If you’re a startup founder, product/market fit may be the thing that you always care about. As I'm constantly reading and highlighting articles about product/market fit, I'd like to share some of my favorite reading materials that helped me figure out the big picture of product/market fit.
There are countless must-read articles and it’s hard to put all, so I picked up some to map out the whole picture for you.
Don’t just read this article or the attached articles. Instead, highlight where you resonate with and leave your thoughts and learnings with Glasp so that you can look back at them anytime and we all can get smarter at the same time ;)
If you're ready, let’s move on.
There are 3 elements of each startup: team (people), product, and market. Andy Rachleff, Marc Andreessen, and other business leaders say that market matters the most. The #1 company-killer is lack of market.
By: Marc Andreessen (@pmarca)
Product/market fit means being in a good market with a product that can satisfy that market.
In a great market—a market with lots of real potential customers—the market pulls product out of the startup. [...] Conversely, in a terrible market, you can have the best product in the world and an absolutely killer team, and it doesn’t matter—you’re going to fail.
Andy Rachleff’s Law of Startup Success:
- 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 are before product/market fit (BPMF), the only thing that matters is getting to product/market fit. Focus obsessively on getting to product/market fit. Do whatever is required to get to product/market fit. (e.g. changing out people, rewriting your product, moving into a different market, telling customers no, etc.)
By: Michael Seibel (@mwseibel)
Finding product market fit = focusing on the market first. [...] The problem, i.e. the market, is the real opportunity.
To find product market fit, choose a market where users have a real, meaningful problem, launch quickly, and listen to your users.
You need to find problems so dire that users are willing try half-baked, v1, imperfect solutions.
By: Andrew Chen (@andrewchen)
A market consists of all the consumers who can search for and compare products for a use case they already have in mind.
Market matters the most, but what is a market anyway? How can we validate it’s real or fake? Andrew Chen shares a smart way to see if pre-existing demand exists or not:
If the answer to #3 is more than millions, then you have a big market. For consumer internet, a great market is composed of the following three things:
Leading with a great market helps you execute your product design in a simpler and cleaner way. The reason is that once you’ve picked a big market, you can take the time to figure out some user-centric attributes upon which to compete. This leads to a strong intention for your product design, which drives a clean and cohesive UX.
People have different opinions on what it feels like when you’ve found product/market fit.
“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.”
“You have very strong customer feedback, even from a small group of people. For example, at Color early on, we were getting literal love letters from customers.”
- Elad Gil
“You have reached product/market fit when you are overwhelmed with usage—usually to the point where you can’t even make major changes to your product because you are swamped just keeping it up and running.”
“The real metric for both consumer apps and enterprise is — do someone’s pupils dilate when they use your stuff? Whether you’re handing them a demo or if you drew something on the whiteboard. Do they say, ‘You’re not leaving’ or ‘Where have you been all of my life?’”
“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.”
“Product/market fit requires you to figure out the earliest tells.”
- 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.
“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. small teams FTW for both.“
“Startups need 2-3 times longer to validate their market than most founders expect. This underestimation creates the pressure to scale prematurely […] In our dataset we found that 70% of startups scaled prematurely along some dimension. While this number seemed high, this may go a long way towards explaining the 90% failure rate of startups.”
By: Lenny Rachitsky (@lennysan)
There are some signs of product/market fit. They are (1) sudden and significant pull, (2) gradual but compounding pull, and/or (3) hitting a milestone that proves it’s working.
Market “pull” comes in many forms:
The intensity of the pull depends on:
Some startups found PMF immediately after launch but some took a long time as shown below:
There are many approaches to measure product/market fit such as survey (NPS, 40% “very disappointed” responses, etc), gut feeling, metrics (cohort retention analysis), and so on, and there’s no wrong answer. Reforge founder Brian Balfour, however, gives us a clear path on product/market fit. In the end, as Casey Winters, Jeff Chang, and other thoughts leaders say, the cohort retention rate is a fair product/market fit metric.
By: Brian Balfour (@bbalfour)
Knowing where you are along a product/market fit path helps you understand when to go from traction, to transition, to growth.
There are 4 checkpoints to get to product/market fit:
By: Rahul Vohra (@rahulvohra)
Rahul explains the measurable indicator of product/market fit for companies pre-launch. If you can measure, you can optimize it.
In short, product/market fit is when 40% of your users answered that they would be “very disappointed” without your product (aka Sean Ellis’s leading indicator).
In essence, it's better to make something that a small number of people want a large amount, rather than a product that a large number of people want a small amount. In my view, the product/market fit engine process of narrowing the market massively optimizes for a product that a small number of people want a large amount.
Ask the following questions to users who used the product at least twice in the last two weeks:
If more than 40% of people answered that they would be “very disappointed” without your product, then your product has reached product/market fit.
By: Casey Winters (@onecaseman)
Product/market fit is not when customers stop complaining and are fully satisfied. They’ll never stop complaining. They’ll never be fully satisfied. Product/market fit is when they stop leaving. - Casey Winters
Casey defines product/market fit as the satisfaction that allows for sustained growth. In other words,
PMF = (flattened retention curve) + (MoM growth in new users)
By: Jeff Chang (@JeffChang30)
There are many definitions of product/market fit such as NPS score, 40% “very disappointed” response, gut feeling, good distribution channel, and so on, but cohort retention rate is the most important product/market fit metric.
Why other metrics are not good?
Why cohort retention rate?
You should find the retention rate of some comparable products that have been able to significantly grow to find the right benchmark for you.
A good rule of thumb is for consumer products, 25% is a good floor and for B2B SaaS products, 70% is a good floor.
Once you have a few cohorts that level off at a vertical-specific number, then you’ve achieved product market fit!
Startups need to get to product/market fit or die trying. There are some approaches to get to product/market fit.
By: Casey Winters (@onecaseman)
I think this is an area where despite all the news we hear about successful pivots that leaning more towards the Rabois model is a dominant strategy. Blindly trying out a bunch of startup ideas is like being in a dark room and feeling around for a door. A successful vision can turn on a light to that room so everyone can see the door and run toward it. Even many of those major pivots were guided by a strong, albeit new, vision from their founders. - Casey Winters
The Paths to Product/Market Fit:
There are two main schools of thought for how to reach product/market fit (Eric Ries Model vs. Keith Rabois Model), and success can be achieved by both modes.
Founders should build a strong opinion over which parts of which model they need to apply to maximize the chance of finding a product/market fit for their business. Casey’s personal belief is a strong vision combined with market feedback is a pretty dominant combination.
Eric Ries Model:
Keith Rabois Model:
By: Andrew Chen (@andrewchen)
To get to product/market fit, you need to keep the time to product/market fit (TTPMF) in mind. Lower TTPMF is good and it’s very easy to get: Just completely copy something that’s already at PMF.
Sure, cloning products have a lot of business (and ethical, and personal) weaknesses:
So, keep the fundamentals the same (80%) while substantially reinventing 20% of the product. And pick the right 20%.
Ideally the differentiation is baked deeply into the core of the product, not out on the edges. Something the end user can see and feel within the first 30 seconds of using the product.
By: Rahul Vohra (@rahulvohra)
Remember the questions that Superhuman used?
The 4-step manual to get to product/market fit:
Don’t settle down. The product/market fit process never ends as your market moves and changes over time. You need to keep moving and growing.
“This process never ends primarily for one reason - your market doesn’t sit still. It is always moving. These days markets are moving/changing at an accelerating pace. As your market moves, your product needs to move with it making product/market fit a pulse that you need to constantly keep your thumb on.”
Product market fit isn’t a one-time, discrete point in time that announces itself with trumpet fanfares. Competitors arrive, markets segment and evolve, and stuff happens—all of which often make it hard to know you’re headed in the right direction before jamming down on the accelerator.
Also, to build a $100M+ company, product/market fit isn’t enough. Though I don’t cover the details in this post, there are four essential fits and each of these fits influence each other, so you can’t think about them in isolation.
🔗 Related Links & Read More:
Remember what you should do next?
Don’t just read this article or the attached product management articles. Instead, highlight where you resonate with and leave your thoughts and learnings with Glasp so that you can look back at them anytime and we all can get smarter at the same time ;)
See you next time,