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Finding PMF in early-stage products

About me:
Started my career in tech as a Software Engineer with Amazon
Went to B-school shortly after → spent a summer in investment banking → helped me realise I would be best in finance tech
Spent the next 7 years in Product Management
Currently at inMobi, Glance - trying to build a compelling lock-screen surface for 200 million users.
Previously at MakeMyTrip, trying the build the International Hotels vertical.
Also spent time at my own startup Yoda - scaled it 250,000 users with an App Store rating of 4.7.

What is PMF?

Simply put in Grade 1 English: it is to build something that users love.

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Why should we care?

1. Product-Market Fit is the biggest predictor of success.

Success = Product x Team x Market

Product x Team x Market - a great product but no one wants it. (e.g. Google Glass)
Product x Team x Market - a talented team building something random. (e.g. Quibi)
Product x Team x Market - a promising problem but this product doesn’t solve it. (e.g. Theranos)

Product x Team x Market - maybe we are onto something!
In this session, we focus on Product x Market. (Team deserves a separate session on its own)

2. Companies only grow sustainably after Product-Market Fit is achieved.

Without product-market fit:
You can easily acquire users but you will lose them shortly after.
You will sink money acquiring users, and key metrics like DAU will go up, but the moment you stop spending on marketing, the DAU plummets.

Please check your phone. If you have 50 apps - but 90% of the time/money would be spent on only 10% of them. The other 45 apps - were apps you downloaded once but never really visited again.

Here are some examples how it would play out -

OK Acquisition, No PMF:

Screenshot 2023-10-14 at 2.19.06 PM.png
OK Acquisition: Strong PMF:
Screenshot 2023-10-14 at 2.19.15 PM.png
Strong Acquisition, Strong PMF:
Screenshot 2023-10-14 at 2.18.51 PM.png

Okay. How do we get there?

Step 1: Be honest and identify whether or not you have PMF.

How do you know if you have PMF?
Before a product releases:
Excitement for a product before its release
Users are willing to pay for a product before its release (example: )
After a product releases:
Strong retention (for a few cohorts, if not everyone)
Metrics: D1, D3, D7, D30 retention
Strong viral loops, word-of-mouth
Organic user growth
Revenue/Business metrics (or) Cost-efficient growth
Burn Multiple is relatively low
Extremely high customer need
Product is often sold out
Product is buggy, but people still use it

But it doesn’t have to be all numbers, PMF measurements can also be pretty subjective.

You can always feel when product/market fit isn’t happening. The customers aren’t quite getting value out of the product, word of mouth isn’t spreading, usage isn’t growing that fast, press reviews are kind of “blah”, the sales cycle takes too long, and lots of deals never close.
And you can always feel product/market fit when it’s happening. The customers are buying the product just as fast as you can make it—or usage is growing just as fast as you can add more servers. Money from customers is piling up in your company checking account. You’re hiring sales and customer support staff as fast as you can. Reporters are calling because they’ve heard about your hot new thing and they want to talk to you about it. You start getting entrepreneur of the year awards from Harvard Business School. Investment bankers are staking out your house. You could eat free for a year at Buck’s.
- Marc Andreessen

Step 2: If you don’t have PMF, this is the product’s most central problem. Obsessively correct it.

There are no algorithms here, but here’s some universally applicable advice:

Focus on adding a lot of value for some people, than some value for a lot of people.
Talk to your customers directly and deeply.
Ask open-ended and divergent questions.
Genuinely empathise and avoid leading questions.
Ask questions two or three levels deep.
Have a high speed of execution, and iterate aggressively.
Take wild swings - instead of small, measured optimisations. (Go for a six, don’t take singles)
If users aren’t playing your video game at all, and you could do two features, which of the two do you pick:
Change the structure and mechanics of the game. (vs)
Improve the time of the loading screen from 4s to 2.5s.
Prioritise ruthlessly. Omit anything that doesn’t directly lead to customer traction.

Step 3: If you have PMF, aggressively scale your product. (Growth problem)


Closing Thoughts

Whenever you see a successful startup, you see one that has reached product/market fit—and usually along the way screwed up all kinds of other things, from channel model to pipeline development strategy to marketing plan to press relations to compensation policies to the CEO sleeping with the venture capitalist. And the startup is still successful.
Conversely, you see a surprising number of really well-run startups that have all aspects of operations completely buttoned down, HR policies in place, great sales model, thoroughly thought-through marketing plan, great interview processes, outstanding catered food, 30" monitors for all the programmers, top tier VCs on the board—heading straight off a cliff due to not ever finding product/market fit.
Ironically, once a startup is successful, and you ask the founders what made it successful, they will usually cite all kinds of things that had nothing to do with it. People are terrible at understanding causation. But in almost every case, the cause was actually product/market fit.
Because, really, what else could it possibly be?
- Marc Andreessen
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