Product Market Fit and NPS
In this article, you will learn about product market fit, investment-readiness, NPS (net promoter score), and startup struggles.
Did you know that successful writers also iterate their crafts and pledge for their readers’ help to improve and gather feedback? Rob Fitzpatrick practices what he preaches in “The mom test” and this is how I found out:
Excited to hear that I had such a successful writer in front of me, I didn’t hesitate to offer myself as a first reader of the book he is currently writing. Surprisingly enough, he not only agreed to it but offered other attendees to do the same. Therefore, just as companies need feedback on their product, writers need feedback on their books too, and I am more than eager to be one of the first people to have a manuscript of Robert Fitzpatrick in my hands.
Just like writers need support, founders, entrepreneurs, product owners do too and that’s why I am excited to share what I have learned at The Lean Startup Circle Meetup. This monthly MeetUp is lead by Robert Fitzpatrick, the writer of The Mom Test and this month’s guest was Jordi Romero, serial entrepreneur and the CEO of Factorial, a cloud-based HR platform.
Jordi Romero is a serial entrepreneur and Factorial is not his first startup. Romero had raised $20 million with his former company and in 2017, Factorial’s seed round raised €3.5 million. “Getting surrounded with people who have already been there, it’s always helpful” recommends Romero. When asked about success in startups, Jordi’s main tips are:
1.Focus on lowering operating costs.
2. Sell. (“even if you don’t have a prototype! Just get out and do what is needed in order to validate your business model!”)
Jordi’s utmost recommendation is always to burn as less money as you need. Even if customers are queueing to get your product, you should always be vigilant about your expenses!
Needless to say that everyone reading this article already knows that validating the business is crucial and in Factorial’s case, product market fit was an issue and had to undergo changes.
“Factorial went from being a corporate benefit-focused business model to a 35 employees HR tool that automates HR, payroll, and company benefits”
Factorial’s successful pivot speaks volumes: its 3.3 million seed round was not the result of a mere business idea but of successful iterations of the initial idea. When the founders went out there to sell their product, they realized that the original plan was not going to work, so they decided to change directions.
Needless to say why it is so important to validate the idea in the targeted market in order to know if it’s time to kill it, pursue it or change the direction of it.
In fact, the term product-market fit, which was coined by Marc Andreessen, describes this precise moment: the moment in which a startup finds a spread of customers that resonates with its product. And in Factorial’s case, those customers were SMB companies and not corporations as initially was meant to happen. When difficult to acknowledge if your startup has a product market fit, Jordi knows his ways to figure it out:
Product market fit is like LOVE. You know you have it, when you get it!
Easy isn’t it? Please don’t try this at home!
When asked what was the one growth metric to have in order to raise investment, Romero highlighted that a must-have is NPS.
Sound like a TV channel right? Well, it’s not!
NPS is the Net Promoter Score, which I have recently learned about in Allan Dib’s book “The 1-page Marketing Plan”. The Net Promoter Score (NPS) is calculated based on responses to a single question:
On a scale of 0–10 how likely are you to recommend our company/product/service to a friend or colleague?
That rings you a bell right? How many times were you asked this question? Have you replied honestly?
If you were one of those who responds 9 or 10 because you liked the product and not because you were trying to be nice, you are a Promoter. Those of you who respond with a score of 0 to 6 have been labeled as Detractors. And the ones responding 7 and 8 have been labeled Passives. The Net Promoter Scoreis calculated by subtracting the percentage of customers who are Detractors from the percentage of customers who are Promoters and is a number that can go from -100 to 100. In fact, when Factorial was looking to raise a seed round, its NPS was of 60, something that obviously grabbed investors’ attention and got them where they are now. There is no blueprint to startup successfulness but there is work, know-how and above all, iterations!
It is not easy to find good meet-ups and engage in conversations with top-notch entrepreneurs but last Thursday, I found the gold nugget I was looking for.
Where can you connect with Growth Mindset people?
- Jordi Romero: Besides being a full-time CEO, Jordi is also an investor in the Barcelona-renown accelerator Itnig. I highly recommend their podcast in order to learn more about the startup ecosystem in Barcelona. You can reach him on LinkedIn.
- Rob Fitzpatrick is currently living in Barcelona and while writing another book, he can be seen organizing monthly meetups. You can reach or learn more about him here.