The Only Question That Matters: Do We Have Product-Market Fit?

ICYMI: Sharing my tweetstorm from yesterday, that probably should have been a blog post to begin with ??. For early stage companies, it's critical to prioritize clear product-market-fit above all else. COVID brings that sequencing back into focus.

1/ If it’s not glaringly obvious your company has product-market fit yet, with customers pulling the product from you, it very likely doesn’t.

2/ One of the most common mistakes is for companies to try and grow ARR, customer count, or “top of funnel” before the product is compelling and retaining. They’re pouring fuel on a leaky and inefficient engine.

3/ It’s hard and scary to admit that a product doesn’t have product-market fit yet. It’s much easier to focus on all the second-order issues. But nothing else matters until you have that (and of course, the initial product team to deliver it).

4/ The reality is that most startups don’t find it, and that’s the cause for their fatality.

5/ But it’s also not something that always happens overnight, or with every user group overnight. You won’t muddle your way to product-market fit without intellectual honesty within your team, and a plan, but you *can* grind away at it. Companies will often have to do this multiple times -- when they expand upmarket, to new verticals, when they launch new products.

6/ Go back to the classic Moore framework — who are your champion innovators and early adopters? If you don’t have them, “pushing” your product won’t succeed. Your early adopters have a different risk and need profile vs. the rest of the market. They will accept an “incomplete” product.

7/ There’s this dominant false narrative in Silicon Valley that genius, Jobsian founders just delivered a perfect, polished, market-disrupting V1 out of the box, and customers flock to it.

8/ A lot of people believe that Figma is the future now (I do!) — because their core insight around building a web-first, collaborative product feels like creation and teamwork magic.

9/ But outside of some early believers in the design community, it took a while. Many people’s reaction (for years!) was, “this isn’t at feature parity with Sketch or Adobe.”

10/ So first they served the believers. And there’s enormous gratitude toward that community.

11/ More early stories look like this than people realize. So I’m not saying don’t go get customers - but there’s a limit to the volume that is useful if you know the product isn’t there yet.

12/ Early momentum (that perfect ARR trajectory from 1m-4m-14m! The new hotness! Everyone in my portfolio is using it!) is so highly valued by the investing community because it’s so easy to see. The magic we look for happens before that. It can take a company 3 weeks or 3 years.

13/ Founders - momentum matters enormously. Access to capital, having a brand within an influential community, employer brand, being a strong default, those are real advantages.

14/ But the COVID-driven recession is a cold shower for companies who have raised a lot of money and are spending a lot of money on distribution with weak product-market fit, and it’s tough to make a great company that way. You can have false momentum.

15/ If you’re not there yet, consider it an advantage. Will be hard for anyone to get breakout momentum this next 6 months (barring selling into people’s crisis-driven needs, remote work etc.).

16/ Given that, keeping burn low until getting to that magic of the initial “click” with customers is a great business strategy.

17/ The more headcount you have outside of people directly working on finding product-market fit, the less time you have to find it. Maximize your chances.

18/ It’s really tough to scope a product to fit 1) what you can deliver with a two-pizza box team and 2) what is compelling for innovator customers. Very different from bigco product management.

19/ In b2b, you’re trying to balance “enough of the key differentiated value” and “enough coverage of the sales blockers.”

20/ We’re never going to invest in a SaaS company only because they got some standard enterprise request like “granular role based access control” right. That’s defensive, not offensive product management.

21/ So your job as a founder or early stage product exec is to be intellectually honest internally, find the *magic*, defer as best you can on “must do but non-differentiated,” avoid shortcuts that are very hard to fix later (architectural decisions, tech debt)...

22/ and to operate with extreme discipline on delivering with high velocity on the value hypotheses. Velocity and listening to customers are more often the ingredients of success than product “genius.”

23/ Listening is the most underrated skill in entrepreneurs. Your friend or customer saying “I like you, your team is credible, and I agree with the pain point and secular trends you are talking about,” is very different from “I want this product and I will use it today.”

24/ It is so much cheaper/easier to find that magic of early P-M fit for software  products than 5-10 years ago. AWS, APIs, web distribution, and empowered users ftw!

25/ COVID makes things tough, but it also clarifies customer and user conversations.

26/26 This is hard, this is fun. Todd McKinnon started Okta in 2008.

Oh yeah, and if you think you’ve found that magic — email me :)