When analyzing competition, zoom out and think beyond direct competitors. I recommend using the Competitive Diamond, which categorizes competitors into five types: direct competitors, indirect competitors, substitute competitors, disruptive players, and potential competitors. For instance, in digital health, a mental health app for teens might see health insurers as competitors because they could build similar services. However, insurers could also become key partners or even first customers.
Another great starting point is the Jobs-to-Be-Done Framework. Focus on the core problem your product solves and ask, ‘Who else is solving this problem, and how?’ I have seen so many competitor slides, comparing if there is for example a 24/7 support. This is not a USP and can be rebuilt. I am more interested in the questions of what alternatives your buyer persona has when considering a purchase, and often it is not about other startups but the incumbent solution at the workplace.
Dive into publicly available materials like websites and pitch decks to understand competitors’ positioning and business models. Remember, competitor analysis isn’t just about identifying threats; it’s about finding opportunities to grow alongside them.
Expand the definition of competition using frameworks like the Competitive Diamond.
Focus on the competition in the core problem with the Jobs-to-Be-Done Framework during your analysis.
Study competitors’ public materials for insights into their positioning and business model.
Leverage tools like SEMrush or Google Alerts to track competitor strategies.
Q2: After gathering insights on competitors, what actionable steps can founders take to translate these findings into unique selling points (USPs)? How can they ensure these USPs address real customer pain points and stand out in the market?
When crafting USPs, it’s critical to consider both users and buyers. For instance, in digital health, the user might value a friendly interface, but the buyer—like an insurer—cares about treatment outcomes and cost reductions. This dual focus is key.
A tool I recommend and love is the Blue Ocean Strategy. Such a strong tool – it takes some setup time, but I have seen amazing results with early startups over the years. Instead of competing on features everyone already offers, look at what drives costs for competitors and find ways to innovate. Take the Nintendo Wii, for example. They skipped high-end graphics and focused on a fun, low-cost gaming experience, which opened up the new market of families. Don’t try to fight with others about the same slice of cake, existing customers in a niche, find the space where the whole cake is growing aka strongly growing markets.
Finally, engage directly with users of competitor products. Ask them what they love, what’s missing, and test your value propositions through A/B testing. Remember, differentiation isn’t enough; you need to deeply understand and address buyer and user needs.
Differentiate between user and buyer needs when defining USPs.
Apply the Blue Ocean Strategy to find opportunities to innovate.
Collect direct feedback from competitor users and test USPs through A/B testing.
Q3: Many founders struggle to define a clear go-to-market strategy. What practical steps would you recommend they take to connect their unique selling points to a strategic plan that resonates with their target audience?
Defining a go-to-market strategy starts with your USPs and how they align with your target audience, the user and the buyer. Segment your audience and focus on niches like early adopters, who are more likely to try your product. Research where they get information and what drives their purchasing decisions, for example certain certifications.
Also our competitor research is very helpful for the go-to-market: if you know what makes you different, that’s not just for your pitch deck—it’s your introduction to sales leads and the basis for your marketing campaigns. Look at the potential and indirect competitors – collaborate with complementary businesses to scale effectively. In the example of a teen mental health app, that might be psychotherapists for teenagers. Start with a simpler business model and a forgiving audience—you’ll make mistakes early on, so it’s better to learn and iterate with a group that’s more open to collaboration. For example, some insurers are much more willing to test new solutions than others.
And as so often in the startup world: you can not come up with the perfect GTM in your coworking space. Try, learn, iterate! Pilot campaigns are a great way to test messaging and gather data. Feedback from early sales pitches can help refine both your product and strategy.
Segment your target audience and focus on early adopters.
Use feedback loops from sales pitches to refine strategies.
Build partnerships to scale and expand your reach.
Experiment with pilot campaigns to test assumptions.
Q4: As founders work toward product-market fit, what indicators should they look for to know if their USPs and strategy are hitting the mark or if they need to pivot?
Measuring product-market fit involves tracking metrics like conversion rates, retention rates, and customer lifetime value (CLV). High retention indicates your product delivers value, while increased CLV shows market acceptance. Referrals—whether in B2C or B2B—are another strong signal of alignment with customer needs.
Direct feedback is invaluable. Surveys like the Sean Ellis Product-Market Fit Survey can help gauge customer sentiment. Monitor sales and pipeline metrics, such as reduced lead times and improving CAC-to-CLV ratios. If retention is low, customers aren’t sticking around, or engagement is lacking, it might be time to pivot.
While this metric might be different if you are in the DiGa market, you can always find a metric to monitor customer satisfaction such as the net promoter score. Again, in healthcare the user is often not the buyer, so don’t forget to monitor metrics for both.
Monitor retention rates, CLV, and referrals as PMF indicators.
Use tools like the Sean Ellis Survey for customer feedback.
Evaluate sales metrics and pipeline insights to assess performance.
Pivot when facing low engagement, high churn, or recurring unmet needs.
Closing Thoughts
Achieving product-market fit is a journey, not a destination. It’s about continuous learning, testing, and adapting. By focusing on the right metrics, engaging directly with users and buyers, and remaining open to change, startups can navigate the challenges and unlock their potential in the market. If you’re working on this, I’m always happy to brainstorm ideas or share insights—don’t hesitate to reach out!
Useful Resources:
https://hbr.org/2004/10/blue-ocean-strategy
https://miro.com/miroverse/competitive-analysis-framework/
https://pmfsurvey.com/