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Whether you’re a seasoned product manager or just getting started in product management, you’ve probably heard the term product-market fit. The idea was popularized in 2007 by Marc Andreessen in his post “the only thing that matters“. In this article, Marc credits Andy Rachleff, co-founder of Benchmark Capital, for inventing the concept and suggests that you can always feel when product/market fit (PMF) isn’t happening and when it is happening.
When customers aren’t getting value. And when users aren’t telling their friends. And when sales cycles take too long. And when users just aren’t using the product. Well, you know you don’t have product/market fit. But when the opposite is true. And you can’t keep up with customer feedback. And when you can’t scale fast enough. And when people are selling for you. That’s when you know you’ve got something that’s working.
To some extent, it’s obvious. But it’s also subtle and often opaque to the founders and product teams who seek it.
What is Product-Market Fit?
Today, the term is nearly ubiquitous. Startups, tech companies, venture capitalists, and product teams live to achieve the elusive product/market fit. So what’s the actual definition?
Put simply, it means that you have identified a real market need and are delivering a product or service that thoroughly meets that need. But it’s more nuanced than that. Many successful entrepreneurs have written extensively about what product/market fit is and how to achieve it. Josh Porter, of Rocket Insights, suggests that product/market fit is achieved when your customers sell your product for you.
Paul Graham, co-founder of Y-combinator, says it’s just making something people actually want. But I particularly like Halloway co-founder, Andy Sparks, definition. He says that achieving PMF is not binary — it’s not something you don’t have one day and you do the next.
Instead, Andy suggests that achieving PMF is a “continuum of traction” meaning that a product will go through a series of stages along the way to absolute product-market fit.
So if finding PMF requires an ongoing effort to move from absolute clarity that you don’t have it, to absolute certainty that you do have it, then you’re going to need to do a lot of work to get from A to B to C and hopefully Z. And that’s what this article is about. Sort of.
I already know from personal experience that finding product-market fit takes a ton of iteration and effort from everyone in the organization, particularly the CEO or founder. I know because I’ve achieved it and I’ve failed at it; more than once. This is a story about finding product-market fit when everything is working against you, including the boss.
On Building a Product People Want
Years ago, 1999 to be exact, I was coming off the pain and frustration of my first failed startup. I didn’t know anything about anything then. I didn’t know how to build software. I didn’t know how to hire employees. I didn’t know how to raise money. And I certainly didn’t know how to make a product that met a real and significant market need.
So I did what many entrepreneurs do after a failure, I started consulting. First, it was just me working for random companies, helping them define and build software. It was a great place to learn about product-market fit. The client had a problem, they understood the problem well, they explained the problem to me and I designed software to solve that problem. I wasn’t building software that was valuable to anyone other than the client, at first.
But one day, after a few years building this software-for-hire dev shop type company, I realized two important things:
- My clients were very similar and operated in similar markets
- I was building nearly the same solution for each of them
This was a powerful realization because it led me to launch my first company where I actually achieved the elusive product-market fit.
Parsa Saljoughian, in his article 7 Lessons from Andy Rachleff on Product-Market Fit, suggests that successful startups often begin with a product then find a market. For me, it was the opposite. In 2003 I was consulting for a lot of mortgage and financial services businesses. This was at the height of the sub-prime mortgage boom. These companies all had the same problem. They didn’t know how to manage a high volume of leads with an unsophisticated sales force.
My solution was a web-based, lead management software, designed specifically for mortgage companies. The mortgage market was big enough to create a basecamp and the product was flexible enough to scale beyond that market. And while I still had no conception of product-market fit, we were able to get there.
Customers couldn’t function without our software and word of mouth lead to tons of new business. Thinking back, so many things went right for us. But while I couldn’t articulate our strategy to find PMF, we did have one.
I relentlessly talked with customers and became experts in their business. We iterated fast and tested features weekly, sometimes daily, until we had a product that so incredibly met the market need that at one point in 2007 we were literally printing money.
There is a lot more to the Veolicify story of course. In 2008 we nearly closed the doors when the mortgage crisis hit. We had many ups and downs but finally did find our way to an exit, selling the company in 2017 for $128 million.
On Finding Product-Market Fit When the Cards Are Stacked Against You
What’s important about the Velocify story is that I learned what product-market fit is, how difficult it is to achieve, and how easy it is to lose it. Since then I’ve been able to apply these skills to future startups. And as important as it is to know what it takes to get PMF, there are so many things working against you when building a business that success is not guaranteed. To that end, I’ve had wins and losses throughout my career as a product-focused founder.
Two years ago I decided to take a break from building startups and help other founders with their companies. I became a sort of Head of Product for hire. Most of my career I’ve worked for myself. And I have to say there are some great benefits of working for someone else. For one, it’s less stressful. Sure, I want the business to work and my stock options to pan out, but I don’t lose much sleep over it.
The problem is that when I’m working for someone else, no matter how hard I push the product-market fit agenda, if the founders aren’t always with me — then I’m stuck. And as any product manager will tell you, being stuck sucks — and I do lose sleep over that.
Misunderstanding Product-Market Fit
As a founder, whether you lead product or run sales, it’s critical that you understand the steps and effort required to find PMF. If you don’t truly appreciate the monumental effort it takes to make a product that people can’t live without you will almost certainly fail. In my case, working for founders that don’t get this, is insanely frustrating.
Moreover, it’s all too common that the issue goes deeper. Founders often get wrapped up in the business of building a business and forget that until they have product-market fit, they are actually in the business of finding product-market fit. That’s all that matters.
You might also be interested in: Never Forget: Products of the 1990s and Early 2000s
Believing You Found Product-Market Fit When You Haven’t Even Begun
Another common issue I’ve noticed working as a product lead for other founders is that they often think they nailed PMF when it’s abundantly clear that they haven’t. This occurs for several reasons, but I’ve most frequently seen it because they receive false positives from investors and partners. PMF is about building something that the actual end-user needs and wants. And it’s literally impossible to make a product for a group of users but not actually ever talk to those users.
“Probably the biggest cause of failure is not making something people want. The biggest reason people do that is that they don’t pay enough attention to the user.”Paul Graham
This problem is compounded when a company has multiple customers. This is most commonly seen in consumer tech products where the actual user of the service (customer A) wants one thing and the companies that pay for the service (usually advertisers) want another.
Take Facebook for example. The actual primary customer of Facebook is the individual consumers that create content on the platform. But the source of revenue for Facebook comes from the businesses and advertisers that pay to reach those customers.
In the early days, Facebook didn’t care one bit about what advertisers wanted. They worked to achieve product-market fit by building things that consumers wanted. Eventually, they grew to a point where they built products and services for the businesses that advertised on the platform. But make no mistake, none of that mattered until Facebook had a sizable audience to advertise to.
I’ve observed many entrepreneurs and founders focus too much and too early on what advertisers want and not enough, or none, on what consumers want. It’s easy to fall into this trap because it feels logical to listen to the customers that will pay you. But here’s what happens.
When you pitch an advertiser on your platform they initially assume you have a large user base that they want to reach. So they are likely to focus the conversation around all the cool features and functionality they are going to want when they advertise to those users. But eventually, they’re going to ask, where are the users. At best they pay once and attrit when they realize nobody is there to see their ads.
So all those cool features like self-service advertising or carousel ad units or AI-driven product recommendations don’t make one damn bit of difference if nobody is looking at them. You must be disciplined and build first for the actual user of your product and second for whoever is going to pay for the right to reach those users on your product.
Keeping The Team Focused on Finding Product-Market Fit
While the effort to find PMF is founder-led, it’s up to the entire team to get behind it. I’ve seen too frequently when founders succumb to playing company and stop working on meeting the needs of a specific market, the entire organization becomes impaired. The culture of the company shifts from inquisitive and iterative to certain and short-sighted. To combat this I’ve had to stick my neck out with some unpopular opinions. In one case I completely lost my cool and found myself in a shouting match with a founder.
The most effective approach I’ve found to keeping the train on the track is using data to demonstrate a lack of product-market fit. And even though Marc Andreessen says it should be obvious when you have it and when you don’t, sometimes you have to punch them in the face with the truth. Showing your team a dismal bar graph or unflattering spreadsheet might be the only way to get them to see it’s not working.
When All Else Fails, Go Back to Doing Your Own Thing
Sometimes you just can’t get through to them. Startups fail every day because founders can’t get out of their own way. Finding product-market fit is hard enough, do yourself a favor and at least focus on that and be honest with yourself when you haven’t achieved it yet. But if you find yourself working for someone else, and you’re doing your best to keep everyone focused on building something customers really want, but your boss isn’t buying it, then maybe it’s time to do your own thing.
In January I started feeling that way. And I knew it was time to go off on my own again. This is my process. I build. I fail or I succeed. I pause and work for someone else. Then I go back to building for myself again.
I’m actually in the middle of a challenging startup situation myself; not because I’m fooling myself about having found PMF, but because we haven’t found it yet. Like many founders, I started by addressing my own pain point.
I have never been satisfied with the screenshot and annotation tools in the market. But this is also a need I have daily and cannot function without a solution. In talking with other product professionals and entrepreneurs like myself, I found that many agreed.
My value hypothesis is that while the core need: take a screenshot and add markup was somewhat solved, there is a complementary set of needs that are simply not addressed current product offerings. At Markup Hero we’re trying to find product-market fit in a market that isn’t actually in that much pain. This is a big challenge. Moreover, the market for annotation tools is large but also fragmented.
Everyone from product managers to customer service reps, salespeople to content marketers, and just about every other role have the need to screenshot and annotate files. That makes focusing on a single vertical difficult. And even as I write this article, if I’m being honest with myself, we need to focus on a single market that does in fact have the pain and maybe haven’t yet discovered the range of solutions out there (even tho Markup Hero is way more awesome 😉).
One thing I know for sure is that the most important skill one needs to achieve PMF is listening. Listen to users. Get good at hearing the signal from the noise. Opportunities tend to present themselves not overtly but obscured in the cacophony of user feedback. I’ve gotten pretty good at it.
And one thing I’m hearing is that teachers like our product. I’m learning that teachers are technologically underserved and generally slower to adopt. They are starting to find value in our product and telling their colleagues. I’m struggling to connect and talk with them, but they could be the market that is just in a little more pain than the others. We shall see.
Finding product-market fit is hard hard hard. The chances of success are sadly low. But your odds are dramatically higher if you focus your entire effort on achieving the goal and spend little time on anything else. If you find yourself working for someone else, and they can’t seem to get behind your product-market fit strategy, then break out the data and bang them on their head with it.
Do whatever is required to get there. Or take the plunge and start something yourself. There will never be a shortage of consumers in pain and a market in need.
Meet The Author
Jeff Solomon is currently co-founder of Markup Hero, a screenshot and annotation tool for Mac, Windows and Web. Jeff is a 5x founder of both bootstrapped and venture backed companies, with several exits under his belt. He is a product and marketing focused founder with deep experience in SaaS. Jeff also teaches entrepreneurship to high school students and is an active advisor on platforms like Clarity.fm.