Does every startup need to solve a problem?
“Yes, every startup needs to solve a problem, but not every problem is worth solving. The number one reason startups fail is no market need, so the real question is whether you have a problem worth solving: one that’s painful, frequent, and replicable for enough people.”
Painful means it's a hair-on-fire problem people are actively spending money to fix, not a mild inconvenience they tolerate. Frequent means it recurs often enough that customers stick around, which is what pays back the cost of acquiring them. Replicable means the same product solves it for many people, so you're building one product, not a hundred custom ones. Miss any of the three and you can build a good product but still fail as a business. The practical move is to pick your target customer segment first, then stack rank the problems they face to find a problem worth solving that clears all three bars.
The number one reason startups fail is no market need. If nobody wants your product, you don't have a business.
But how do you know if there's a market need before building your product?
If your product solves a painful, frequent and replicable problem for enough people, you've got a market need. If not, you're probably in trouble. It really is that simple.
Your startup needs to solve a problem, but not all problems are equal
You can easily find a corner of the internet like Quora full of people debating whether products really need to solve a problem. Most examples from the anti-problem side are social media companies like Facebook, or consumer goods like alcohol (whether vodka solves or creates more problems is a different question).
Looking at Facebook today, with its trillion-dollar valuation, it's hard to spot the problem Mark Zuckerberg set out to solve at first, but the problem was obvious to Zuckerberg from the start: "You could find music; you could find news; you could find information, but you couldn't find and connect with the people that you cared about, which as people is actually the most important thing. So that seemed like a pretty big hole that needed to get filled."
All products need to solve a problem, but not all problems suit startups. Knowing how to spot a problem worth solving is a core skill for any product builder.
What makes a problem worth solving?
A problem worth solving for a startup has three characteristics: it's important, it's frequent, and it's replicable.
1. The problem must be important
Every product sits at a point between burning problem and mild inconvenience. The best products solve hair-on-fire problems.
People don't go searching for a fix for mild inconveniences; we tolerate hundreds of them every day. Burning problems send people searching for a fix with cash in hand.
Take Stripe for example:
“In early 2010 John and Patrick Collison began working on Stripe together. At the time, Patrick was working on several side projects and they debated why it was so difficult to accept payments on the web. They sought to solve the problem and see if it was possible to make it simple, really simple.”
Looking at Stripe's website today, it's easy to assume their giant vision of "increasing the GDP of the Internet" couldn't have started with one clear problem solved for one specific segment (software developers). But like most startups, that's exactly how Stripe began.
Stripe offered a product for an unsolved burning problem. Many successful companies start by solving a problem better than the existing alternatives, and those alternatives can make the burning problem harder to spot.
Take Dropbox. In founder Drew Houston's original HackerNews launch, he named two core problems with existing cloud storage that Dropbox could beat the alternatives on: "The problem is that the user experience (on Windows at least) with online drives generally sucks and you don't have disconnected access." Cloud storage existed, but it hadn't yet cleared all the burning problems.
2. The problem must be frequent
To scale, a startup must earn more from each customer than it spent acquiring them (about 3 times as much, the 3x LTV:CAC ratio).
Customer acquisition cost is often a lot higher than you'd expect. When Hubspot IPOed in 2014, they were spending $12,000 on each new customer (Revenue & Associates, 2017). Each new customer added an average of ~$8,500 in revenue that same year.
Asking each of them to pay $36,000 upfront for Hubspot seems pretty insane. Instead, companies fill that gap two ways: keeping customers for years ("retention"), and growing what those customers pay over time to cover the losses from churn ("net revenue retention").
How do you build a product a customer uses for years, so you earn back that acquisition cost? You solve a problem they deal with all the time. The more often the problem shows up, the easier it is to keep the customer.
Stripe and Amazon Web Services are perfect examples. The more successful your product, the more often you deal with payments and hosting, so you're more likely to stay, and these companies earn more from each customer over time.
Intercom founder Des Traynor uses a simple quadrant to explain why you need frequency to build a good product:
“It’s the [bottom left] quadrant where the risk lies. Small, rare problems might be desirable and feasible, but just not that viable. People won’t pay you a lot for it (if anything at all) and you can’t easily monetize through ads or sponsorship because by definition your engagement is quite rare. Ultimately, you can succeed as a product but still fail as a business if you find yourself in this trap. Some problems persist because they’re quite simply not worth solving.”
3. The problem must be replicable
Unless you can sell to each customer for hundreds of thousands of dollars (e.g. Palantir's top 20 customers each pay an average of $24.8 million a year), you'll need a lot of people to buy it.
To serve a lot of customers profitably, you need to sell the same product to many people. That matters most early on, when time and money are tight. You want one problem that lots of people share, so you can build a single product for all of them.
That's the third characteristic: replicability. If you find 100 target customers who all have the same problem but in different ways, you'll end up building 100 different products. That's a service business, not a product.
The perfect example is the graveyard of apps for logging gym workouts. Other areas of fitness have been taken (Strava for outdoor cardio, Freeletics for fitness newbies, Peloton for spin classes), but the workout tracker is still wide open.
Every regular gym-goer will tell you logging workouts and progress is a pain, yet the most common approaches are still pen and paper, spreadsheets and note-taking apps. A quick search on the Google Play Store reveals thousands of near-identical workout logging apps for weightlifting. So why aren't they used?
Because the problem barely replicates between customers. Every weightlifter has their own workout structure, plus different equipment, goals, and ways of tracking progress. So every workout logging app tries to cover all of it with a complicated mess of features that no user loves.
It's not enough for your target customers to have a burning, frequent problem. If they can't all solve it with the same product, your product works for none of them.
Why pick your target customer segment before your problem
You can find a burning, frequent problem by starting with a product idea, but replicability becomes the biggest challenge as startups try to scale.
Start with the idea and you'll end up picking a problem to solve for several customer segments. Your first product might solve all their problems, but as you grow the feature set, each segment pulls you a different way. In the end, startups always have to pick one segment to build for to reach scale.
The best example of why specific customer segmentation matters is WeatherBill: their 2010 pivot turned a failing startup into a $930M acquisition in just 3 years.
So how do you pick the right problem to solve as a startup?
Once you've picked a target customer segment, the best characteristic to start with is problem importance.
In theory, finding an important problem is easy: figure out all the problems your target users face and stack rank them to see which matters most.
In practice, though, pitfalls are everywhere. A multiple-choice survey risks missing a big problem you hadn't thought of. Telling burning problems from mild inconveniences in open-ended responses is guesswork at best. And it's deceptively hard to ask the right questions in user interviews without leaking your own biases.
Instead, leading product teams use OpinionX to stack rank the most important problems their customers are trying to solve. On OpinionX, participants can add new problems to your list as they go, filling in the blind spots you missed at the start.
Create your own stack ranking survey for free in under 4 minutes today to find the most important, frequent and replicable problems that your customers are dying to solve.
Frequently asked questions
Does every startup need to solve a problem? Yes. The most common reason startups fail is a lack of market need. But not every problem is worth solving, it needs to be painful, frequent and replicable for a large enough group of people.
What makes a problem worth solving for a startup? Three traits. Important: it's a burning problem people actively spend money to fix, not a mild inconvenience. Frequent: it recurs often, which drives retention. Replicable: the same product solves it for many people.
What does "replicable" mean for a startup problem? That a single product can solve the problem for many customers. If 100 customers each have the problem in a different way, you'd have to build 100 different products, which is a service business, not a scalable product.
Why does problem frequency matter so much? Because acquiring a customer often costs more than they pay in year one. A frequent problem keeps customers using the product for years, which is how you earn back that acquisition cost and grow revenue over time.