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Quest for Product Market Fit: 5 Pitfalls

Updated: Jan 16

-- Danny Pantuso, Venture Investor, Decasonic

Some Perspectives from Web3 Deal Flow

As a founder, you know you have product/market fit when your customers start demanding your product faster than you can ship it. Your biggest problems are about scaling fast enough and keeping the servers running rather than wondering how you’re going to sell your next unit.

Until then, achieving early product/market fit remains a subjective endeavor. There is no definitive method to demonstrate it to investors, but there are certainly missteps to avoid. Drawing from my conversations with numerous Pre-Seed to Series A startups, I’ve put together a concise list of common pitfalls found in pitch decks that indicate a lack of product-market fit.

1. The solution doesn’t match up with the problem statement

I see a lot of decks whose problem statement doesn’t align with what the product actually does, and it’s an immediate signal that the product doesn’t have product market fit.

Problem: It’s hard to smartly invest in crypto for the average person.

Product: A platform that allows you to track what sharp investors are buying/selling.

Pitfall: Do more data points make investing harder or simpler?

The key is often to get more specific about the problem you are solving, or get more specific about the solution. In this example, the problem being solved is actually strategy generation for other sharp investors. It’s often best to establish product / market fit for a niche use case, and then to expand into other verticals and features than it is to solve generic problems.

2. Presenting value propositions instead of use cases Especially in early stages and/or in bear markets, it is often more impactful to emphasize use cases rather than high-level value propositions. Use cases highlight the practical applications and tangible outcomes that customers can expect from using the product. They illustrate how the product solves a problem, fulfills a need, or improves a particular aspect of the user's life or work. They’re also what users ultimately pay for jobs to be done. While value propositions outline the overall benefits and advantages of a product, these are oftentimes easier said than done. As a VC, I tend to discount value propositions until I see them in action.

3. Markets don’t buy products. People buy products.

When it comes to product-market fit, it's important to recognize that people, not markets, are the ones who buy products. A great way to demonstrate to investors you know your market is to get specific about your user base demographics and user personas when you talk about the market size.

Similarly, when it comes to identifying the total addressable market, it is crucial to reference the market numbers that directly correlate to the specific business and its use case. For instance, I recently had a conversation with a Web3 communications protocol that referenced how Web3 is projected to be a $50 billion market by 2025. However, what’s immediately apparent to me is that only a small portion of that figure was relevant to Web3 communications.

Inflated or inaccurate market assessments may serve as a warning sign rather than a valid indicator of product-market fit. It’s fine to project market growth, but it’s critical to reference the right market.

4. Pitching a product, not a business (especially in a bear market)

The problem with product/market fit as colloquial shorthand for the rapid adoption of a new product is that it implies the product comes first. But as venture investors at Decasonic, when we think about product/market fit, we consider it shorthand for Market → Fit → Product. This reframing puts the market at the forefront of discussions and prioritizes scalable business opportunities upfront, rather than something backed into. It’s a key distinction that reshapes the challenge of a startup, to begin with, the most important part of venture-backed business: its billion-dollar potential.

As a former product manager, this framework was initially un-intuitive; I was adamant that the product must always come first. But as a Venture Capitalist, I see now that it’s a critical mindset shift that’s the difference between outlier venture-backed businesses and other ideas.

You might have a truly great product that grows virally, but without a clear and scalable business model, it’s more likely you have a great mailbox money business but potentially not a venture-backable business. AdBlocker is a great example of a world-class product that lacks a business. 5. Targeting small markets

For many founders, the top-down market sizing is a byproduct of their current product category. What many founders don’t realize is that they get to define their market and that it’s more important than how they define their product.

At Decasonic, we frequently collaborate with founders to reshape their narrative, allowing them to capture more value and tap into a larger market without necessarily altering their product. Let's consider a recent example involving a pre-seed Augmented Reality (AR) company I worked with. Initially, they were developing an AR creator suite, targeting a relatively small market for AR experiences. However, we identified an alternative market for their suite as a sales tool in residential and commercial real estate, which presented a significantly larger market opportunity.

In both cases, the product remained the same, but the market for retail and real estate sales was exponentially larger compared to the market for consumer experiences in AR.

Product / Market Fit is the single most important thing in startups, but it can also be so hard. Hopefully you can at least avoid these common pitfalls. I’m humbled to learn from the world-class entrepreneurs I meet with.

If you’ve made it this far, reach out.

About the Author

Danny is a Venture Investor at Decasonic - a Chicago-based web3 native venture fund. With a technical background from Stanford University and experience as a product manager, CEO/founder, and now a venture investor, Danny is the in-house expert on product-market fit within web3. He spearheads investment theses in web3 gaming, AR/VR, and web3 x AI, working with startups to develop tokenomics, and core user loops, and investing in the future of fun. Danny's mission is to identify the best entrepreneurs in crypto, connect with them, evaluate the opportunities, and help them succeed post-investment.


The content of this material is strictly for informational and educational purposes and is not meant to constitute investment advice or a recommendation or solicitation to buy or sell any asset or to make any financial decision. Nothing in these blog posts should be considered legal or tax advice. You should consult with your own professional advisor before making any financial decision. Decasonic offers no warranties on any content in the material posted in these blog posts, including that it is accurate, complete, or correct. The opinions expressed in these posts are those of the authors and do not necessarily reflect the views of Decasonic. Decasonic is not liable for any errors or omissions in the content of this newsletter or for any actions taken based on the information provided herein.


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