On June 5th Venrock co-hosted an event with Plato called Product Unplugged, an off the record session providing mentorship for early stage startups on all things product. We had over 85 applications for the event, but space for only 40 attendees, so we’ve decided to share some of the insight from the event to a broader audience in a series of posts my colleague Tom Willerer and I will author.
We’re going to use the fireside chat interview Tom conducted with Sami Inkinen, co-founder of Trulia and founder of Virta Health, as a guide for sharing some of the insights unearthed at the event, and for this post focus on the following topic:
How do I get to Product/Market Fit?
Even with the breadth of companies and questions, one key question continued to reverberate with every group and discussion, and is one we hear consistently from founders, “how do I find product/market fit”?
So who better to ask than Sami, who co-founded Trulia and led them through their acquisition by Zillow for $3.5 billion. See the video clip below and our take on his great answers:
Sami summarizes the most critical elements in building at the early stages into (3) areas, which we’ve added additional commentary to:
1. First focus on team, people, culture, and values. If you have product/market fit but don’t have the people to scale it, all else will fall apart.
Building the right team around you is one of, if not the, most important thing you can be doing as a founder. Product/Market fit is everyone’s job, from finding it, maintaining it, to growing it. The pursuit of product/market fit is a sobering journey challenging the agility and grit of your team as you test your hypotheses and execution, the markets willingness to pay, and your ability to focus on the right things. This isn’t for the faint of heart, and most often takes a village to accomplish.
This is why Sami emphasizes his points on culture and values, two critical aspects of building a high performance team that are often mistaken for ‘do you have lunch and have beer on tap’ and ‘do you have inspirational statements posted on the wall somewhere’. Culture and values are the representations of how a team makes decisions, it’s operating model, and type of behaviors that are rewarded and rejected. There are many dimensions that go into creating your culture, such as:
- How are decisions made? by consensus, democracy, autocracy, benevolent dictatorship, meritocracy, holacracy, etc.
- How are top and poor performers managed?
- How freely does information flow?
- How are priorities and goals defined and communicated?
- How engaged is the team in important decisions?
- How is true accountability and ownership maintained?
- What behaviors are rewarded and promoted? What are rejected and corrected?
- What are the qualities of the best people on your team?
- How is feedback given and received?
In the journey of attaining product/market fit, having an empowered, feedback-rich, open, and accountable culture can significantly change the probability of success. As Sami says, product/market fit without the team to capture it is like not having product/market fit at all.
2. When you have product/market fit, you know it. It goes above and beyond what your customers expect, it’s the moment the market realizes you have something very special and the market starts to demand it. It’s the moment where you have created so much value that the switching cost is too painful, and your customers don’t want to be without your product/service. And there is no single metric or moment that defines it.
Sami is right, there is no single metric or moment that represents product/market fit, it is an interconnected set of signals that show you have it, and vary between markets, segments, and your products/services. Most of the time when you have product/market fit, you know. And when you don’t have product/market fit, you know. But it usually always involves solving a hair on fire problem in a way that your customers love and want more of. Here is a simple way to think about it:
Product/Market Fit = when people (e.g. the market) who want your product become happy customers and engaged users and lead to new customers knocking down your door (market pull) to use your product/service.
As a founder, it’s the stage when you have more customers knocking than you know what to do with, all wanting to solve a consistent problem with your solution. As investors, it’s when runaway growth occurs, when the output begins to exceed the efforts and inputs to generate it, and market push switches to market pull.
3. Product/market fit is not a one and done. You can hit it and lose it; customers become less engaged, competition leap frogs your offering, market shifts, technology or platform changes, or consumer demands shift. Product/market fit is hard to find and is hard or even harder to keep. It should be constantly worked on to refine, strengthen, and expand.
As mentioned above, product/market fit is when your solution solves a hair on fire problem in a way the market begins to pull for, but as your product continues to evolve, so does the market, and that hair on fire problem today may no longer be important in the future.
A market problem is only a problem because of the context around it; the availability of alternative solutions or options, the level of continued pain, and the cost of solving that pain. Any of those dynamics can change and taking with it your product/market fit if you don’t continue to evolve and change with it. Here are (3) ways a market can shift on you:
A new solution may come to market that either solves the pain in a better way, or offers the same solution for cheaper, causing the market shifts to the new solution.
Netflix dethroned Blockbuster into a faint memory after it’s dominance for over a decade with an alternative experience that changed the dynamics of the market: they got rid of the late fees by letting you hold on to your DVDs as long as you wanted, gave you access to a broader catalog of content, removed the need to drive to the store, and offered it all at a low flat fee that was equivalent to renting two DVDs a month or ½ the cost of one DVD and 4 days of late fees. Blockbuster at its peak was a $5B revenue company with 60,000 employees and 9,000 stores worldwide, and today has a single store in the US remaining, in Bend, Oregon.
Venrock portfolio, Dollar Shave Club, is another example of leveraging the power of customer convenience and value first, leveraging a direct-to-consumer relationship and asymmetric marketing to scale, shifted the market to their solution They grew to own over 15% of the U.S. men’s razor cartridge market before they were acquired by Unilever for $1B. See this great write up by my partner, David Pakman, on how Dollar Shave Club changed the US Razor market dynamics.
When a platform or technology shift occurs and the level of the pain is substantially lower, and your solution can become less relevant or no longer worth the price point.
Desktop to mobile, blackberry to the iPhone, usb sticks to cloud storage, on-prem data centers to AWS. And we can expect this to continue in the future as we usher in autonomous mobility, increased ubiquity of voice interfaces, electrification of ground and aviation based powertrains, new modalities for interaction and communication through AR/VR, breakthrough speeds in computing power, decentralized microservices, and more.
A user behavior shift occurs, your customer/user base no longer want/need to continue the activity and such no longer have the pain, and no longer need your solution.
User behavior shifts are fundamental expectation shifts in performing a task; I used to do it one way, and as soon as a new and better way introduced itself, it became the new norm, and re-anchored my expectation. Uber introduced a simpler and more convenient way to call a black car, and snowballed into a significant shift in the expectations and behaviors of the market, from picking up the phone and waiting 15 – 20 min, to instant access almost anywhere in the world. Our kids may remember yellow taxis the same way we remembered horse buggies… when was the last time you called for a taxi? This expanded the market and led them to offer UberX, UberPool, UberSUV, and now UberBike (?) and more.
Amazon did this in ecommerce with the everything store, Trulia for real estate, YouTube and Netflix for streaming content, iOS and Android with the app stores, Dollar Shave Club and Casper for digitally native vertical commerce, and the list goes on. Much of these behavioral shifts are unscored by the ability to do more of my offline activities now online, with a more personalized, intimate, and convenient experience. Understanding a users expectations and if a behavioral shift is near requires you to look at the norms and expectations of that user; much of which come from the current products and services they use, the technologies they’ve adopted, and depth of their usage.
Keeping product/market fit means always being ahead of the market; deeply understand your customer, the market, and their problems, anticipating what the competition or alternatives will do, being agile to consumer or user behavior changes, and continuing to take advantage of powerful technology or platform capabilities to further deepen your value.
I hope the insights we are sharing from the Product Unplugged event are helpful! Please drop us a comment with your advice for finding product/market fit or with your questions. And have a read of Tom’s post where he dives into Sami’s take on “What advice do you have for first time founders?”.
Stay tuned for these future topics:
- When is the right time to define and cultivate a unique culture?
- How do you deal with investors?
Founder Advice for Finding Product-Market Fit was originally published on LinkedIn, where people are continuing the conversation.