Rob Go: 

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Product Market Fit vs. Growth

Rob Go
July 28, 2013 · 2  min.

The holy grail of early stage startups used to be finding “Product Market Fit”.  Tons of stuff have been written about this, but my favorite is from Sean Ellis and Marc Andreesen.

Explicitly or not, I’ve found the tide has shifted away from PMF as a major goal.  Instead, the focus has been on growth and distribution. Tons of stuff have been written about this too, but my favorite is from Paul Graham.

Traditionally, focusing on PMF means not really worrying too much about growth early on.  The reason being that any improvements/refinements to marketing you achieve will have a bigger impact the better your PMF.  Similarly, it doesn’t make sense to spend money and resources on growth if the thing you are growing fundamentally isn’t something that people want.

The counter-argument is that growth is a by-product of PMF.  The is no great way to know if you have PMF, but if you can grow quickly and effectively, then that must be a signal (both internally and externally) that you have it.

The counter-counter argument to this is that this can lead to a death spiral because it’s very hard to know in a short period of time whether your product really is great, and thus, your growth is really durable.  What will retention look like (and thus, LTV) for a SaaS or recurring revenue business?  How does this degrade over time as you go outside your first set of users?  Or, as in the case of social services that amplified their growth through another network, how durable is your user base and will they still be around in a few months?

What to focus on then?  Well, like with all false choices, the answer is that both really do matter.  But the key is in Sean Ellis’ blog post in PMF, specifically this sentence:

“Of course progressing beyond “early traction” requires that these users represent a large enough target market to build an interesting business.”

Getting to PMF is the most important thing for early stage companies, because without that, there is no hope for your business.  But, growth informs product market fit. This is especially true for consumer or end-user focused businesses.  You might have great PMF with a small set of users, who all say they would be “very disappointed” if they could no longer user your product.  But that universe of users may end up being really small, and it might be too difficult/expensive to get anyone else to use your product.  You won’t really know that unless you are constantly fighting to grow, even through unscalable means, to see if you run out of users that really fit your target market, or not.

This is why I find that companies with small-scale economics still often have a hard time finding investors.  There seems to be product market fit, but the unknown question is “are there really that many people out there that want what you’ve got?”  It’s a good question, and a pretty tough one to answer without growth.

 


Rob Go
Partner
Rob is a co-founder and Partner at NextView. He tries to spend as much time as possible working with entrepreneurs to develop products that solve important problems for everyday people.