Don’t do paid acquisition before product market fit

I spend most of my day working with startups on product-market fit because PMF is a clear northstar metric for seed companies and if they achieve it, good things happen on most of their customer metrics, almost always leading to a good Series A.

Here’s the thing. I know everyone wants growth. Everyone wants to get on to the scale part of the company because it’s exciting, cool, fun, and everyone loves you. But there is no better time to get your product right and your culture right for your company than when you are in seed stage.

The two biggest positive correlations I see between seed companies having great Series A are strong PMF and strong experimentation cadence. The two biggest negative correlations are outsourced development and paid acquisition.

The strongest negative correlation is outsourcing development of an early product. Outsourced development almost always makes building a high experimentation cadence impossible, because there is a lot of coordination required. Finding that co-founder who can lead product development is really a must-have.

Paid acquisition is certainly something I see all the time in seed companies, but I don’t believe you should do it until you have PMF. The reason is that growth is a very compelling metric and almost always if you have high growth, it’s easy to ignore your PMF northstar. Paid acquisition tends to be relatively easy when you start to drive growth both because you are starting from low numbers and because your channels are fresh. The thing about PMF and the organic traffic it generates is that it gets better over time. Not only does it not burn out, as your brand and reputation improves, more people will talk about you, not less. It’s a positive feedback loop and unique in that way.

It may sound funny to think about growth loops at the seed stage. Hey, I just need to find PMF and then I’ll worry about growth. But paid acquisition through the traditional channels, Google and Facebook, is rarely viable any more. Prices have been bid up as more and more acquisition demand comes online. So a solid growth loop, one where each user exposes or refers other users to your product, is incredibly important. The best companies I have worked with have 80% organic acquisition because they have an incredible growth loop, often coupled with a free version of their product to get people hooked.

So the reasonable thing to do would be to say — ’I get it, but I need to do some paid acquisition to prime the pump.’ I would say that you are far better off focusing on things like SEO, content sharing, and other ways of generating referral traffic than writing checks to Facebook and Google. While it means you will spend longer in seed stage, it will give you the time to focus on PMF, retention, and referral right at the beginning of your company. Channels are outside your locus of control, product is inside your locus of control. So make product great before you focus on things outside.

Stopping paid acquisition is a bit like saying you are going to lose weight without exercise. That forces you to learn how to eat right, and then you can add exercise later to get even healthier. To figure that out, you are going to build some very good habits. In the seed world, the good habit you are trying to build is an experimentation culture and cadence and a focus on product-market fit.

So just say no to paid acquisition until you have product market fit, and do the hard work early. You will come into your Series A with a much better validated product, a better culture, and pouring money into acquisition will work much better.