Finding our Product Market Fit
Startups are often measured against certain milestones: pre-revenue, product/market fit, traction, scale... Those are some terms used to easily tag the maturity of a new business. Many times VCs will even define themselves by them and pigeonhole their investment strategy with those labels.
The problem I see with such binary approach is that it misses half of the picture. If you read The Lean Startup and share its philosophy, you’ll agree with me that the evolution of a new company is not about hitting major one-off milestones but rather hitting them over and over in short cycles that make the company progress.
Product/Market Fit
Product/Market Fit is often defined as finding a product that can satisfy the market. What I like to focus on is actually finding the market that you can satisfy with a product you’re able to build (now!).
For instance, I can say that Factorial found product/market fit a few months back, as soon as companies that started using the product couldn’t live without it and wanted to tell their friends and fellow HR Managers about it.
But at the same time a 1,000 employee company would have a really hard time using the product back then. Definitely no PMF in that market.
Last week I was interviewing a candidate for VP of Sales and I liked how he positioned it:
Candidate: “What size company do you feel the product currently can support (without having angry customers)? How will this change over the next 6–12 months?”
Technology Adoption Curve (again)
We already talked about the technology adoption curve back in the article on the first day of our startup. Understanding what customers we want to get right now is crucial to avoid wasting anybody’s time.
Early on it’s pretty tough to say no to interested (and interesting) customers, but doing otherwise would put our company at risk and would steal the focus that we need to delight the right kind of customers.
I recommend reading Point Nine Capital’s Rodrigo’s post on this topic:
Net Promoter Score
Remember when the candidate I was interviewing wanted to know how far we could go without having angry customers? Well that’s something we want to measure then.
For that, I propose using NPS, or “Net Promote Score”, which is a mechanism that classifies your customers in three buckets (promoters, passives and detracters) and gives you a score that tells you how well your products or services are satisfying the customers. All by asking:
How likely is it that you would recommend our company/product/service to a friend or colleague?
Some months ago I shared my experience on using NPS to promote a business strategy shift at Redbooth. You can read about or watch it here:
Does product/market fit travel around the world?
An added challenge that we face at Factorial is that we’re serving very diverse customers in different parts of the world. Does it make sense to validate our PMF in different geographies? I think so, since both the market and the product change.
On-boarding an employee, asking for days off or enrolling in a benefits plan are things that are done slightly different depending on where you are, and that’s mostly what we do at Factorial for our customers.
One of our key concerns is making sure we understand the realities of different countries and solve country-specific issues well with our product. That’s a key part of scaling our business internationally.
Does your product/market fit change depending on the country?
Thanks for reading this far! There’s a bunch of posts about how we started Factorial and different things we think about during the process. Stay tuned for the next post!
