Brad Feld published a very thought-provoking post about product-market fit (PMF) a few weeks ago:
The piece that really resonated with me was the list of the 4 key myths about product-market fit:
- Myth #1: Product market fit is always a discrete, big bang event
- Myth #2: It’s patently obvious when you have product market fit
- Myth #3: Once you achieve product market fit, you can’t lose it
- Myth #4: Once you have product-market fit, you don’t have to sweat the competition
I believe we’re both in agreement on one other thing: companies tend to “claim victory” on finding product-market fit prematurely, but this is when Brad’s view and mine start to diverge.
Brad lays out a monthly-recurring-revenue(MRR)-based milestones, outlining when you only *think* you’ve found PMF, when you’ve actually found it, and when myths #3 and #4 start to kick-in.
Reflecting on the market the company I currently work for is in, automatically caused some red flags to pop up in my head. In our industry, a single, “small” transaction may yield $50K in MRR. So 3-4 clients can easily get us to Brad’s “PMF sweet-spot” but I doubt it would have made sense to claim PMF victory then. Granted our case is extreme, but it may shed some light on more industry-agnostic milestones. Looking at # of users, clearly takes us in the wrong direction, in ways far beyond the different-users-pay-for-different-product-plans argument that was discussed in the comments to Brad’s post. Perhaps a more generic way to define these milestones is as a percentage of the total-addressable-market (TAM) for that product. Without going into a lengthy debate about how to go about assessing it, I suspect this is what was implicitly set Brad’s MRR thresholds.
The part of the blog that really irked me was the discussion on valuations through a hyper-growth-centric lens. But I’ll leave opening the “growth obsession” pandora box for a different post and share some parting thoughts about PMF instead:
A good analogy for finding PMF comes from Physics: finding resonance with your customers and getting on the same wavelength as them. Note that this can be accomplished both by changing your product and by changing your customers (market pivot). Changing your wavelength is a gradual, continuous process (anti-myth #1), you know when you’re close to being on the same wavelength but it’s hard to tell if you’re exactly there (anti-myth #2). Since both your product and your customers constantly change (wavelength), it’s easy to get out of sync again (anti-myth #3) and it’s clear that your actions don’t prevent others from getting on the same wavelength (anti-myth #4).
Perhaps another good analogy from the same discipline is thinking about PMF as an unstable equilibrium often illustrated as a ball at the top of a hill (as opposed to a stable equilibrium illustrated as a ball at the bottom of a valley). You first need to roll the ball up the hill (find PMF), but then every little nudge can get easily get it rolling down the hill again.