The Search for Product-Market Fit
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How to achieve product-market fit by running the experiments that matter most and building the right organization to run those experiments effectively.
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The Search for Product-Market Fit
- 1. CONFIDENTIAL PRESENTATION | PAGE1 The Search for Product- Market Fit Jeff Bussgang General Partner, Flybridge Capital Senior Lecturer, Harvard Business School May 22, 2019
- 2. CONFIDENTIAL PRESENTATION | PAGE2 Concepts • Startups as experimentation machines • Deconstruct “Product Market Fit” (PMF), plus: – Lean Start-Up Theory – Customer Development Process • Help you devise your approach to achieving PMF and avoid wasting a lot of money • The metrics that matter most
- 3. CONFIDENTIAL PRESENTATION | PAGE3 Taking A Page From Experimental Design
- 4. CONFIDENTIAL PRESENTATION | PAGE4 Startup = Experimentation Machine CVP Experiments GTM Experiments BM/CF Experiments Which Experiments Should I Run? CVP = Consumer Value Proposition GTM = Go To Market BM/CF = Business Model / Cash Flow Source: HBS Launching Tech Ventures Course
- 5. CONFIDENTIAL PRESENTATION | PAGE5 Startup = Experimentation Machine CVP Experiments GTM Experiments BM/CF Experiments What Organization Should I Build? GrowthProduct Sales Biz Dev
- 6. CONFIDENTIAL PRESENTATION | PAGE6 CVP Experiments GTM Experiments BM/CF Experiments Product Machine Growth Machine Business Machine What Machine Should I Focus My (Very) Scare Resources On Building? Startup = Experimentation Machine
- 7. CONFIDENTIAL PRESENTATION | PAGE7 Experiments Drill Down CVP Experiments GTM Experiments BM/CF Experiments WHO HYPOS WHAT HYPOS HOW HYPOS SALES MODEL HYPOS CHANNEL CHOICE HYPOS PARTNER HYPOS GROWTH HYPOS MONETIZATION HYPOS PRICING HYPOS CVP = Consumer Value Proposition GTM = Go To Market BM = Business Model Source: HBS Launching Tech Ventures Course
- 8. CONFIDENTIAL PRESENTATION | PAGE8 Where are You? Before Product-Market Fit: Search & Validation • Lean startup approach • Hunch-driven hypotheses • Minimum viable product (MVP) • Product-centric culture; informal roles • Customer development process • Pivoting • Bootstrapping/pre-seed • Small, founding team • Founder selling - early adopters • Early in sales learning curve After Product-Market Fit: Scaling & Optimization • Building a robust, feature-rich product • Crossing the chasm • Metrics, analytics, funnels • Designing for virality & scalability • Scaling the team; more formal roles • Challenges with corporate partnerships • Building a brand • Scaling a sales force
- 9. CONFIDENTIAL PRESENTATION | PAGE9 Lean Startup Principles • No idea survives first customer contact, so get out of the building ASAP to test ideas • Goal: validation of business model hypotheses, based on rigorous experiments and clear metrics • Minimum viable product (MVP): smallest set of features/marketing initiatives that delivers the most validated learning • Rapidly pivot your MVP/business model until you have validation and product-market fit (PMF) • Don’t scale until you have achieved PMF Source: Eric Ries
- 10. CONFIDENTIAL PRESENTATION | PAGE10 “Lessons Learned” Drives Funding Concept Business Plan/Canvas Lessons Learned Series A Do this first instead of fund raising And perhaps even before writing code (or raise seed round to test hypotheses…rigorously) Test Hypotheses Source: Steve Blank
- 11. CONFIDENTIAL PRESENTATION | PAGE11 INBOUND15 Sales team hitting quota Sales cycles short 40% test – if product disappeared Product usage high, growing LTV : CAC > 3 MRR growing > 10% MoM Churn < 30% / year NPS > 20 Criteria for Product Market Fit
- 12. CONFIDENTIAL PRESENTATION | PAGE12 Leading Thinkers/Books/Blogs • Geoffrey Moore: Crossing the Chasm (read this!) • Steve Blank: Customer Development Process (read Four Steps to the Epiphany) • Eric Ries: Lean Startups (read this too!) • Marty Cagan: Silicon Valley Product Group (great book and blog) • Sean Ellis: Hacking Growth (great book)
- 13. CONFIDENTIAL PRESENTATION | PAGE13 The Search for Product- Market Fit Jeff Bussgang General Partner, Flybridge Capital Senior Lecturer, Harvard Business School May 22, 2019