12 Things About Product-Market Fit
About ATTACH
The product/market fit (PMF) concept was developed and named by Andy Rachleff. The core of Rachleff’s idea for PMF was based on his analysis of the investing style of the pioneering venture capitalist and Sequoia founder Don Valentin.
Why Market Matters More Than Anything
#1 “Give me a giant market — always.”
“Arthur Rock is the representative of: you find a great entrepreneur and you back him. My position has always been: you find a great market and you build multiple companies in that market.”
“Our view has always, preferably, been: give us a technical problem, give us a big market when that technical problem is solved so we can sell lots and lots and lots of stuff. Do I like to do that with terrific people? Sure. Are we unwilling to invest in companies that don’t have them? Sure. We invested in Apple when Steve Jobs was about eighteen or nineteen years old — not only didn’t he go to Harvard Business School, he didn’t go to any school.” – Don Valentin
valuable business is as an effort to build a stool with three legs: people, markets, and innovative products.
“the marketplace comes first, because you can’t change that, but you can change the people” (according to Pitch Johnson, who was a venture capital industry pioneer at the same time Valentine was developing his investing style).
What is Product-Market Fit, Really?
#2 “A Value Hypothesis is an attempt to articulate the key assumption that underlies why a customer is likely to use your product. Identifying a compelling value hypothesis is what I call finding product/market fit. A value hypothesis identifies the features you need to build, the audience that’s likely to care, and the business model required to entice a customer to buy your product. Companies often go through many iterations before they find product/market fit, if they ever do.”
“When a great team meets a lousy market, market wins. When a lousy team meets a great market, market wins. When a great team meets a great market, something special happens.”
“If you address a market that really wants your product — if the dogs are eating the dog food — then you can screw up almost everything in the company and you will succeed. Conversely, if you’re really good at execution but the dogs don’t want to eat the dog food, you have no chance of winning.”
Andy Rachleff observes that if you look at the most successful startups, they actually didn’t have “the world’s best management teams in the very early days. They happened to have conceived, or more likely pivoted into, an idea that addresses an amazing point of pain around which consumers where desperate for a solution”.
The Process Behind Product-Market Fit
#3 “You often stumble into your product/market fit. Serendipity plays a role in finding product/market fit but the process to get to serendipity is incredibly consistent. What we do is teach that incredibly consistent process.” – Andy Rachleff
Andy Rachleff later created and teaches a course at Stanford, Aligning Startups with their Markets. Steve Blank also developed a customer development process based on the idea that startups should apply the scientific method just like scientists do: start with a hypothesis, test it, prove it, move on or further iterate on the hypothesis.
“First you need to define and test your value hypothesis. And then only once proven do you move on to your growth hypothesis. The value hypothesis defines the what, the who, and the how. What are you going to build, who is desperate for it, and what is the business model you are going to use to deliver it?”
Startups should therefore start with the product and try to find the market, as opposed to starting with the market to find the product. It’s important to emphasize here that the iteration is more about the market and the business model than the product itself.
How Can You Tell Whether You Do (or Don’t) Have Product-Market Fit?
#4 “You can always feel when product/market fit isn’t happening. The customers aren’t quite getting value out of the product, word of mouth isn’t spreading, usage isn’t growing that fast, press reviews are kind of ‘blah’, the sales cycle takes too long, and lots of deals never close. And you can always feel product/market fit when it’s happening. The customers are buying the product just as fast as you can make it — or usage is growing just as fast as you can add more servers. Money from customers is piling up in your company checking account. You’re hiring sales and customer support staff as fast as you can. Reporters are calling because they’ve heard about your hot new thing and they want to talk to you about it. You start getting entrepreneur of the year awards from Harvard Business School. Investment bankers are staking out your house. You could eat free for a year at Buck’s.”
#5 “The term product/market fit describes ‘the moment when a startup finally finds a widespread set of customers that resonate with its product’.”
best tests for PMF? Andy Rachleff writes that “You know you have fit if your product grows exponentially with no marketing. That is only possible if you have huge word of mouth. Word-of-Mouth is only possible if you have delighted your customer.” suggests Net Promoter Score (NPS) as a great tool to predict the magnitude of customer love for one’s product/service — ideally a score of 40 or higher “to know you’re on the right track.”
#6 “The number one problem I’ve seen for startups, is they don’t actually have product/market fit, when they think they do.”
a Value Hypothesis is driven by core Product Value — “what the market desires about a product”
Common Misconceptions About Product-Market Fit
#7 “First to market seldom matters. Rather, first to product/market fit is almost always the long-term winner.”
“Time after time, the winner is the first company to deliver the food the dogs want to eat.”
“Once a company has achieved product market fit, it is extremely difficult to dislodge it, even with a better or less expensive product.”
#8 “Product/Market Fit Myths:
- Myth #1: Product market fit is always a discrete, big bang event;
- Myth #2: It’s patently obvious when you have product/market fit;
- Myth #3: Once you achieve product/market fit, you can’t lose it;
- Myth #4: Once you have product/market fit, you don’t have to sweat the competition.”
Constant adaptation is therefore required to retain PMF.
#9 “Getting product right means finding product/market fit. It does not mean launching the product. It means getting to the point where the market accepts your product and wants more of it.”
How to Get There
#10 “In the early days of a product, don’t focus on making it robust. Find product market fit first, then harden”
Again, the process is discovery-based and experimentation is required.
#11 “In general, hiring before you get product/market fit slows you down, and hiring after you get product market fit speeds you up. Until you get product/market fit, you want to a) live as long as possible and b) iterate as quickly as possible.”
#12 “Founders have to choose a market long before they have any idea whether they will reach product/market fit.”