How A Problem-First Mindset Can Help Your Startup Defy The Odds Of Failure

The startup landscape is constantly booming: At the end of 2024, the total number of startups worldwide was recorded at more than 150 million. But it’s not all rainbows and sunshine — the sobering reality is that 21% of all startups collapse in their first year, with the overall failure rate consistently remaining at around 90%.

The reasons for failure can be different, but a lack of product-market fit and insufficient demand remain among the top culprits. At least one-third of all startups fail due to a lack of product demand.

This is why I believe that adopting a problem-first approach can make all the difference between success and failure. Rather than starting with an idea that’s simply flashy and exciting, this method is about identifying real problems before building solutions to solve them.

Here is how a startup can find interest among its target audience and lay a solid foundation for long-term growth.

Key reasons the problem-first approach is vital

Addressing real needs enhances product demand: Startups that tackle well-known and clearly defined problems are more likely to attract loyal users. Demonstrate that your business pays attention to people’s needs and is actively looking for ways to make things easier for them. This is how you deliver real value and build a strong customer base that will be interested in long-term engagement with your startup.

Investor confidence: Investor behavior today has grown increasingly cautious, which is evidenced by the declining seed-stage funding in the closing months of 2024. In November, seed funding went down a third in the year-over-year perspective, just as early-stage funding fell over 20%.

Given this difficult climate, investors are more drawn to startups that can offer comprehensive solutions to address clear market pain points. Having a sensible product will make your business more attractive to investors who will be more confident about its prospects and the ability to bring in profits.

Resource optimization: When you have a well-defined problem at the core of your product, it is much easier to retain focus and avoid the very common trap of wasting resources on unnecessary features or development directions.

When you’re starting out with a new venture, the temptation to experiment is always there, but attention to the essentials is what’s going to help your team deliver the MVP faster and with greater clarity. In this case, the problem-first approach acts as a filter of sorts, allowing you to sift through what’s needed and what isn’t. You can allocate time and money effectively without wasting effort on “weaker” ideas.

Applying this approach in practice

Here are some core tips for how to actually apply this approach to projects.

First, define your target problem and solution as early as possible. Ideally, you’ll do this when your startup is still in the stage of initial conception. Having a clear goal from the get-go will guide all your subsequent decisions and keep your team on track.

Don’t be afraid to refine your problem statement as time goes on. As you continue working on your product, your understanding of both the product itself and the market you’re building it for is naturally going to evolve. Taking in feedback from early users, for example, might reveal nuances that will reshape your original vision and plans.

Regularly check in with your target audience to validate their needs. This is an invaluable source of insights when fine-tuning your solution and ensuring its relevance.

Revisit your objectives frequently. This will help ensure your actions still align with solving the core problem. If you’re working on an initiative that doesn’t seem to contribute directly to the main goal, maybe it’s time to reconsider its priority.

Identifying the “right” problem isn’t always about aiming big. Sometimes, niche markets offer the best opportunities. If your team lacks deep industry expertise, engaging with your target audience through surveys or interviews would be a good place to start. The main thing is your business should solve a problem that truly matters to your users.

By adopting a problem-first approach, startups can reduce risks and distractions, maximizing their focus for the best possible impact and setting the stage for lasting success.

Roman Eloshvili is a founder and CEO of XData Group, a B2B software development company. As a serial entrepreneur he developed a keen eye for trends and opportunities in internet banking. He embarked on his journey in finance more than 20 years ago and as CEO of XData Group is on a mission to revolutionize the banking landscape.

Illustration: Dom Guzman