Measuring Product-Market Fit

"PMF has been so gradual; I might even say . . . linear. There’s not just one hump that we got over and thought, ‘Okay, now it’s clicking.’ It’s more like we’re chipping away at these obstacles and getting more and more people interested. It’s more like, ‘Oh, this is really working for certain segments.’"

"The median time from idea to feeling product-market fit was roughly 2 years. Start to worry if you’ve been working on your idea for over 2 years and not feeling PMF (see below what that feels like), and start to seriously worry if it’s been over 3 years."

"Personally, I’ll take the third position—I’ll assert that *market* is the most important factor in a startup’s success or failure. Why? In a great market—a market with lots of real potential customers—the market *pulls* product out of the startup."

"Most marketplaces fail not because of the marketplace, but because of more fundamental reasons — not building something people want, too small a market, inability to acquire users, etc. So start by looking at the bigger picture before focusing on whether this works as a marketplace."

"In my experience, you never really know you have PMF until you’ve built the thing, gotten people to use it, and enough people continue to use it for an extended period. Also, it’s not a binary, big-bang, event — you simply get clearer and clearer about what the market wants, build it for them, and hope that it has lasting, differentiated, value."

"The average time from launch to PMF is around 1.5 years. This doesn’t even include the time it takes to build the v1, which is often another 1+ years of work. So expect to put in at least two years before you get to the feeling of “This is working!”"

"When you're putting almost no effort into growth but it's clear the product itself is becoming 'word of mouth' viral, you know you have something really special. Then all efforts shift to keeping that magic going as long as possible."

"I felt we had PMF close to 9-12 months in, after we were able to replicate the same or better success in city 2 vs. city 1."

"The rise of Tinder was really fast, and there were very, very few changes to the product before it had already taken off."

"Do whatever is required to get to product-market fit. Including changing out people, rewriting your product, moving into a different market, telling customers no when you don’t want to, telling customers yes when you don’t want to, raising that fourth round of highly dilutive venture capital—whatever is required."

"You measure cohort retention by bucketing all the users who joined during a certain month/week/day (that’s your cohort) and looking at how many in this group are still active x months/weeks/days later."

"You have product-market fit when your retention creates enough money (or content/virality) to drive sustainable acquisition."

"You can always feel product/market fit when it's happening. 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."

"Are people willing to pay you for this product? Ask them this directly. Even try to get them to pay you now (i.e. literally send them an invoice) to get early access to the product. Nothing will be a better signal of interest and PMF if you can get people to put down money before you have a product."

"Plot the % active users over time (for various cohorts) to create a retention curve. If it flattens off at some point, you have probably found product/market fit for some market or audience."

"Survey your users and ask them ‘How would you feel if you could no longer use the product?’ and measure the percent who answer ‘very disappointed.’ If that percentage is over 40%, you have PMF."

"The higher the Burn Multiple, the more the startup is burning to achieve each unit of growth. The lower the Burn Multiple, the more efficient the growth is. This is a Measure of Product-Market Fit."

"On some level, all founders suffer from “happy ears”—the chronic confirmation bias pervading conversations with customers, partners, team members, and investors. We tend to have irrational levels of confidence anyway, but that gets compounded when we mistake support for market signal."

"As we took Cascade to market, we were dismayed to find that the business analyst role had changed, making us less relevant. A lot of big-data wrangling and analysis was being shifted to more technical data teams, for whom Cascade had little value. Business analysts at midsize companies no longer faced the diversity of analytical problems they used to, which meant that more opinionated, targeted products could pick up what was left."

"Our first market had extremely high product-market fit. Engagement (orders per week) and retention were high, and over 90% of new users came from friends telling their friends."

"On average, it took top B2B startups ~2 years from founding to hit $1m ARR, and roughly 1.5 years after closing their first customer. My takeaway is that once you’ve signed your first customer, you should strive to hit $1m ARR within 1.5 years if you want to be on pace with the top B2B companies."

"The only metric that merits congratulations is product traction/PMF. Fight the urge to use vanity metrics (like team size or news mentions) as a sign of progress."

"If I drill down what makes companies fail, it’s quite simple. It’s just like they don’t talk to users, which means they don’t find product-market fit. And if they don’t find product-market fit, nothing else really matters."

"It’s a huge mistake to focus on the growth number before getting retention. You can often hit the ‘great’ number at an early stage by brute force because the numbers are so small. Unfortunately, that won’t translate to continued growth, and then you’ll end up in a worse place than if you’d spent longer to hit the fundamentals."

"“Great retention is the scalable way to grow a product. It’s the best indicator of product-market fit, it is the most important factor in a user’s lifetime value, and high retention drives all of the best acquisition strategies. It’s growth’s equivalent of the triple word score.”"

"Every company did have a clear moment where they recognized they had PMF, and many did experience a sudden hard-to-miss pull from the market, BUT many companies did not see it immediately. For many companies, PMF became clear over time through a series of compounding wins or milestones."

"About half of these companies found PMF immediately after launch, but half spent months or years iterating to get there. Once they got there though, it became obvious."

"While product-market fit looks different for every product, it’s hard to imagine a scenario where you’ll attain PMF if people don’t feel some degree of affection for your product, don’t find it useful, and don’t use it 😉"

"Product-market fit happens only when a set of underlying assumptions end up being true. So try to break down what those assumptions might be for your product, and use questions that measure your progress toward confirming them."

"There should be clear, qualitative daylight between the ways that people talk about using your product and the ways they use alternatives, and people should have no trouble articulating detailed specifics of why your product is preferable."

"One of the most common ways that startups die is premature scaling, a term first used by Steve Blank. A business is scaling prematurely if it is spending significant amounts of money on growth before it has discovered and developed PMF."