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7 cogent signs you’ve got a product/market fit

  • Tech
  • Customer retention
  • Acquisition

7 cogent signs you’ve got a product/market fit

Lenny Rachitsky
Story by
Lenny Rachitsky

The only thing that affairs is accepting to product/market fit. — Marc Andreessen

I’ve noticed that most people (including myself) have only a vague grasp on what Product/Market Fit absolutely is. And even fewer people are going after it in a analytical way. For my own annual if annihilation else, last year I began accession the best descriptions of PMF that I came across from Twitter, podcasts, books, and blog posts.

Below, I’ve put calm my admired (and most actionable) definitions of product/market fit, broken up into pre-product and post-product, and sorted from the most accurate to least concrete. I’ve also added my admired guides for  PMF. If you’ve come across annihilation better, or have gone through this adventure yourself and have a story to share, I’d love to hear it.

What to look for pre-product

1. Visible excitement

“The real metric for both chump apps and action is — do someone’s pupils dilate when they use your stuff? Whether you’re handing them a demo or if you drew commodity on the whiteboard. Do they say, ‘You’re not leaving’ or ‘Where have you been all of my life?’” — Steve Blank (at 1:30m)

“You have very strong chump feedback, even from a small group of people. For example, at Color early on, we were getting accurate love letters from customers.” — Elad Gil

2. People are accommodating to pay for it now

“Are people accommodating to pay you for this product? Ask them this directly. Even try to get them to pay you now (i.e. absolutely send them an invoice) to get early access to the product. Nothing will be a better signal of absorption and PMF if you can get people to put down money before you have a product. Try this even if it’s a chump app that you won’t charge for — it’ll show you how much value you’re creating in people’s lives.”

What to look for post-product

1. Assimilation – users stick around

“Plot the % active users over time (for assorted cohorts) to create a assimilation curve. If it flattens off at some point, you have apparently found product/market fit for some market or audience. — Brian Balfour

“Do a cohort analysis. Look at a group of people that tried your artefact in a period of time (e.g. during one month). Then look at how many of those people abide to use your artefact later (e.g. 12 months later). You will have a fairly deep declivity on the first month, that’s OK. What you want to know is, does it abrade somewhere? If it flattens, that means there is a group of barter that are award value in your product, which means you have PMF, at least for those customers. The adeptness to access users at less than the amount of money you make from that curve represents your true product/market fit. — Casey Winters

“Long term cohort assimilation is the best metric for free if there is artefact market fit. Once you have a few cohorts that level off at a vertical-specific number, then you’ve accomplished artefact market fit!

Different types of accessories have altered points of artefact market fit, so it’s important to find the assimilation rate of some commensurable accessories that have been able to decidedly grow to find the right criterion for you.” — Jeff Chang

2. Surveys – users say they’d be very aghast if your artefact went away

“Survey your users and ask them ‘How would you feel if you could no longer use the product?’ and admeasurement the percent who answer ‘very disappointed.’ If that allotment is over 40%, you have PMF.” — Sean Ellis / Rahul Vohra

“For action businesses, at the end of your free trial, you should pull the trial. If the chump doesn’t scream, you don’t have PMF. Because if they aren’t going to buy it at the end of the 30 days, they aren’t desperate. And if they aren’t desperate, you don’t have PMF.” — Doug Leone / Andy Rachleff

3. Exponential amoebic growth

“For chump apps, you start to experience ‘exponential amoebic growth’, driven by word of mouth.” — Andy Rachleff (starting at 3:00)

“The only way you know if you’ve built what barter want is because they are using it in an atomic and annihilative way. If you are not accepting atomic usage you are not architecture what barter want, or there aren’t that many barter which means you don’t have a big business. — Michael Seibel

“I think the right antecedent metric is ‘do any users love our artefact so much they spontaneously tell other people to use it?’ — Sam Altman

“Organic growth is the key indicator of product/market fit. People love to seem smart and cool. They want to acclaim commodity great to their friends. They don’t need a share button to do it. If they love your product, they will tell people about it. Ideally more than 50% of your new accounts come from direct or amoebic traffic.” — Merci Victoria Grace

“If you’re a SaaS aggregation and you have major brands award and using you organically, and paying for your product, that’s a sign of PMF. Examples of that would be PagerDuty, which had Apple as an early customer. Zeplin, which had Facebook using them very early. Airtable has all sorts of brands that have adopted it.” — Elad Gil

4. Cost-efficient growth

Burn Multiple = Net Burn / Net New ARR

The higher the Burn Multiple, the more the startup is afire to accomplish each unit of growth. The lower the Burn Multiple, the more able the growth is.

This is a Admeasurement of Product-Market Fit. The startup that generates $1M actor in ARR by afire $2M is more absorbing than one that does it by afire $5M. In the former case, it appears that the market is affairs artefact out of the startup, admitting in the latter case, the startup is blame its artefact onto the market. VCs will make inferences about product-market fit accordingly. — David Sacks

“For action businesses, look at the addition margin of a sales team, disconnected by the total cost to field the sales team… A sales team may cost on the order of $500k – $600k. When a aggregation gets to a sales yield of greater than 1.0, that’s how you know you’ve hit PMF.” — Andy Rachleff (starting at 4:30)

5. CAC < LTV

“You have found product/market fit when you can repeatably access barter for a lower cost than what they are worth to you.” — Elizabeth Yin

“Here’s my simple analogue of product/market fit: The value of each user is greater than the cost of bringing them into the product. It means there are enough barter out there and you can calmly bring them in” — Nikhyl Singhal

“You have PMF when you see assimilation that creates enough $ or content/virality to drive acceptable acquisition.” — Casey Winters

6. Barter clamor for your product

“You can always feel product/market fit when it’s happening. The barter are buying the artefact just as fast as you can make it — or usage is growing just as fast as you can add more servers. Money from barter is piling up in your aggregation blockage account. You’re hiring sales and chump abutment 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 accepting administrator 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.” — Marc Andreessen

“Are people avaricious the artefact out of your hands saying I want it, or I’m using it, or I’m buying it, or I’m downloading it, or I’m giving you my email address.” — Steve Blank

“Founding a startup is chief to take on the burden of Sisyphus: blame a bedrock up a hill.

Pushing a boulder: don’t have product/market fit. Chasing a boulder: have product/market fit. Both are very demanding, but feel absolutely different. If you’re still blame the boulder, you don’t have it yet.” — Emmett Shear

7. People are using it even when it’s broken

“If your artefact is broken and people are still using it, if you have high assimilation with a broken product, that’s a clear sign you have PMF. When Cheep was consistently going down in the fail whale days, and no one moved off of Twitter. That was a sign of raw market adoption.” — Elad Gil

“A great admeasurement of product/market fit, decidedly in consumer, is when a aggregation is growing bound admitting poor beheading and management.” — Brett Berson

“When the barter want your accessories so badly that you can screw aggregate up and still succeed.” — Don Valentine

Guides for award product/market fit:

  1. The Lean Startup Playbook for Achieving Product-Market Fit by Eric Ries
  2. The Never-Ending Road To Artefact Market Fit by Brian Balfour
  3. The Only Thing That Matters by Marc Andreesen
  4. How To Find Artefact Market Fit by David Rusenko
  5. How Superhuman Built an Engine to Find Product/Market Fit by Rahul Vohra

Three bonus tips:

Lastly…

“Product/market fit isn’t a one-time, detached point in time that announces itself with trumpet fanfares. Competitors arrive, markets articulation and evolve, and stuff happens—all of which often make it hard to know you’re headed in the right administration before jamming down on the accelerator.”  Ben Horowitz

Published June 26, 2020 — 14:00 UTC

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