A tool to help African startups systematically find product-market fit

The journey to finding product-market fit is arguably the most important journey for any early-stage startup. Getting there is a tricky path to navigate. PMF is critical, as it serves as an inflection point in a venture’s maturity, where it transitions from ‘search’ to ‘execution’. From the search for a viable business model, to executing that business model at scale. Given its importance I have been surprised at how few actionable guides there are for African founders to improve their chances of getting to this milestone. My hope is that this tool will serve as just that, a practical guide that will help African startups systematically find product-market fit (PMF).

My unique positioning as a former founder with an exit and an experienced operator within the industry has given me a bird’s eye view of the startup ecosystem, including the trends that consistently affect African startups in their pursuit of PMF. My current position as Head of Growth at Founders Factory Africa, one of the largest startup accelerators on the continent, has allowed me the chance to analyse the inner mechanics of African startups through the firm’s investment in more than 60 early-stage ventures and the screening of hundreds more.

The Startup Curve

The startup curve, a diagram popularised by Paul Graham, founder of Y-Combinator, is a pattern typically followed by African startups too and is the natural progression of many early-stage ventures. This helpful visual details the pitfalls and the milestones that these ventures will encounter as they generate initial traction.

Many ventures begin with a fair bit of enthusiasm but as reality begins to set in, entrepreneurs can fall into the “valley of death,” which is a key point in the journey. During this time, a search for a viable business model commences. This includes experimenting and pivoting to find something that solves an acute problem for a specific audience. Many startups die upon failure to reach PMF, as they don’t have a chance to validate their solution and inevitably run out of money. This framework aims to reduce the risk of failing in the valley of death and increasing the likelihood a venture will find PMF.

I like to think of traction as “the progress a startup makes on the path to product-market fit.”

It is a critical milestone for investors too, as evidence that a venture is progressing towards PMF de risks their investment. Determining where a venture is along the journey also helps investors make smarter decisions when comparing similar businesses.

One of the world’s most successful early-stage investors, Marc Andreessen, states;

“For new startups, the only thing that matters is getting to product/market fit.”

Making Product-Market Fit Actionable

In the past, product-market fit has often been described in fairly vague terms, which leaves startup founders scratching their heads about whether or not they’ve reached this point in the process. There has been a profound evolution in this thinking to one where, PMF can be defined in more concrete terms — such as with the key metrics uncovered in this framework.

Acquisition, engagement, and retention are three fundamental metrics that allow a startup to identify what PMF is and are quantifiable, leading indicators of how close they are to securing it. Underpinning the three primary metrics are what I like to call ‘magic metrics’. They provide measurable signals of progress towards PMF:

• > 60% organic acquisition: If most new user acquisition is from organic channels this shows the product has a natural pull.
• DAUs/MAU ratio > 50 %: If more than 50% of the monthly active users are also daily active, it shows the product is part of daily habit.
• Retention rate > 40%: If the retention curve flattens above 40% it’s the ultimate signal of PMF.

Investors are keenly interested in where a startup is on the path to finding product/market fit, as this helps them to invest with less risk and uncertainty. Investing in an early-stage venture that’s still in the “valley of death” carries a great deal of risk versus investing in a company that’s already secured PMF where revenue provides an easily identifiable measure of progress. Identifying traction pre-PMF is much harder to decipher.

Key levers help accelerate progress to PMF

I’ve observed specific tactics that work best to accelerate the progress a startup makes towards PMF. I’ve compiled these tactics into a framework I call the Traction Framework. The framework identifies the most impactful levers that African startups commonly skip that have been proven to accelerate traction for early-stage ventures. These levers include:

• Customer Value
• Core Product Value
• Product-Led Growth
• Retention

As each lever is applied, progress accelerates. The traction engine represents the amalgamation of these levers into a cohesive framework. Under each lever, there are key metrics that indicate the value they hold and the measurable outcomes they deliver in reaching product-market fit.

While other frameworks exist, they skew towards US and European startups. This traction framework was specifically designed for African early-stage ventures through its emphasis on the persistent patterns that have been identified through the analysis of hundreds of startups on the continent.

Designed to provide the most impactful tactics possible for African startups looking to reach PMF, following the framework can lead to faster acceleration and goal-oriented progress.

The Traction Framework

The Traction Framework establishes key milestones, as well as an endpoint for startups to map their journey towards finding traction and establishing an audience who finds value in their offering.

The framework is an active system, as opposed to a linear step-by-step process. It represents the core components that African startups should focus on to reach the end goal of unlocking their unique value within the market.

These quantifiable outcomes release PMF from its past vagueness and provide founders with actionable steps and hard data. Through the use of the levers, a startup will greatly improve its chances of getting to product-market fit and build retention with a wider audience. At this point, the company can be scaled and experience sustainable growth. Investors will be eager to jump on board when they can be provided with insightful data that gauges a startup’s progress toward achieving PMF.

Each lever includes a set of metrics, which allow founders to quantify the data and determine what’s working and what’s not. Core product value, for instance, can be deduced from repeat user engagement, which is quantified by activation rate, the number of engagements, the number of new users, and the number of these users that become repeat consumers.

As each lever is “pulled,” the closer a startup comes to achieving PMF. All of the levers combine to achieve retention, which is the overarching goal of scaling a new venture’s growth. It is a robust, highly data-driven set of tactics to help founders find PMF.

Just the beginning of this series

This article represents the introduction to a series that will be delving deeper into the Traction Framework, such as detailed breakdowns of what each lever does, how to track the metrics, and how to successfully use the process to accelerate progress toward achieving product-market fit.

I’ve leaned into and used years of experience within the startup ecosystem to develop the framework and provide African startups with a resource for unlocking their venture’s ability to reach PMF.

I will be hosting free webinars aimed at teaching African founders how to incorporate the tool into their own businesses. These webinars will provide an opportunity for questions and discussion.

While I spearheaded the development of the framework, it was an incredibly collaborative effort, that wouldn’t have been possible without the immense support and contributions of the FFA Studio team. Massive credit goes to; Kate Ovwighose, Emmanuel Ajah, Nancy Mkhize, Roger Norton, Kevin Odongo, Kiereini Kirika, Candice Warnasuriya, Paula Nagy, Andrew Obuoforibo, Sona Mahendraand and Jacqui Maroun.

If you found this article interesting, stay tuned for subsequent content. If you’re a founder or investor and want to discuss the framework further, please reach out to me at steven.waidelich[at] gmail.com

About the Creator

Steven Waidelich began his career as an operator for tech startups in San Francisco in the USA before returning to South Africa to co-found the startup digital media agency, Lighthouse Digital. After 5 years, the company was the largest digital media agency on the African continent. Upon reaching a $40 million valuation, Lighthouse Digital was acquired by Publicis in 2014.

Since then, Steven has focused his professional efforts on venture capital and advising early-stage startups. He currently serves as a growth advisor for dozens of African startups and is himself an accomplished startup growth professional. His personal experience within the industry allows him to apply his insight and wealth of knowledge to help other startups achieve success.