Budding entrepreneurs would be wise to consider Jeff Aronin’s litmus test for new business ideas: “Would you be solving a problem that potential customers are willing to pay you for? Because, if not, you don’t really have a business.”

Jeff Aronin, Chairman and CEO of Paragon Biosciences, has relied upon that litmus test for the past two decades as he’s built several successful life science companies. Paragon Biosciences is a life science innovator that invests in, builds, and advises independent portfolio companies specializing in biopharmaceuticals and advanced life science technologies.

A recent study by CB Insights echoes Aronin’s essential rule for startups. “No market need” is ranked by the technology research firm as the No. 1 reason new businesses fail, actually well ahead of cash flow or talent difficulties.

As for why so many companies get the critical business issue of market need wrong, CB Insights says that distraction and lack of focus play a part. Many new business owners fixate on “tackling problems that are interesting to solve” rather than those “that serve a true market need,” according to the study.

Leading with market need

At Jeff Aronin’s Paragon Biosciences, innovation begins with an examination of a high, unmet medical need and promising new science to address it. Says Aronin, Paragon Biosciences pursues opportunities where its team and resources are best positioned to reduce the development risk, time and cost of bringing a critically needed treatment or technology to patients who need it most.

Innovation often means making tough choices, says Aronin. “The goal is to find a medical problem which needs solving where our team has exceptional expertise to contribute,” he explains, adding, “When we find the right match, the therapy is either developed by a portfolio company which already focuses on that therapeutic area, or we launch a new portfolio company for a new therapeutic area.”

In just the past two years, Paragon Bioscience’s approach has enabled the successful launch of seven independent portfolio companies. Successes include an FDA-approved treatment for excessive daytime sleepiness (EDS) in adult patients with narcolepsy, clinical advancements in potential therapies to treat Tourette Syndrome and stuttering, and further development of the first FDA-cleared, AI-enabled breast cancer system for radiology.

Analysis of the need can always help businesses. It is not just in the health sector, but any business that caters to the wider public. The political atmosphere can also impact market needs. The best example is the legalization of marijuana and the benefits on the economy afterward. Several small businesses and agricultural boosts are part of the economical benefits of marijuana legalization. There was a market need for the product, and hence many businesses could find success in this niche.

Business success is all about finding more efficient and effective ways to solve some of the world’s toughest problems. “We’re focused on advancing science and helping patients get medicines and therapies they need,” said Aronin. “We’re doing meaningful, important work.”