THE PROCESS BEHIND PRODUCT-MARKET FIT - Deepstash
THE PROCESS BEHIND PRODUCT-MARKET FIT

THE PROCESS BEHIND PRODUCT-MARKET FIT

Start with a hypothesis, test it, prove it, move on or further iterate on the hypothesis. After a series of build-measure-learn iterations, the process is more of an art than science. Startups should start with the product, then find the market:

  • What are you going to build?
  • Who is desperate for it?
  • What is the business model you are going to use to deliver it?

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MORE IDEAS FROM THE ARTICLE

WHY MARKET MATTERS MORE THAN ANYTHING

The three "legs" venture capital look for in a valueable business are

  • people
  • markets
  • innovative products

Entrepreneurs resonate with one of them more, depending on the situation.

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What the term "product market fit" describes?

”The moment when a startup finally finds a widespread set of customers that resonate with its product.” Eric Ries

”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.” Andy Rachleff

Nate Promoter Score is a great tool to aproximate the level of customers' satisfaction for a product(a good score should be > 40), but does not compare with market feedback.

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Some founders think they have product market fit when they don't

Many founders think that users will immediately pay for their product, but in reality things are harder. 

Ideally in the easiest stages of a product development process pull is happening organically (i.e., without any advertising spending).

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Iterate as quickly as possible

“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:

  1. live as long as possible 
  2. iterate as quickly as possible "

Sam Altman

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PMF Myths
  • Product market fit is always a discrete, big bang event
  •  It’s patently obvious when you have product/market fit
  • Once you achieve product/market fit, you can’t lose it
  • Once you have product/market fit, you don’t have to sweat the competition

Markets and the actions of competitors in that market (which are not always visible to outsiders) are always changing. Constant adaptation is therefore required to retain PMF.

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First to market fit is almost always the long-term winner

Once a company has achieved product market fit, it is extremely difficult to dislodge it, even with a better or less expensive product. Facebook was not the first social network either.

The target is not only product market fit, but also "product market scale".

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WHAT IS PRODUCT-MARKET FIT, REALLY?

More iterations of a product are needed until it becomes market-fit. The most important aspect of a company is its market and then the team.

“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

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Founder market fit

Venture capitalists generally tend to invest in companies that already found their PMF. They let the founders do the heavy-lifting.

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HOW CAN YOU TELL WHETHER YOU DO  HAVE PRODUCT-MARKET FIT?

Time spent building a business around the product alone is pointless. A great market means succes if both the team and the product are competent.

A marvelous product is useless in a terrible market and even if the team is great, they will get demoralized if customers do not show up.

You can have an OK team and a buggy and incomplete product but if the market is great and you are the best product available success can happen both suddenly and quickly. That success won’t last unless those products are fixed, but at least the business has the beginnings of something wonderful.

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Premature scaling

A mistake usually made is trying to scale the product before it became product market fit. Most start-ups need 2-3X more time to validate the market than expected. Early adopters is not the same with the market and the danger of early traction because of the revenue generated by early adopters is big.

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First find product market fit then make the product robust

If customers do not want to buy/use the product, it does not matter how many features it has or how flawless it is. The path to PMF is discovery-based and then the company must find a sustainable growth model and create a moat against competitors and so on.

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RELATED IDEAS

CARR

Total contracted annual recurring revenue is the single best metric for the health of a business. It encapsulates new logo growth, expansion, and churn in a single number. Shows the money that comes in every year for the life of a subscription (or contract).

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It refers to the fact of designing a product in a more complex way than necessary:

Overengineering (or over-engineering, or over-kill) is the act of designing a product or providing a solution to a problem in an overly complicated manner, where a simpler solution can be demonstrated to exist with the same efficiency and effectiveness as that of the original design.

In the context of software: Code or design that solves problems you don’t have.

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Scaling start-ups

Scaling a start-up requires careful preparation and a timely launch.

  • Scaling is exponential growth, where your revenue grows faster than you spend. The net income is often reinvested to further the growth of the company.
  • Growth is often a linear term. The start-up revenue increases as more resources are added, such as capital, people and technology.

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