What is Product / Market Fit?

Disclaimer Personal sharing and experience of a startup founder in China. Information in here is my POV. Take it with a pinch of salt. If you learn something, share with me next time. If u manage to exit your startup, buy me a coffee. If u fail, look for them below. Credits to all information at their respective creators, Sean Ellis, Andrew Chen, Marc Andreessen, Brian Balfour, Alex Schultz, Chamath. (:

Why and what’s your objective? What’s your frustrations? Not sure where to focus? How to keep the customers? How to grow the product/business? What’s the growth strategy? How to raise $ or make $ now? Need to pivot? Need a new market? Too many competitors? Bla bla bla…

Focal Point – The Need… The need to feed / survive as a company The need to maintain and grow the team The need to find the right customers to listen to… The need to find the right trend, the big market, the huge problem The desire to succeed (or NOT to fail and face your friends/family!)

BUT!!! What’s next? Easy as A B C! 1. Make $ as a business or raise $ (any living soul if you need to) 2. Solve a BIG problem (or fundamental need) 3. Preferably a growing trend... 4. Make the product. Not a business plan. (at least a working prototype!) 5. Bootstrap it. Apply to YC (or Chinaccelerator!). Crowdfund it. 6. Grow it. Scale it. Sell it off. IPO. BUT!!!

How do I know I’m going the right way? 1. The usual process. Listen to your early adopters and customers. Customer Development Framework – Steve Blank LEAN startup process – Eric Ries 2. Measure the right stuff for your product. 1. Set the right KPI at the right time. 3. In order to get to,… Product / Market FIT!

So, what is P/M Fit? According to Marc Andreessen (VC and Founder of Netscape): “The only thing that matters is getting to product/market fit.” According to Alex Schultz (VP Growth Facebook): “Retention is the single most important thing for growth.”

Product/market fit means being in a good market with a product that can satisfy that market. 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. Lots of startups fail before product/market fit ever happens.

So, how do I measure it? Well, apparently you can: Leading Indicator Survey Net Promoter Score (NPS) Retention Curve Trifecta

Measurement 1: Leading Indicator Survey “How would you feel if you could no longer use [product]?” The measure of success is if 40% or more respond “Very Disappointed.” Tool: Product/Market Fit Survey

Measurement 2: NPS Net Promoter Score is a method to measure customer happiness and has been used by many companies as an indicator of growth. Tool: Wootric *While surveys are useful, I would much rather take bets on what people are doing, not what they say they would do or are doing.

Measurement 3: Retention Curve

Measurement 4: Trifecta The story of SNAPCHAT. About a few months after launch SnapChat had about 200K downloads, 100K daily active users, and those 100K DAU’s were sending on average 1 Million pictures a day (10/DAU). Product/market fit? Hell yes!!! 1. Top Line Growth (Snapchat - 200K downloads) 2. Retention (50% of downloads were active Daily) 3. Meaningful Usage (The users just weren’t coming back daily, but there were taking a meaningful action - sending 10 pictures a day on average)

Benchmark of P/M fit: Andrew Chen Consumer products: Usage 3 out of every 7 days Organic growth of 100s of signups/day 30% users are active the day after signup Clear path to 100,000 users SaaS products: 5% conversion rate from free-to-paid 3X CPA to LTV ratio <2% monthly churn rate Clear path to $100k MRR

In short: Different strategies at different stage

References: 1. Growth and P/M Fit http://startupclass.samaltman.com/courses/lec06/ - Alex Shultz (VP Facebook) https://medium.com/how-to-start-a-startup/24-quotes-from-alex-schultz-on-startup-growth- d3a846544937#.kwehoxr5t https://www.youtube.com/watch?v=raIUQP71SBU - Chamath (Facebook) 2. P/M Fit articles http://www.coelevate.com/essays/product-market-fit http://www.coelevate.com/essays/traction-vs-growth https://medium.com/evergreen-business-weekly/product-market-fit-what-it-really-means-how- to-measure-it-and-where-to-find-it-70e746be907b#.wtxq6dj5d 3. Andrew Chen – P/M Fit http://1g1uem2nc4jy1gzhn943ro0gz50.wpengine.netdna-cdn.com/wp- content/uploads/2013/10/andrewchen_zerototraction.pdf

Recap: Why? (make $ or fast growth?) How do you know? (which path to take? Retention, traction, growth…) Measurements of P/M fit… Leading Indicator Survey (40% very disappointed without your product) NPS scores (0-10 happiness level) Retention Curve (Cohort Analysis, after 28 days) Trifecta (Growth, Retention, Meaningful Usage)

Last but not least: Ben Horowitz: The big thing is to focus all of your energy on is product/market fit. Get to a product that people are adopting very quickly, or that you can reliably sell repeatedly. To some extent, everything else — culture, management, etc — is secondary. Don’t take your eyes off the prize. Buy me a coffee! Wechat: VictorLeeJW Email: Victor.Lee@olifun.com Founder of Olifun: The Happy Hour App