Product Market Fit

What is product/market fit?

Pull not push

A common definition of product/market fit is that the business feels “pull” from customers as demand increases, sales are quicker, and adoption is faster. That’s opposed to push, where the business is struggling for sales and has to convince each new customer to use their product. Growth is consistent and linear month over month but at a higher rate.

Low churn

If customers actually need you product for a sustainable period of time, churn rate will be low (less than 3%, see churn benchmarks for B2B companies). If your goal is to build a large durable business, there’s no world in which you have product/market fit with low retention.

Is that it? People don’t expect much from simple ideas.

See also:

• Product/Market Fit: Experience & Data
• The number one job of a startup CEO is finding product market fit
• Product work is a pursuit of facts about the user, market, and their problems

Links to this note

• The Number One Job of a Startup CEO Is Finding Product Market Fit

  Of all the roles and responsibilities an early stage startup CEO has, the most important is finding product market fit. A good heuristic to use is to continually ask, “Is what I’m doing getting us closer to product market fit.” If not, it’s a sign that the thing you are doing is not the most important thing to be spending time on.

• Magic Vending Machine Business Model

  A lot of startups have a business model which roughly equates to: put a dollar in, get two dollars out. This “magic vending machine” is obviously unsustainable but easy to fool oneself into thinking you have excellent product market fit.

• Four Levels of Product Market Fit

  First Round Capital has a helpful guide to product market fit that helps to orient founders so they can focus on the right things. Rather than a binary, yes/no, evaluation of product market fit, the guide discusses different levels.

• Time to First Million ARR

  One way to measure product market fit is to look at the time it takes between putting a product out in the market to the first $1MM in ARR.

• The Mistakes We Make the Second Time (Literature Notes)

  I read The mistakes we make the second time by Harry Glaser. It points out that certain things are easier than they should be (raising money, hiring) and that friction is helpful. It’s easy to build in anticipation of scale you don’t have because you weren’t spending enough time getting to product market fit. It also talks about how the excitement and joy don’t the same thing they did the first time (e.g. seed round doesn’t feel like an accomplishment).