What is product-market fit — and what is it not?

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What is product-market fit — and what is it not?
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As an early-stage founder, you might be looking for product-market fit in all the wrong places.

Anish Acharya, general partner at Andreessen Horowitz, joined us recently to moderate a conversation about the path toward achieving product-market fit (PMF). Rahul Vohra, founder and CEO of Superhuman, and Jean Yang, founder and CEO of Akita Software, joined Mercury’s own co-founder and CEO, Immad Akhund, to share their hard-won insights. Anish challenged the founders to pinpoint signals of that elusive destination every successful startup must arrive at — product-market fit — and recall their own paths and detours along the way.

What is product-market fit?

To achieve PMF, you’ll need to first figure out what exactly PMF looks like — and, perhaps more importantly, what it doesn’t look like.

Is it when VCs are knocking at the door? Is it when you see signs of rapid adoption or growth? Does it come down to some measure of your net-promoter score (NPS)? How about the moment when — as Sam Altman, CEO of OpenAI and former president of Y Combinator, describes it — users love your product so much they spontaneously tell other people to use it?

While there are a few ways to gauge PMF, it isn’t any one phenomenon or metric. According to Immad, it’s a matrix — “a set of things coming together that get your startup to scale fast: distribution, retention, and good unit economics — and the scalability of those channels.” Then comes the challenge of holding on to these things. Silicon Valley has seen startups rise to mythic-level status only to become forgotten shortly after, so understanding the importance of maintaining PMF once you have it can be just as important as knowing what it takes to get it in the first place.

What do founders often get wrong about product-market fit?

Here are a few common red herrings that could lead a new company off-course when looking to nail down PMF.

Confusing positive reception with adoption.

While a successful beta or positive reception can feel like a win, the conditions surrounding this early period are typically not representative of long-term success. In Akita’s case, Jean says there was a ton of excitement from client teams in the company’s early days, with product demos attracting an impressive list of attendees promising sign-ups. “They were like, ‘this is the coolest thing we’ve ever seen,’ but when it came down to installing it, months and months dragged by, and it wasn’t getting installed.” She says adoption isn’t enough either. “People have to want it, then they have to use it, and then they have to pay for it.”

Assuming free users will convert to paying customers.

Rahul echos how crucial it is to pressure test the value of your product. In his case, the strategy for getting an accurate read on PMF with Superhuman included insisting that early investors pay the full retail price for a still imperfect beta. “I wanted to keep ourselves intellectually honest. Is this actually something you would pay thirty dollars a month for?” Vohra wanted to be sure the product’s time savings were worth the price of admission to users. “I would definitely advise doing that from the get-go,” he says.

Mistaking early momentum for product-market fit.

It can be tempting for founders to attribute the feeling of momentum inside the company for confirmation of PMF. Immad experienced rocketship growth with his prior company, Heyzap, after leveraging distribution for their mobile app inside mobile gaming apps. “We had a ton of users, and that scaled to ten million installs, and we thought we had product-market fit,” Immad recalls, “but then no one stuck around.”

Marc Andreessen famously described the feeling of PMF while it’s happening, but founders shouldn’t take one or two of these milestones as permission to assume their work is done:

The customers are buying the product just as fast as you can make it — or usage is growing just as fast as you can add more servers. Money from customers is piling up in your company checking account. You're hiring sales and customer support 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.

Enviable as this characterization sounds, Rahul cautions founders against lulling themselves into a false sense of product-market fit based on how it feels from inside the company. “The trouble with Andreessen’s characterization, is that it’s post hoc,” says Rahul.

Fixating on competitors.

Founders may look to their competitors next to gauge their product or performance. Mercury’s own Immad would avoid that route. “You should ignore your competition,” he says. He believes that “it’s dangerous to look at competition because instead of building something that customers want, you’ll be copying both the failures and successes of your competitors.”

Taking customer feedback verbatim.

Finding product-market fit isn’t as simple as listening to your customer. A better course of action may be to practice selective listening.

In working to gauge PMF for Akita, Jean had a lot of one-on-one conversations with clients. Her takeaway? “People telling you [about] their problems is usually very accurate,” Jean explains. However, people sharing their thoughts around what would solve their problems is often not as accurate. Do customers keep reporting the same business problem or pain point? They may not know or be able to articulate the solution they need, but if you zoom out and look for trends, you may discover fixes or feature sets to build or refine. Henry Ford is famously rumored to have said, “If I asked people what they wanted, they would have said faster horses.”

How to gauge product-market fit?

You’ve probably heard Paul Graham’s advice: If you make something users want, they will be happy. According to Rahul, more actionable advice for founders seeking PMF might sound like, Make something your users want so much, they don’t want to lose it.

Rahul draws this concept from Sean Ellis, who ran early growth at Dropbox, LogMeIn, and Eventbrite. Sean developed a framework around finding PMF based on how disappointed users would feel if they could no longer use a product. If you survey your customer and find that 40% of users would be “very disappointed” to lose your product, it’s highly likely you’ve found PMF.

When Rahul first ran this survey, the results were a dismal 22% percent of “very disappointed” responses. To reach (and then surpass) his desired 40% metric, he took two approaches:

  1. Doubling down on what people love. Founders can use the “very disappointed” responses as a lens into their ideal customer profile (ICP).
  2. Fixing what’s not quite hitting the mark. Refocusing on the customer who loves the core value proposition but for whom the particulars or features leave something to be desired.

When should you start looking for product-market fit?

Once you have a sense of where and where not to look for PMF, the question becomes when to look. According to Rahul, this key moment is when the customer can experience the core value proposition without being distracted by too many bugs or problems. (Think: after Uber’s first ride, or Airbnb’s first stay.)

In the early days, it can be hard to decide which to prioritize — speed or quality. Ultimately, it’s a balance that will depend on your product and your vision. You’ll need velocity — both speed and direction. While Immad recommends going for speed pre-PMF, Vohra reminds us “that it’s very hard to take a product that is low-quality, slow, or unreliable, and then fix those things. “You’ll need to fight code, fight culture — maybe even throw the whole thing away and rewrite it again.”

The founder’s path toward finding product-market fit is often winding and circuitous, with multiple pivots along the way. From the outside, it might look like a straight shot. But don’t worry — it’s an ongoing journey for everyone — not a fixed point. If you listen carefully to your customers, you might be surprised where they’ll lead you.

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