Point Nine Land
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Point Nine Land

WTF is PMF? (part 1 of 2)

1. What is Product/Market Fit?

  • Paul Graham apparently said that PMF simply means “making stuff that people want” (I couldn’t find the original quote but saw it in this presentation).
  • Marc Andreessen got more precise, saying that PMF means “being in a good market with a product that can satisfy that market”.
  • Michael Skok added the important element of the “Minimum Viable Segment” in this article, pointing out that “your product isn’t going to fit the entire market from day one. Minimum Viable Segment (MVS) is about focusing on a market segment of potential customers who have the same needs to which you can align.”
  • My dear colleague Clément Vouillon added another dimension — distribution — and defined PMF like this: “It happens when the product (a set of features that have a clear value proposition) resonates with customers (which are of a certain type and have defined needs) that you know how to reach and convert (through marketing and sales).”
  • Andrew Chen has another interesting twist: PMF is “when people who know they want your product are happy with what you’re offering”.
  • Last but not least, according to Eric Ries “The term product/market fit describes ‘the moment when a startup finally finds a widespread set of customers that resonate with its product”, and Andy Rachleff said: “You know you have fit if your product grows exponentially with no marketing.”

2. Is Product/Market Fit a discrete event, or is there a gradual development towards PMF?

  • In his excellent talk at the great SaaStock conference in Dublin last fall, Peter Reinhardt, co-founder & CEO of Segment, explained how Segment, after struggling for a long time, suddenly got to PMF when they put up a landing page for what used to be a little side project. According to Peter, “product market fit is not vague, positive conversations with customers. It’s not glimmers of false hope around some random positive interaction. What it actually feels like is a landmine going off”.
  • According to Brad Feld and Ben Horowitz, Segment’s experience is the exception to the rule, though. According to Brad, PMF is something that you find somewhere between $100k and $1M MRR, and Ben has called PMF as a “discrete, big bang event” a “myth”.

3. How can Product/Market Fit be measured?

  • As mentioned in the beginning, a lot of people would say you can’t measure PMF and that you “know it when you see it”. Sean Jacobsohn of Norwest Venture Partners took up the challenge and developed a 5-question quiz that you can use to rate your level of PMF. I like his approach a lot and turned the quiz into a little Typeform some time ago.
  • Another quantitative approach comes from Sean Ellis:

“I ask existing users of a product how they would feel if they could no longer use the product. In my experience, achieving product/market fit requires at least 40% of users saying they would be “very disappointed” without your product. Admittedly this threshold is a bit arbitrary, but I defined it after comparing results across nearly 100 startups. Those that struggle for traction are always under 40%, while most that gain strong traction exceed 40%.”

  • Andrew Chen offers a few examples of what PMF looks like. For a SaaS company, he mentions a few indicators, including these:
    - 5% conversion rate from free to paid
    - less than 2% monthly churn
    - clear path to $100k MRR

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Christoph Janz

Christoph Janz

13.1K Followers

Internet entrepreneur turned angel investor turned micro VC. Managing Partner at http://t.co/5WJ3Pepbcv.