What is the number ONE reason startups fail. Some investors might say something basic like team or product but my answer is actually simpler than that. In my opinion the number one reason startups fail is because they don't have something that customers are willing to pay for. Good teams can fail, good tech can fail, but companies that solve problems that set customers hair on fire don't. This is why I always say that convincing investors you are solving a big worthwhile problem is the MOST important thing you can do if you are looking to raise money. Let's take a look at some of the biggest mistakes startups make when they are describing the problem they are trying to solve and how to avoid them.
It's Not Broken and If It Is You Are Not Fixing It
The biggest mistake founders make in their problem statement is using the cliché phrase "X is broken". "Data sharing is broken". "Workflows are broken". Or my absolute favorite: "Healthcare is broken". The first problem with these statements is that they are boring and completely undescriptive. Saying that something is broken doesn't give investors any information on your potential customers' pain points or why they would be willing to pay for your solution in the first place. If investors can't understand why anyone would want to buy your product, you are not in good shape.
The second major problem with "broken" problem statements is that they don't allow you to properly match the solution your product solves. If healthcare is broken then your solution needs to fix healthcare and there is a good chance your startup doesn't do that (Sorry Oscar, Bright, and Clover). Things aren't "broken", they are slow, manual, inefficient, etc. and your product needs to match one of those issues. If you can 5 minutes into a pitch and investors don't know what the problem is and how you solve it, your chance of getting an investment are basically ZERO.
Making Problem Statements That Matter
So at this point you might be wondering how to make a better problem statement. My best advice is to be SPECIFIC and TARGETED. Your problem statement needs to be descriptive and actual match the solution you are offering. For example let's say your company offers a solution that automates prior authorizations for providers. Then your problem statement needs to be something along the lines of "The average provider organization handles 60 prior authorizations a week for a total of 15 hours". Forget if the actual numbers are true, but a statement like this contextualizes the problem and sets you up nicely to introduce your solution. Investors know how many prior authorizations your customers deal with and how long it takes them, so ideally your solutions allows them to handle their volume faster so they can see more patients and make more revenue. A problem statement like the above shows investors exactly WHY your customers will want to but your product and that is a great start if you eventually want a check.
Summary
Problem statements need to be specific and matched to your solution. The problem statement is your opportunity to convince investors why customers would be willing to pay for your product, don't miss it. Avoid using bland useless statement like saying something is broken, it doesn't help your case or separate you from the pack. If you need help making your problem statement stand out, reach out to us at InfleXion Point. We are happy to help!
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