Startups need to grow. Everything else follows. Where does growth come from? From ‘product market fit’! Let’s explore it what it means and why it matters.
When a great team meets a lousy market, market wins. When a lousy team meets a great market, market wins. When a great team meets a great market, something special happens.
Paul Grahams defines startups as growth engines. Everything else follows from … well … growth!
Where does growth come from? From ‘product market fit’!
Hence, let’s explore now what is product market fit and why it matters.
— PS: In the next post, you will learn about how to find product market fit and how to measure it that you know you reached the holy grail of early-stage startups.
What is product market fit?
If you’re searching for advice in making your startup successful, you will inevitably stumble upon the concept of product market fit.
A lot has been said about it, and many of the most famous startup-thought leaders are constantly referring to it.
It seems as if product market fit is the holy grail you have to find, a magical border that marks the transition between the messy and abstruse early startup phase and the nice, smooth road to hyper growth …
Well, let’s shed some light on one of the most famous and important startup concepts!
Different schools of thought have emerged around product market fit and can be classified into 3 camps qualitatively:
- Market View: Marc Andreessen says if there is no market, even a great product and a great team will not get you there.
- Business View: Steve Blank says if you can’t realize the business model, there is no product market fit.
- Product & analytic View: Eric Ries, Ash Maurya, and Dave McClure say if there is no retention and referrals, there is no product market fit.
#1: Market view
Marc Andreessen, famous VC and the first one who used and coined the term product/market-fit thinks about it as follows:
Product market fit means being in a good market with a product that can satisfy that market.
For Andreessen, the life of any startup can be divided into two parts: before product market fit and after product market fit.
You can always feel when product market fit is AND isn’t happening. Lots of startups fail before product market fit ever happens. Before product market fit — Do whatever is required to get to product market fit.
He concludes that
- The #1 company-killer is a lack of market.
- When a great team meets a lousy market, market wins.
- When a lousy team meets a great market, market wins.
- When a great team meets a great market, something special happens.
#2: Business view
According to Steve Blank, each startup has to move through 4 distinct phases in search for a scalable and repeatable business model:
- Customer Discovery
- Customer Validation
- Customer Creation
- Company Building
A startup begins its journey with the search for a repeatable and scalable business model (“Search Phase = Discovery + Validation”).
You’ll have to find out yourself a) how to turn your ideas into a product that people want and b) how you can sell it effectively to them.
That’s what product market fit is!
According to Steve, most startups die before they reach it.
Read more about the startup path here.
#3: Product view
Ash Maurya, author of ‘Running Lean’, also confirms that the first thing that matters is …. ? Yes — product market fit.
Ash adopts Steve Blanks search phases and uses his model to define goals for each phase:
- Customer Discovery – Achieve problem solution fit
- Customer Validation – Achieve product market fit
You will not reach product market fit if you haven’t found Problem/Solution Fit that is closely connected to your product — the solution to solving a customer’s problem.
It is likely, however, that you find Problem/Solution Fit and still struggle to reach product market fit.
What’s the difference between product market fit and problem solution fit?
—Problem solution fit means finding a problem worth solving. A problem worth solving boils down to
- Is it sth. the customer wants? (must-have)
- Will they pay for it? (viable)
- Can it be solved? (feasible)
—Product market fit means finding a repeatable, scalable business model.
Applying Paul Graham’s thoughts and Y Combinator’s mantra:
Reaching product market fit is basically about building something people want!
Why product market fit matters?
The reason is simple! Marc Andreessen says:
Markets that don’t exist don’t care how smart you are.
Meaning that if there is no market for your product, even a great product and a great team will not make your startup grow big. If there’s a market but your product is bad, you won’t make it either.
And I’m quite sure you know what that means! If startups don’t manage to get into hyper-growth mode, they either die or turn into petty companies that make a mockery of any startup founders dreams and ambitions. Ben Horowitz, former entrepreneur and now famous VC, once called this state ‘start-up purgatory’.
Marc Andreessen even believes that many of the most successful startups just got so much traction because they had a good product market fit (— even though they messed up most other things).
In contrast, he sees many well-managed companies go straight off the cliff because their product, or the market for their product, isn’t great.
Better focus on finding product market fit.
- Steve Blank: Survive the Leap to Hyper-Growth
- Marc Andreessen: The only Thing that Matters
- Morgan Brown: Ten Things I Learned Researching Ten of the World’s Fastest Growing Startups
- Ben Horowitz: The Revenge of the Fat Guy
- Ash Maurya: The First Thing That Matters: Product/Market Fit
- Stanford class: What is Product/Market Fit?