How To Find Product Market Fit

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My notes on this lecture by David Rusenko on How To Find Product Market Fit.

General thoughts

David Rusenko gives you an overview of everything you need to do to achieve Product Market Fit.

The journey

1. February 2006: 0 months on weebly. The first line of code was written.
2. 8 months later: 36 users, still no official launch.
3. November 2006: Applied and accepted to Y Combinator.
4. 11 months later: Moved to SFO worked on Weebly day and night.
5. 14 months later: User graph was declining, no Product Market Fit yet.
6. Pre seed investment 14 months in.
7. 20 months in and they found Product Market Fit.
8. 4 years in and the graph shown looks like a Hockey stick and they kept growing.

What is product market fit?

Make something people want < Make something a lot of people want

Stages of a company

1. Idea

2. Prototype

3. Launch

4. Traction

5. Monetization

6. Growth

Initial product market fit search happens between idea and traction. This is the hardest part to achieve and it almost always kills companies when they are unable to achieve it.

Refined product market fit when on monetization and growth phase. It’s important to remember that after achieving it you need to refine it while also growing.

What are the hardest things at a startup

1. Finding product market fit (most companies can’t find it).
2. Hiring and building a world class team.
3. Making money.
4. Later, how to build an organization that scalable and repeatedly launches great products.

The best companies create a market

How can you create a market?

Find a hidden need

if it was obvious then everyone would be doing it. What are you a substitute for, what need are you serving better? what job are you being hired for?

Where are you getting pulled? where are people hacking the thing you got and using it in a way you didn’t intend? Double down on that.

Build a remarkable product

1. have a great idea
2. talk to customers
3. ???
4. PROFIT!

What is step 3?

1. Talk to customers. Develop a market thesis.
2. Listen to their problems not their solutions.
3. Rapid prototyping and user testing.
4. Build the solution to their problems
5. test the solution with them.
6. did it work? If false Go back to step 1.
7. By the time you’ve reached this step you’ve likely looped ~ 27 times.

2. Listen to their problems not their solutions

“Some people say, “Give the customers what they want.” But that’s not my approach. […] I think Henry Ford once said, “If i’d asked customers what they wanted, they would have told me, ‘A faster horse!’ People don’t know what they want until you show it to them. That’s why I never rely on market research.”

• Steve Jobs

Talk to customers and understand the pain. No amazing product was ever created in a vacuum and delivered perfectly on V1. listen to their proposed solutions but dig deeper. What underlying job are they trying to accomplish?

3. Rapid prototyping and user testing

• Building a fully functional product is the most expensive way to test your hypothesis.
• Focus on getting to a functional prototype as quickly as possible that you can get in front of users.
• Don’t worry about scaling, monetizing, etc. This will come later.
• Expect it will take 10x the number of expected iterations:
  • Keep your burn rate low.
  • Build a team that do this quickly (this is what makes outsourcing difficult in the early days).

build a Functional prototype very FAST. Don’t worry about scaling don’t worry about monetization initial make sure product is working for people

5. Test the solution with them

Two important rules:

1. Make sure you are talking to your target customers (but be open to changing your view on who those are).
2. Don’t overthink it. Anecdotal is OK.

Most helpful tools in the early days:

1. Customer interviews (5-10 needed).
2. UX testing sessions (3-5 needed).
3. Metrics (You’ll never have as large a sample size as you’d like - beware of telling too many stories with too little data).

UX Testing sessions are simple & invaluable:

1. Get someone to use your app/service in front of you.
2. Encourage them to give open and honest feedback.
3. Ask them to perform a task (you are not allowed to touch the phone/keyboard).
4. DO NOT SAY OR DO ANYTHING.
5. Watch in extreme agony as they struggle to figure it out.

Before you launch anything do ux testing sessions. You only need 3-5 testing sessions to uncover the most critical issues.

When should we launch

Minimum Remarkable Product > Minimum Viable Product

The least you can build to be remarkable.

“Launch when your product is better than what’s out there” - Paul Bucheit

Prioritizing

1. Only one thing matters.
   1. Focus only on the things that get you to your next milestone (here that’s product market fit).
2. Optimize for learning.
   1. Most people prioritize by creating a list sorted by cost x benefit. Instead, ask yourself “What is our biggest unknown that would rewrite our priority list?” Don’t focus on anything else: conferences, blogposts, news, don’t do anything that won’t get you to your next milestone.

How do I know when I achieved product market fit ?

Three key metrics

1. Returning usage (people who come back within a 1 day, 3, 7, 30 retention).
2. NPS (Should be > 50).
3. Paying customers renewal rates.

Sidebar: Renewal rates (liked a lot better) is defined as the percentage of eligible subscriptions who renew, which is cohort-based. Churn is typically defined as the number of churned customers / total customers, which is not cohort based. Churn, while easier to measure can be deceiving especially if your growth is accelerating (it will look lower than it actually is).

Metrics not included

1. Signups
   1. Signups are more of a reflection of market fit than product market fit. You’ve identified something a lot of people want - but did you build the right solution?
2. Conversion Rate.
   1. Conversion rate improvements can often be tactical and unrelated to product market fit. All conversion rates start low.

How does it feel?

You’ll know when you achieved it when customers start beating a path to your door.

When you don’t have it, everything feels hard. When you do have it, everything is easy and every move you make works - You’re a genius.

(ps: the reality is somewhere in between)

Beyond product market fit

Three key things a startup needs to do

1. Product that is meaningfully better than alternatives.
2. How to acquire customers in a differentiated way that scales.
3. Invent your business model without killing your traction.

What’s needed to build $100M+

Scaling the team

Don’t scale team past ~20 before product market fit

• A moderate amount of micromanagement is healthy at this stage.
• Why is it good? You should be involved in everything important and know all there is to know about your customers/product/market/channels.
• This helps you make fast & high quality decisions and is a huge advantage over larger orgs where this is distributed across many roles.
• Don’t delegate anything important — yet!

Scale aggressively once you get to PMF.

Sidebar: Building a Brand

It’s not worth it to spend too much time thinking about but its worth it to spend some time thinking about it.

• Great brands are built on a core consumer insight — ideally the same one your product is built on.
• Extremely powerful if you can identify and articulate this insight early on to form the basis of all of your communications & marketing.
• More than anything else, this is the foundation of your brand.

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