![]() ![]() Getting it wrong means the startup is listening to the wrong feedback, letting it guide the product roadmap and strategy. For this reason, a certain amount of time is needed to assess whether a startup’s success with its early adopters is anecdotal and fleeting, or meaningful and consistent. Their eager adoption of your product may be reflective of an unsophisticated customer or just a very narrow use case. They are outliers, drawn to your vision, but there is no mainstream customer base ready to follow in their footsteps. Sometimes your early adopters are merely your first customers. Revenue-centric and sexy story startups are both susceptible to accepting a common fallacy that the early adopters of their product are also the industry trailblazers. Revenue-centric or sexy storyĮarly stage startups in both the bottom right and the top left have a degree of customer traction, but not yet enough to declare product/market fit. Having achieved it, a successful startup may find that over time they have diluted much of their vision as they focus exclusively on hitting revenue targets, or that growing customer churn suggests they are out of touch with the evolving needs of the customer base. Of course, maintaining product/market fit is by no means assured in dynamic technology markets. Maintaining product/market fit is by no means assured in dynamic technology markets. ![]() It is also natural that a startup would drift from one quadrant to another before achieving product/market fit. The upper right quadrant is where everyone should be aiming, but invariably most startups find themselves in one of the three adjacent quadrants, especially in the early years. Analyzing the four quadrants Congrats! You have product/market fit Some paying customers will not embrace your vision, while others will adopt your vision without conveying the insightful feedback that is so vital. A startup needs both, even though doing both involves tradeoffs. It’s not enough to solely listen to customers or to rely on a compelling vision. ![]() However, such startups don’t appreciate the broader strategic trends in their particular market and fail to offer the kind of vision that resonates with their audience. The lower end of the y-axis can best be described as unconvincing, which does not necessarily imply the startup can’t sell its product. A compelling vision can also be one that challenges the conventional view on a particular product or technology architecture. A compelling product vision will be clever and innovative, with a pitch that generates a buzz among customers, partners and investors alike. The y-axis measures the strength of your product and business vision as determined by how compelling it is for prospective customers and users. If they are engaged with customers, they are likely preaching to the choir or else speaking to the wrong ones, those too weak and compliant to have or express their own coherent views. These startups are engaged with themselves and perhaps fellow startups, overconfident in their understanding of the target customer. The other end of the x-axis continuum is the proverbial echo chamber. This involves understanding customer priorities, needs, alternatives, concerns, and levels of usage and engagement. In the above diagram, the x-axis measures the depth of customer engagement, characterized by carefully listening and understanding the target customers and users. I developed the following diagram for founders to reflect on their own product-market fit journey, as well as for myself, to evaluate my multi-stage portfolio. One reason it’s difficult to pinpoint is that product/market fit is not a one-dimensional continuum measured by sales growth, but rather a nuanced, two-dimensional matrix. Getting it wrong can result in a waste of resources and loss of precious time. Some startups declare they have achieved product-market fit prematurely, while others don’t recognize they have it until much too late. ![]() For this reason, venture investors seek signs of it when assessing a portfolio company or evaluating an investment opportunity. It is a single business term that at once denotes successful product delivery, a working go-to-market strategy, and customer satisfaction. “Product/market fit” is the elusive goal of every startup. ![]()
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