Product Market Fit vs. Growth

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

Thanks for reading! Here’s a quick background on who I am:
1. My name is Rob, I live in Lexington, MA
2. I’m married and have two young daughters. My wife and I met in college at Duke University – Go Blue Devils!
3. We really love our church in Arlington, MA. It’s called Highrock and it’s a wonderful and vibrant community.  Email me if you want to visit!
4. I grew up in the Philippines (ages 0-9) and Hong Kong (ages 9-17).
5. I am a cofounder of NextView Ventures, a seed stage investment firm focused on internet enabled innovation. I try to spend as much time as possible working with entrepreneurs and investing in businesses that are trying to solve important problems for everyday people.  
6. The best way to reach me is by email: rob at nextviewventures dot com

    • Mike Volpe

      I love all the lean startup / PMF stuff but always thought it was half the puzzle and did not match our experience scaling HubSpot. Had we strived for really, really good PMF in 2007 we would have focused on one vertical or become a services company – things that would have made our early customers happier but would have limited our long term growth potential.

      I think there is a balance between having a big vision and finding PMF. Either one alone will not create a big enough company to attract VC and make a dent in the universe.

      • robchogo

        Well put Mike.

        • Mike Volpe

          thank YOU for making sense of something that always bugged me when I read PMF stuff but could never put my finger on…

      • sbermo

        @disqus_GtXmnHGoM1:disqus – Do you think it’s possible that you could have first dominated in one vertical and still scaled in the others in the way you did?

        • Mike Volpe

          I think it would have been a lot harder for a few reasons. First, I don’t think we would have been able to raise as much money as easily because the addressable market would not have looked as appealing. Second, I think it would have been a lot harder to do it that way (harder to do marketing, harder to build product, harder to morph your brand over and over from vertical to vertical). Finally I think it would have been harder to assemble a great team because working on LegalSpot is not as exciting as HubSpot, even if LegalSpot will eventually become TechSpot and MaufacturingSpot, etc. The best talent wants to work on big ideas that have some sex appeal, the verticalization kind of kills that.

          Technically Salesforce grew from their core marketo of CRM/sales automation to service and then platform and then other stuff (now they are even trying to do marketing!). All huge companies grow their addressable market over time. But starting in one industry vertical just means too many jumps from market to market, I just think it is too hard. (I see 100x less deals / companies than VCs like Rob see, so my sample is limited and I might suffer from blindspots on this opinion.) Over time you will see HubSpot grow our addressable market (come to INBOUND on Aug 20-22 and see what we launch 🙂 but it will be fewer moves than jumping through many industry verticals – more on par with the number of moves Salesforce or NetSuite made to become a platform rather than an app.

          • sbermo

            Thanks for your perspective @disqus_GtXmnHGoM1:disqus. I mentor lots of startups, and I often find myself advising them to focus more narrowly in the earliest stages of their company. One of my favorite quotes on this matter is, “If you chase two rabbits, both will escape”. Of course there comes a time when any company with big ambitions must broaden focus. For me the question is how to identify when it’s appropriate to expand that focus to capture not only the scale you describe, but also the appeal to potential investors and employees.

            • Mike Volpe

              It is unconventional but we did chase two rabbits from the beginning at HubSpot (small businesses and mid-sized businesses – they have pretty different needs). I also advise startups to focus. “Do what I say not what I do.” 🙂

      • 100% agreed, and I was saying something similar last week in my post- Don’t confuse Growth with Success on the Startup Management blog that I just shared with Dharmesh today, actually!

        Staying too close to the lean methodology doesn’t let you leapfrog because you’re held hostage by your user metrics, whereas you should look to go capture markets instead.

    • Yesss! You could have PMF in a small market and still be screwed.

      I pounded on that same issue a few days ago, Don’t Let Lean Startup Become a Crutch.

      Basically, if you stay Lean for too long, you’re not going to take a leap in non-linear growth.

    • Sean Ellis

      Great article Rob – and not just because you mentioned me 🙂 I agree that growth can be an indicator of product market fit, but it is also a means to get to product market fit faster. If you get your product into more people’s hands, you are much more likely to find segments that consider it a “must have.” Of course investing limited capital in the teams and tactics required to drive growth can significantly shorten a startup’s runway. A more conservative approach is to iterate the product on feedback from a cheap flow of new users. The right approach for each startup depends on their appetite for risk and available capital.

      I also read the great thread between Sbermo and Mike Volpe. Mike, one “outsider’s” observation about Hubspot is that you guys never seem to have pursued growth for the sake of growth. It seems you essentially measure success in units of happiness delivered. Something like a growth multiplied by the CHI (customer happiness index).

      Contrast this approach against companies that have grown by importing addresses books and spamming invites before someone abandoned the conversion process. While these companies appeared to be growing, it is often smoke an mirrors without any real utility delivered.

      Finally, I’m guessing we all agree that it’s a fallacy to believe product market fit means you won’t have to work to grow your company. It is extremely rare when a product is so good that it flies off the shelves without marketing and sales effort. To me, product market fit simply means your product is good enough to have a realistic chance to drive sustainable growth over time.

      • robchogo

        Thanks Sean. Great points. Manufactured growth drives me crazy. It’s a shame that the market occasionally rewards it, but gladly it’s just the minority of cases.