Determining the equation of a Product/Market Fit
Marc Andreessen, partner at VC firm Andreessen Horowitz, insists that a startup’s success ultimately rests on finding alignment between a healthy market and an in-demand product:
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“In a great market — a market with lots of real potential customers — the market pulls product out of the startup.
When you get right down to it, you can ignore almost everything else besides the market.
A successful startup is thus one that has reached product/market fit.
You see a surprising number of startups that have nearly all aspects of operations completely buttoned down and yet they’re actually heading straight off a cliff due to not ever finding product/market.”
Marc’s essential claim here, then, is that founders are destined to fail if they don’t perform their due diligence by ensuring that a genuine product/market fit develops and flourishes over time.
Growth hacker Sean Ellis argues that once a startup develops a working prototype and subjects it to beta testing, the business can begin measuring its product/market fit by asking its beta users to answer the following simple yet important survey questions:
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How would you feel if you could no longer use product x?
Very disappointed
Somewhat disappointed
Not disappointed (it isn’t really that useful)
N/A — I no longer use product x
Ellis’ famous survey, which has been tested on hundreds of startups, is based on his belief that:
“The best way to think about product market fit is that the product should be a ‘must have’. People have too many choices today to settle for a nice-to-have. So what makes something a must have? Essentially it needs to be both valuable and difficult to replace. The various survey questions are intended to function as leading indicators of it being a ‘must have’.”
Essentially, if more than 40% of your beta testers indicate that they’d be “very disappointed” if they were unable to continue using your product then, arguably, your startup has achieved a solid product/market fit.
If you’d like to learn more about the thinking behind, and the usefulness of, Ellis’ test then consider watching the following on-stage talk delivered by Ellis himself.
- Sean Ellis- Growing Your Startup- Pioneers festival 2012
At this point, having successfully traversed the first 3 or 4 key stages of building a startup, it’s time to move onto developing economies of scale, generating greater revenue, and expanding your operations.
As we’ve already provided lots of detailed and comprehensive content on different methods for scaling startups, We encourage you to follow The Founder's Journal to continue reading about this topic.
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