Going from Zero to Series A: the formula for nailing Product-Market Fit
The best entrepreneurs and venture capitalists know that a new startup’s main objective in its early days should be to reach product-market fit (PMF), a state where the business has found a compelling value hypothesis for one or more large segments of customers. While some investors hesitate to really define how to know a startup has reached PMF, others have defined it as a state where there is a fairly high amount of repeat purchases/usage and where existing customers are themselves creating referral traffic.
Marc Andreessen, Partner at a16z, puts it this way:
“The life of any startup can be divided into two parts — before product/market fit (BPMF) and after product/market fit. When you are BPMF, focus obsessively on getting to product/market fit. Do whatever is required to get to product/market fit. Including changing out people, rewriting your product, moving into a different market, telling customers no when you don’t want to, telling customers yes when you don’t want to, raising that fourth round of highly dilutive venture capital — whatever is required.”
The moment a startup team have de-risked product-market fit and have shown they are able distribute their product to the people who want it (through one or more channels) is when the team can usually raise a Series A round.
So YES, everyone talks about PMF! but “how to get there?” is the real question that entrepreneurs really ask themselves. I’ve thought up my own framework, and I believe that a startup can get to PMF by making sure the following formula stands true:
A=B means that the product is offering something unique and different from what your competition offers
A=C means that the startup is always communicating what the product really offers, not just putting out random slogans and marketing messages
A=D means that a user is actually experiencing the main value proposition continuously throughout the journey and experiencing it fast after first usage
A=E means that the value offering matches what users are demanding or lacking in the market
B=C means the startup is communicating what is unique about it and making sure it is well positioned against competitors in a user’s mind
B=D means that a user is actually experiencing something different in your product that what other products are giving him
B=E means that no one else is aiming to solve that specific need in the market
C=D means that you’re making sure that user understands how the product works and balancing expectations of value
C=E means that you are positioning yourselves towards what users need and effectively communicating a benefit to them
D=E means that the user’s need is being solved by using the product/app
Once all these aspects are balanced, your product will have created value. And from this formula stems that business strategy, brand strategy, product strategy and marketing strategy are all interlinked. The essence of this formula is in the consistency among those. The customer, after all, doesn’t see all of those strategic decisions. The customer sees one brand, one product and one value proposition. The only economical value is really only created inside the consumer’s mind.
