*Problem-Solution-Fit*

Building a successful business is all about a simple premise: you solve a real problem for real customers. However, most companies fail because they create products that no one truly needs. Now that we've discussed how to approach finding the right problem to solve, let's dive into discovering a suitable solution for that problem. This is where the Problem-Solution Fit comes into play.

Problem-Solution Fit means you’ve identified a deep, genuine problem in the market and designed a solution that resonates with a specific group of customers. It’s the first critical milestone on the startup roadmap, preceding Product-Market Fit.

What is Problem-Solution Fit?

Problem-Solution Fit (PSF) is the phase in a startup’s journey when founders can confidently say, “Yes, we have identified a significant problem that needs solving and have a solution that works." This usually happens in the early stages (pre-seed or seed stage) before the startup grows, often involving a small group of test users or early customers.

What's the difference between Problem-Solution Fit and Product-Market Fit?

PSF is about making sure you’re solving the right problem, while PMF is about scaling that solution to more people.

Problem-Solution Fit (PSF) = you found a group of target customers who have a significant problem that your solution can solve. These early users are willing to try an unfinished version of your product because it addresses their main issue. They accept missing features and workarounds as long as the solution resolves their key pain point.

Example
‍​Airbnb’s founders started by renting out an air mattress in their apartment when a design conference caused a hotel shortage – they validated that travelers with no hotel options would pay to stay in a stranger’s home, and that hosts were willing to rent out space for extra income. Those first few paying guests during the 2008 conference were evidence of PSF – a real problem (no affordable lodging during big events) met with a scrappy solution.

Product-Market Fit (PMF) = after PSF you built out the product with more features and polishto appeal to a broader market, and prove that the business can consistently acquire customers and generate revenue.

Example​
‍After the conference's success, the Airbnb founders knew they had something. They got into Y Combinator and expanded to cities (like New York) where hotel shortages were common. Only once they saw strangers using Airbnb regularly (not just during events) and returning to the platform did they reach true Product-Market Fit.

How to achieve PSF?

Here's a (very) simplified mental framework to think about the steps to achieve the PSF.

1. Identify the (right) Problem.
2. Form Solution Hypotheses.
3. Test Hypotheses with MVPs.
4. Validate Learnings.
5. Pivot or Persevere.

Step 1: Identify the (right) Problem

We've covered this topic in our previous lessons. Here, we just want to remind you that every startup begins with an idea, which usually includes some notion of a problem and a solution. Instead of rushing to build the solution, start by deepening your understanding of the problem. Remember that a good startup problem is: 

• Frequent – Happens regularly, not once in a while.
• Painful – Causes frustration, financial loss, wasted time, or emotional stress.
• Urgent – People are actively looking for a solution.
• Underserved – No great solution exists yet.
• Growing – The pain is increasing, not going away.

Make sure you:

• Define your target customer segment: Describe who has the problem. The more specific, the better. For example, “busy professionals aged 25-40 who struggle to cook healthy dinners” is better than “everyone who eats food.”
• Articulate the pain point: What is the need or pain this customer experiences? Why is it a pain? How are they handling it today?

A great exercise is to fill in the blanks: [Customer] struggles with [Problem] whenever [Situation], resulting in [Consequences]. For instance, “Inventory managers at mid-size retail companies struggle with out-of-stock surprises whenever they rely on manual inventory tracking, resulting in lost sales and customer dissatisfaction.”

Step 2: Form Solution Hypotheses

Once you have evidence that a compelling problem exists, you can start shaping your solution hypothesis. This is where you outline how you intend to solve the problem in a way that’s significantly better than current alternatives.We recommend starting with two types of hypotheses: the value hypothesis and the growth hypothesis.

The value hypothesis tests whether the solution will create value for the customer. To determine this, we suggest asking the following questions:

• Is this a valuable proposition for my target customers?
• Will customers be willing to pay for it?
• Will customers return?

The growth hypothesis tests how new customers will adopt your solution. To determine this, consider the following questions:

1. Once the project demonstrates initial value, what mechanisms will we use to grow it?
2. How will we know if the learnings from the initial customers apply to other types of customers?
3. How can we promote solution evangelism?

Step 3: Test Hypotheses with MVPs

After forming your hypotheses, the next step is to create a Minimum Viable Product (MVP). An MVP is an early version of your solution that helps you learn from actual data instead of just guessing about the future. It turns your idea into something tangible, even if it's not perfect, and allows you to start testing and improving. Although an MVP might have flaws, the ultimate goal is to develop the best possible product or process while minimizing waste.

MVPs vary greatly depending on what you want to learn. The main point is to keep things simple and efficient. Your aim should be to quickly gather feedback from actual customers about their behaviors, without committing too many resources to a particular idea just yet. For instance, if you think your app needs a feature to predict stock shortages, don’t build that feature right away. First, check if customers actually want an app that notifies them about low stock. You can create a simple test by manually tracking inventory and sending alerts via text to see how customers respond and if they take action.

Always brainstorm multiple MVPs for any project. It's natural to latch onto one idea too soon. We often fixate on a solution we favor, without exploring very different options. Aim to think of at least three alternatives: start with your preferred option, then consider a more extravagant one, and finally, come up with a simplistic idea that is very different in cost and complexity from your original design—something so straightforward that you feel a bit silly for even thinking of it.

What can your MVP look like?A good way to test the effectiveness of an MVP is to see if people are willing to exchange something valuable for it. This value can be money, but it can also include time, energy, reputation, or detailed feedback.

• A simple landing page describing the product’s value proposition with an email capture (“Sign up for early access”) – great for gauging interest before building anything.
• A slide deck or video walkthrough showing how the solution would work. Sometimes called a demo or a prototype, this helps users visualize the product.
• A mockup or wireframe if it’s an app or website – using design tools or even drawing on paper.
• A concierge test if it’s a service: manually perform the service for one or two customers to see if it solves their problem (for instance, if your idea is an AI report-writing tool, actually personally write a report for a customer as if you were the “AI” to see if it provides value).

Step 4: Validate Learnings

To validate your PSF, get feedback from the people who had the strongest need for your solution. Show them your MVP and see how they react:

• Do they seem excited?
• Do they ask how they can get it or start using it right away?
• Or do they look confused or uninterested?

Ask follow-up questions like:

• “How could this help you in your work?”
• “Do you have any concerns about this?”

If they mention features you don’t have yet, just take note. At this stage, it’s more important to find out which features are absolutely necessary.

This feedback should be:

1. Actionable: The feedback should clearly show what changes in your product cause which results. Otherwise, it’s just a “vanity metric.” For example, more website visitors doesn’t always mean your product is better. Ask yourself:
   • Why are people visiting?
   • What are they doing?
   • What specific product changes led to this result?
2. Accessible: Everyone on your team should be able to see and understand the feedback. It must be easy to access and interpret.
3. Auditable: Your data must be reliable and decisions should be based on clear, trustworthy numbers and analysis. Avoid confusing or unclear data—make sure your findings are straightforward and well-supported.

More importantly: ask for commitment. One of the most telling things you can do at this stage is to gently ask for some form of commitment. For instance, “If this were available next month, do you think you’d start using it?” and even “Would you be willing to pay a small amount to pilot it?”. This is often called pre-selling. You don’t have to actually take their money on the spot (unless you’re ready), but their reaction will be informative. Early evangelists – the truly pain-stricken customers – won’t hesitate to put skin in the game if they believe your solution can really solve their problem. The ultimate test is their willingness to pay for an unfinished product. If you get a lot of polite “Sounds cool, keep me posted” without any commitment, that may signal your solution isn’t yet convincing.

To figure out if you've achieved a PSF ask yourself the following questions (and answer honestly, backed by evidence wherever possible):

• Do customers acknowledge the problem and prioritize solving it?
• Are users actively using your solution to solve the problem?​
  Look at your early user behavior. If you provided a prototype or beta, are they actually logging in, using it, and coming back? For a B2B product, did the pilot users integrate it into their routine or workflow? For a consumer app, do you have repeat usage? If people sign up out of curiosity but never use the product, you haven’t solved their problem in a meaningful way. However, if you see even a small number of users relying on your solution (e.g., checking your app daily to accomplish something they couldn’t do before), that’s strong evidence of fit.

• Do you have paying customers (or users ready to pay)?​
  Nothing validates a solution better than someone paying for it. It’s the difference between “nice-to-have” and “must-have.” Even at PSF stage, you can often get some form of monetary validation. It could be actual revenue (customers purchasing or subscribing), or it could be letters of intent, pre-orders, deposits, or agreed pilots for which payment will be made. If you’re pre-revenue, ask: “Would at least a few of these users be upset if I started charging for this tomorrow?” If the thought of losing access causes them discomfort, that’s a good sign. Remember, early evangelists are willing to pay for an unfinished product if it truly solves their core problem.
• Is your core value proposition validated by users?​
  Summarize your product’s core value in one sentence (e.g., “We automatically reorder inventory so you never run out”). Do users echo that sentiment? Ideally, you’ve heard some early users say things like “It really [saves me time / saves money / reduces hassle] by doing XYZ.” When users start describing the benefits unprompted, and it matches your value proposition, you have alignment. If users are getting different value than you expected, that’s interesting – you may have discovered a different problem you solved! Ensure that at least some valuable outcome is being achieved consistently.
• How narrow is your focus?
  ‍​A counterintuitive sign of Problem-Solution Fit is that your target market at this stage is actually narrow, not broad. You aren’t trying to solve everything for everyone – you’re solving a specific problem really well for a specific group. If you find yourself still trying to cater to vastly different customer types or solving multiple unrelated problems, you likely haven’t honed in enough. As the saying goes, “everyone is not your customer”. PSF is typically found in a micro-market (sometimes called a niche) where you can become the best solution for that one problem. Only later will you think about expanding.
• Have you iterated to a solid understanding of the problem and solution?
  ‍​Revisit the hypotheses. For example: “Originally I thought our customer was any retailer, but now I know it’s specifically pharmacies with 5-15 employees, and their biggest issue is running out of chronic medications. We solve this by syncing their inventory with supplier orders automatically, and our 3 pilot pharmacies have cut stockouts by 80%.” That level of clarity indicates you’ve learned a ton and likely reached PSF. If you’re still uncertain about who exactly the ideal customer is or what exact benefit you provide, you might need more validation.
• Do you have advocates or referrals happening?
  ‍​Are your early users telling others about your product without you asking? Even a couple of unsolicited referrals or a user posting about your product in a forum is a strong validation signal. It means your solution delivered enough value that others with the same problem want to know about it. These “pull” effects (customers coming to you because they heard of your solution) hint that the fit is there.

You don’t need everything to be perfect to have Problem-Solution Fit, but you should have good evidence. If you have a few real users who really care about the problem, love your solution, and would be unhappy if it disappeared, you likely have Problem-Solution Fit. For example, Airbnb founders knew they had Problem-Solution Fit when strangers (not just friends) started booking through their site.

Step 5: Pivot or Persevere?

Hitting a perfect bullseye on your first try is uncommon. However, if each attempt at your solution shows improvement and provides valuable insights, it's important to keep going. Focus on refining your MVP and continue developing your idea.

Sometimes, even when you try your hardest, your product may not succeed right away. Maybe customers aren’t as interested as you hoped, or your solution isn't quite working. This is when you might need to pivot.

A pivot means you change your strategy, but not your overall vision. Founders always have a big vision for what they want to achieve, but how they reach that vision can change. For example, you might adjust who the product is for or add new features. The vision stays the same, but your approach changes. Each time you pivot, you test new set of hypotheses to see what works best.

How do you know it’s time to pivot rather than persevere with your current plan? Look for these indicators:

• After numerous interviews, no one seems to feel the problem is that serious. You might keep hearing lukewarm feedback or “nice to have, not urgent.”
• You’ve trialed a solution with multiple variations, but usage remains low or customers drop off quickly. If early adopters—who should be your most forgiving users—aren’t sticking, the fit might be off.
• Prospective customers keep pointing to a different problem that’s more pressing for them.
• No one is willing to pay even a small amount for the solution, or every sales conversation stalls. Early revenue isn’t expected to be big, but if even the promise of payment or pilot is elusive, you might not be solving a critical problem.

Pivot Doesn’t Mean Start Over from Scratch: A pivot is often about leveraging what you’ve learned and adjusting direction, not throwing everything away. Here are common types of pivots:

• Customer Segment Pivot: You discover the problem is real, but you’re talking to the wrong customers. Another segment has this pain more acutely. For example, a product aimed at freelancers might find more traction with small businesses, or vice versa.
• Problem Pivot: Through research, you find a more pressing problem to solve for your target customers. Perhaps your health app idea to track calories wasn’t compelling, but in talking to users, you find their bigger problem is actually managing stress – so you pivot to solving stress (new problem, maybe new solution).
• Solution/Product Pivot: The problem is confirmed, but your approach to solving it isn’t working. You might try a different technology or method to address the same problem. For instance, if an AI approach is too costly or inaccurate, maybe a simpler software tool or a service-based solution would fit better.
• Zoom-in or Zoom-out Pivot: Sometimes startups realize they need to narrow the solution (focus on one killer feature) or broaden it (the problem is part of a larger need). If one feature of your product is the only thing users care about, you could pivot to make that the whole product (zoom-in). Or if users say your solution solves part of their workflow but they also need adjacent features, you might consider zooming out to cover a broader solution (careful: that can lead to scope creep).
• Channel or Business Model Pivot: If the way you’re reaching or monetizing customers isn’t right, a pivot might involve choosing a different distribution channel or revenue model. For example, maybe consumers won’t pay for your app, but a business would pay for data from it – pivot from B2C to B2B.

How to Pivot Gracefully: When you identify a pivot, it’s important to do it systematically:

1. Revisit your assumptions: A pivot is basically going back to Step 1 or 2 with a new hypothesis. Formulate the new hypothesis clearly: “We are now going to solve [new problem] for [new customer] by [new solution idea]. We believe this is better because [evidence/reason].”
2. Communicate with stakeholders: If you have a team, investors, or even just those helpful advisors and early users, let them know what you learned and why you’re changing course. This can maintain trust and often they’ll support you if your decision is backed by learnings.
3. Leverage what you built (if possible): See if any part of your previous work is reusable. Many famous pivots salvaged something. For instance, Slack, the workplace messaging giant, famously started as a video game company. The game failed to get traction, but the team had built a really useful internal communication tool to collaborate – that tool became Slack . They pivoted from “MMO game for consumers” to “enterprise chat software,” a drastic pivot in product and market, but they reused technology and insights from the first attempt. In your case, maybe the codebase isn’t reusable, but perhaps your understanding of a certain technology or the relationships you built in an industry are assets you carry into the pivot.
4. Test the new hypothesis quickly: Just as before, run through the lean validation steps – interviews, prototypes, etc. The good news: you’re now a more experienced founder than you were initially, and you might validate the new direction faster. You also know what didn’t work previously, which can inform your next moves.
5. Be mindful of morale: Pivoting can be emotionally tough. It might feel like admitting failure of the original idea. However, reframe it as a win for learning. Many top startups only succeeded on their second or third idea. Instagram started as a location check-in app called Burbn before pivoting to photo sharing. Twitter was a side project after a failed podcasting platform. These stories are common – the pivot is often where true product-market love is found. Share such examples with your team to show that pivoting is normal and healthy when done for the right reasons.

Schedule regular “pivot-or-persevere” meetings, ideally once a month or once a quarter. These meetings help you:

1. Evaluate Progress: Review whether your current strategy is moving you closer to your vision in a calm, focused setting.
2. Maintain Focus: Encourage team members to consider if their work will meaningfully impact your results by the next meeting.
3. Reduce Waste: Prevent unnecessary work, like:
   • Planning too far ahead after launch
   • Building features customers don’t want yet
   • Chasing mainstream customers before winning early adopters
   • Hiring customer service staff earlier than needed

When to persist instead of pivot?

On the flip side, don’t pivot at the first sign of trouble. Early stages are supposed to be challenging. If you have some signals of potential (maybe 2 out of 5 users loved it, or people say “if you just had X feature, I’d use this”), you might iterate rather than pivot – which is more like a minor course correction versus a new direction. Use your judgment and perhaps set criteria or a timeline (“If we still don’t have at least 3 engaged users after another 2 months or after testing these next two hypotheses, then we pivot.”). This prevents thrashing about too quickly or sticking with a lost cause for too long.

Final Advice: Perseverance, Focus, and Customer-Centric Mindset

Achieving Problem-Solution Fit is a significant milestone – it means you’ve de-risked your startup in a big way by ensuring you’re building something that people truly need. However, it’s not always a quick or easy journey. Here are some closing thoughts and tips as you work toward PSF:

• Stay Customer-Centric: It might sound obvious now, but as development ramps up it’s easy to get engrossed in code or design and lose touch with customers. Continuously engage with your users, even after you feel you’ve got PSF. Remember, you’re creating a product for your customers, not for your ego.
• Focus on the Core Problem: Early on, it’s tempting to add features or address side problems. Resist this. Nail one problem really well. Solve it 10x better than it’s being solved now. That will give you a strong beachhead.
• Time is Your Most Precious Resource: In a startup, especially pre-funding or with limited funds, your runway (time before you run out of money or energy) is critical. Be scrappy and preserve time and resources by testing assumptions cheaply. Don’t spend 12 months building the perfect product without validation – that’s a huge risk. Instead, spend a good chunk of that time in discovery and iterative development. If an idea isn’t working, recognize that quickly (fail fast) and either iterate or pivot.
• Be Ready to Pivot, But Pivot Based on Data: As we discussed, pivoting is fine when necessary, but do it based on what you’ve learned, not on a whim. If you do pivot, it’s not a sign of failure – it’s often a sign of wisdom and adaptability. The founders of Slack, Instagram, Twitter and many others all pivoted from an initial idea that wasn’t sticking to a new idea that became a huge success.
• Document Your Learnings: As months go by, you’ll accumulate a lot of knowledge about your customers and market. Keep a log – it could be a simple doc – of key learnings and decisions. Note when you validated something (“Confirmed via 8 interviews that retailers do face issue X”) and when you invalidated something (“Users didn’t care about feature Y at all”). This helps onboard new team members, and keeps you grounded in evidence-based decisions.

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