I’ve been a technology entrepreneur my entire career. I’ve built companies, invested in others and been fortunate enough even to exit from a few (both as an investor and an entrepreneur).
Whilst none of the companies I’ve been involved in have become unicorns and quite frankly most companies are never meant to be, a cornerstone to every business I’ve been involved in has been the pursuit (and hopefully eventual discovery) of product/market fit.
The term, coined, much to our delight and sometimes dismay, by Marc Andreessen, has morphed based on context to something that listening to startup entrepreneurs, angel investors and even professional venture capitalists sometimes feels both mythical and mysterious and at other times surreal, far removed from its original intention or purpose.
Yet one thing remains true. For a startup, any startup, there is no life without product/market fit. It remains the one single binary element that dictates whether your startup will have to shut down and be declared a failure or whether you have an opportunity for growth and glory. Make no mistake, even though studies such as this one published by CB Insights point out the visibly apparent reason for startup failures, the underlying root cause for failure most often than not is the lack of a product/market fit. Founders who believe the contrary are likely fooling themselves.
Reaching product/market fit isn’t straightforward or logical. It defies conventional business wisdom. All the learning you’ve had from your career in corporate America nor your IQ of a 160 won’t help you.
There are many articles, blog posts and even books written about product/market fit. Most of them reference high-level activities like “building a better product” or “you know when you have it”. Some even go as far to create derivatives of product/market fit like “product-market-sales-fit” or “product-market-pricing-fit”. Not only are these high level activities, abstracts and derivatives confusing, they’re often counterproductive.
So, what does it mean to have product/market fit then? Whilst the definition has been stated a million times in a million ways, in its simplest you have product/market fit when you have a group of customers for whom your offering is consistently and repeatedly delivering value that those customers are willing to pay for.
The above definition may seem simple enough on the surface but broken down reaching such a state requires more than you can imagine. For example, “a group of customers” implies that you can identify a segment of customers. In order to identify that segment, you need to understand how does customer A differ from customer B and what do those customers share. The list goes on.
Since most entrepreneurs fall into the trap of simply reading a definition of of product/market fit and not thinking about or understanding the underlying pre-requisites for that definition, my intention is to provide to provide three key focus points to guide your thinking.
In my own pursuit of product/market fit for my own companies as well as watching the tens of companies I’ve invested in struggle to find it, I’ve learned these valuable lessons I hope to be able to share with you and help you reach product/market fit in your startup faster than I did.
Whilst the below three pieces of advice won’t automatically guarantee product/market fit, following this advice will make finding product/market fit less unpredictable and increase your odds of finding it.
- Understand your customer. Really. Deeply.
I’ve learned that the deeper you understand your customer, the better your chances of finding product/market fit are. There’s no room for ego or assumptions in accumulating customer understanding. All you need is simply the mindset of a detective accompanied by the relentless pursuit of first hand information, not Gartner market-size studies. In attempting to understand your customer, ask yourself the following questions :
Who is your customer? I mean really. What do they care about? What drives their decision-making? Why? How do you know? Your customer isn’t someone AND someone. Nor is it someone OR someone. You don’t have that luxury. Ironically the more narrowly you can define your customer at this stage, the easier it will be to uncover product/market fit.
You will have plenty of opportunities to expand on your customer base later. For now, narrowing it enough to allow you to become a market-leader for this segment or group of customers within a reasonable time period is enough.
Understanding the customer is also not something you can outsource. Not to a business development person. Not to a colleague. It has to be accumulated by you, the founder. As food for thought, the great Steve Blank once said: “The winners understand why the customers buy, the losers never do”. Trust Steve.
2. Solve a Real Problem. An important one.
This one should be obvious. Yet it isn’t. At any given point in time, your customer suffers from dozens, if not hundreds of “problems”. Things they wish would be better, things they could improve on, things they could make money on or save money on, the list goes on. That doesn’t mean that they will pay to solve nearly all of them. They may suffer from a bleeding wound simultaneously whilst suffering from 200 paper cuts. The problem you need to solve for them, is the bleeding wound. They don’t have time, energy, money or interest to care about the paper cuts whilst that bleeding wound is present. And trust me, everyone has a bleeding wound.
Here, it’s important to be critical. The problem that you would like to solve or care deeply about solving may not be the one that actually exists let alone turns out to be the bleeding wound worth solving. It’s important not to try to find evidence in your favour but rather discover, openly, honestly and without bias, what the real pain worth solving is. I’ve seen too many entrepreneurs try to argue the existence of a problem to a customer, prospect or partner only since they themselves became passionate about solving something that didn’t need solving in the first place.
3. Don’t build. Uncover.
There’s a notion that finding product/market fit would require you to build a product. Let me tell you, it doesn’t. In fact the best evidence of product/market fit is a group of customers wanting to pay you for a product they haven’t yet even seen nor have you yet built.
The problem with starting with a product lies in the sub-conscious side effects of building a product. Once you build a product (or have a product built), you’ve already settled on a series of features, functionalities, processes etc. You’ve invested resources into dreaming up a product that you’re proud of, at least to the extent that you’re willing to it out into the market. You want this product to succeed. You want others (including your customers) to love it. Your mindset has now shifted. It’s no longer 110% about solving a problem for a customer. The product you’ve built is now a factor. And it’s a dangerous one. It will de-rail you.
In order to maximize your chances of finding product/market fit, you need to be able to focus 100% on uncovering the problem that is worth solving and proposing a solution to that problem. Note, a solution to a problem is distinctly different than a product. The eventual product is simply the delivery mechanism that enables you to deliver the solution to a problem to your customers. And its the solution you should figure out. Not the product.