Let’s Talk: Product Market Fit
When you think of product-market fit (PMF), you may immediately think of customer satisfaction, industry standings, and the value created for the customer. This rings true and consistent across high-growth startups but many businesses seem to underutilize the understanding of PMF and the power it holds.
The definition? The PMF concept was developed and named by Andy Rachleff (who is currently the CEO and co-founder of Wealthfront and is a co-founder of Benchmark Capital). The gist of Rachleff’s definition for PMF was based on his analysis of the investing style of the pioneering venture capitalist and Sequoia founder Don Valentine.
“A value hypothesis is an attempt to articulate the key assumption that underlies why a customer is likely to use your product. Identifying a compelling value hypothesis is what I call finding product/market fit. A value hypothesis identifies the features you need to build, the audience that’s likely to care, and the business model required to entice a customer to buy your product. Companies often go through many iterations before they find product/market fit, if they ever do. When a great team meets a lousy market, the market wins. When a lousy team meets a great market, the market wins…When a great team meets a great market, something special happens. If you address a market that really wants your product — if the dogs are eating the dog food — then you can screw up almost everything in the company and you will succeed. Conversely, if you’re really good at execution but the dogs don’t want to eat the dog food, you have no chance of winning.”
Andy Rachleff, Venture Capitalist & EntrepreneurWhat does all of this mean? No matter how revolutionary your product or how well-versed your team is- nothing can overcome the weight of an imperfect market fit. That is why it is so important to fully understand who you are serving and why with enough substantial evidence, trial and error.
How to Figure out your own market fit strategy
Much like the scientific method back in grade school, startups must go through a series of careful observations and apply rigorous skepticism about what is observed. To be constantly questioning your assumptions is crucial to understanding your target market and their problems. Much like our introduction science class’ budget, it is important to keep your own initial testing small and preliminary. There is a great deal of uncertainty and human error at risk to be testing a market too far along with your company’s growth.
“Founders have to choose a market long before they have any idea whether they will reach product/market fit.” Chris Dixon, VC, and American Entrepreneur
Once your company has PMF it still must curate a sustainable business model, find investors, understand competitors… But without a well-researched and absolute understanding of the market- there will not be any room and reason for long-term growth.
