March 4, 2024

these years, I’ve talked to quite a few startup founders. Many of them are smart, likeable, and have really good ideas that can be conveyed in speeches. However, many of them have struggled to secure funding. Why is it so difficult to get a letter of intent to invest?

If everything seems to be going well, but you’re not getting the momentum you think you need to fundraise, you may be experiencing one of these three problems.

market is too small

There are a lot of really cool products out there that just don’t have a big enough market for general adoption. For example, you might be building an add-on that makes crop-spraying fields 30% more efficient. On the surface, this appears to be a good product in a large market. People who want to buy your product will be excited about it, and it will be easy for you to sell.

Here’s the problem, though: there are only so many crop spraying planes in the world, which means that once you reach market saturation — that is, every crop spraying plane in the world is using your product — you’re unlikely to be able to manufacture additional Sale.

Crop dusting is obviously Niche markets, but there are less obvious examples as well.

I recently spoke to a founder who had a very elegant solution for helping people optimize meal planning so that the products in the fridge that go bad the fastest are eaten first. On the face of it, this is an important question: reducing food waste is objectively a good thing. The founders talked to many potential customers and everyone agreed – food waste was a problem and they wanted a solution. The catch was that the startup didn’t ask how much customers were willing to pay for the product. It turns out it’s a $100 piece of hardware, and that’s the problem: the Venn diagram shows that those who care enough about the problem will pay $100 for a device to fix it, rather than just throw the food away, It turns out that buying new food when it goes bad is pretty much non-existent.