Stories of PMF failure and lessons learned


Discover the critical planning that goes behind finding product-market fit, and the common traps that can derail even the most technically sound founders.
As the founder of Nimble Storage and leading at other startups, I’ve gotten a behind-the-scenes look at what it takes to find product-market fit (PMF) — and the unfortunate consequences that can occur when you don’t pin it down.

Let’s take a look at why many startups fail to achieve PMF, look at some examples of this type of failure and unpack some lessons we can learn from these mistakes.

The heart of most PMF failures

A failure to generate customer engagement is at the heart of most PMF problems.

Many technical founders have a strong bias toward building before they fully understand their market’s demands. They may create an impressive solution, but without a clear idea of the target customer or how to ensure they have a competitive edge, their product will struggle to find a place in the market.

This was the case with Sneller, a startup I was involved in. We developed a promising product but the market fit was an afterthought — and that resulted in a mismatch. More on that later.

For many founders, PMF challenges start when you can’t get in front of a sufficient number of potential customers. These conversations are critical as you’re searching for PMF, so you can find out more about what they need and whether your product is a fit. User engagement must start before you build a product. If prospects are not enthusiastic about your product, that is a big warning sign.

Even when founders do manage to engage with users, they can fall into the trap of false positives. Enthusiasts and early adopters may give glowing feedback, but they might not represent the larger market that's necessary for sustained success. In that case, they don’t provide the critical, unbiased feedback you need to evaluate your product's viability.

To get honest insights, you must leverage every available channel — including investors, professional networks, social media and speaking engagements — to find customers to connect with. 

And with every conversation, remember that planning for PMF is less about your product, and more about your understanding of the market and unearthing frustrations with the status quo.

Examples of PMF failure

There have been some spectacular examples of product market failure in the past few years. PMF challenges aren’t just startup issues, either — even tech giants can stumble in very visible fashion.

Here are some notable stories of how companies have taken a swing at PMF and missed, despite massive investment:

Airbus A380

This plane, considered a marvel of engineering at the time, was designed to be the future of air travel. I have to say that it was the quietest, smoothest and roomiest airplane I’ve ever traveled on. However, it was built on the assumption that airlines would continue to prefer large aircraft to transport passengers between major hubs. Then the market shifted towards smaller, more fuel-efficient two-engine planes such as the Boeing 777 and 787 and the Airbus 330 and 350. These airplanes offered more frequent flights directly from starting points to destinations. Airbus had projected the A380 market to be over 800 aircraft but they ended up selling fewer than 300.  It was a product that didn't align with industry trends or needs, which led to its eventual discontinuation at a massive loss for Airbus.

Iridium satellite network

Motorola built the Iridium satellite network as a pioneering technology designed to provide mobile phone service anywhere on the planet. However, the company failed to consider the global spread of cellular networks, which offered a more cost-effective and convenient solution for most users. Iridium couldn't compete with the expanding cellular infrastructure and failed to capture enough market share to sustain its costly operations. Iridium went through a bankruptcy that wiped out all its initial investors. Freed from returning money to those investors, Iridium  survived as a much smaller entity serving the military, disaster agencies and ship operators.  SpaceX’s Starlink, on the other hand, appears poised to be far more successful due to huge cost efficiencies in space launches and satellites. Starlink has also initially targeted internet rather than mobile service, which is better suited to bulky and power-hungry satellite antennas.

Crypto and Web3

Cryptocurrency started out of the gate very hot. There were promises of huge potential in how payments, the entire financial system and even the web would work. But since then, there’s been a significant challenge in finding practical, mainstream applications. While the blockchain technology behind crypto is groundbreaking, its use cases did not turn out to be easier, faster, cheaper or more secure than the incumbents. Without practical purposes, crypto has struggled to achieve widespread PMF.

Virtual Reality

Virtual Reality (VR) technologies, like Google Glass, Microsoft HoloLens, Facebook’s Metaverse and Apple’s recent Vision product, continue to search for their PMF. Outside a dedicated base of gamers and some niche professional applications, a broad, hungry audience for VR or AR (Augmented Reality) remains elusive. These technologies haven’t become indispensable for the average consumer. I’m reminded of the Pen Computing craze in the 1990s where everyone thought that stylus-based text entry was the next computing paradigm (you might remember the Apple Newton, the Palm Pilot and Windows for Pen Computing). However, that turned out to be a dead end when the iPhone and Android gained popularity with virtual keyboards and touch-based entry. 

PMF failure can happen to any company, regardless of size — so use these examples to remind you of how important it is to validate market demand and ensure the practicality of your product.

Other causes of startup failure

While failing to achieve PMF is often cited as the leading cause of startup failure, several other factors can also lead to a startup's downfall:
  • Running out of capital: A lack of funds can halt startup progress due to budget mismanagement or underestimating costs.
  • The product doesn't meet vision or specifications: The product may not meet the initial vision or specs, often due to technical challenges or deviating project scope.
  • Being outcompeted: Startups can fail if they are outpaced by competitors with better products or marketing.
  • Lacking the right team: A startup's team is its backbone. Without the proper mix of skills, experience, and cultural fit, even the best ideas can flounder.
  • Go-to-market problems: Ineffective marketing or sales strategies can prevent a startup from reaching its potential market.
Each of these factors alone can be detrimental to a startup's health. Combined, they can ensure its demise. That's why it's crucial for startups to not only focus on achieving PMF but also to manage their finances wisely, assemble the right team, stay competitive and carefully execute their go-to-market strategy.

What I learned from startup setbacks

I’ve had my fair share of successes. NetApp, Data Domain and Nimble all hit scale quickly and eventually had IPOs. But sometimes you learn as much from the misses as the hits. Looking back at my own startup adventures, some of the companies I was involved with faced hurdles that we couldn't quite clear. Here’s a quick summary of what happened with some of these companies.

Panasas: The market misalignment

Panasas, a clustered storage company, faced a fundamental challenge — our product couldn't capture a broad market. We originated from the halls of academia and targeted high-performance computing, but the company couldn’t invest enough to make the leap from promising concept to mainstream success. The lesson here was clear: Understanding and accessing a wide market is as crucial as the product itself.

PeakStream: The timing problem

At PeakStream, a general-purpose GPU company, we had the foresight to see the potential of GPUs beyond gaming. Yet, despite identifying use cases, we were ahead of our time, with crypto and AI not even blips on the horizon. It is these latter two applications that really boosted general purpose GPU applications about a decade after our time. PeakStream’s product was not sufficiently cost effective to use for the current scientific and simulation workloads that we targeted. NVIDIA didn’t invent crypto or AI, but when those waves rolled in, they were poised to take advantage of them.

Sneller: The competitive crunch

Sneller, a cloud database company, innovated by enabling unutilized vector hardware on Intel processors for parallel query processing. But we stumbled in achieving that critical tenfold performance goal and delivering a product feature set necessary for out-competing an incumbent in the market. This reinforced a harsh truth: A great insight isn't enough if you can't easily build a product that will outpace the competition.

We did attempt to pivot, but couldn’t find applications useful enough for a broader community to engage with. Often, technical founders facing a dwindling cash cushion rush to execute a vision without a clear target buyer. That’s what happened to us.

The takeaway

The path to success is never a straight line, especially in the startup world. It's a series of calculated risks, pivots and sometimes, starting from scratch with the insights gained from past failures.

Planning for PMF: Avoid pitfalls while getting to market alignment

The path to PMF is fraught with potential missteps, and many startups falter by building before they fully understand the market landscape.

Let's distill the key lessons from these stories of startup failure:
  • PMF requires more than a good product. You’ll need a deep understanding of your market (including competitors and potential disruptors) and your customers.
  • Technical founders often jump into building without adequate market research, which can lead to products that don't meet a true market need.
  • Engaging with a broad and representative customer base — starting even before building a product — is essential to avoid the false positives that can lead you down the wrong track with your product development.
  • To remain competitive in an existing market, you’ll need to be 10 times better than your competition.
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