A bit of context and etymology:
- Product/Market Fit is a concept most commonly accredited to Marc Andreessen who defined it simply as “being in a good market with a product that can satisfy that market.” He also asserts that getting to product/market fit is the “only thing that matters” for new start-ups.
- Me arse is a concept much older than product/market fit whose origins are most likely not to be found in a seminal Stanford University paper on start-up success metrics. It is rather a Hiberno-English phrase, literally translated as ‘my ass’, which conveys a degree of scepticism or disagreement on behalf of the utterer. e.g. John: “I once beat Tiger Woods in a pitch and putt competition.” Paul: “Me arse!”
- Mearse is the reflexive Spanish verb meanin”g to piss oneself e.g. ‘Mearse de risa’ meaning to piss oneself laughing. The two phrases are not connected and shouldn’t be mistaken for one another so be careful with that space bar.
What I really think about Product/Market Fit
I seem to say this a lot but – don’t get me wrong. I am entirely in agreement with Marc Andreessen’s assertions on PMF and its importance as a key factor in the success of start-ups. Andreessen points to three variables in the determination of start-up success: the caliber of the team, the quality of the product, and the size of the market and correctly points out that a great team, and a great product will still fail if the market isn’t there. Also, to be clear, I’m not in the same camp as former Evernote CEO, Phil Libin, who stated at Web Summit in Dublin last year:
“We make things we love. I think that’s critical. Product/market fit is kinda a bullshit concept. You can’t approach it that way: ‘What should I build? Let me go and see what the market needs!’. That doesn’t make any sense: your only competitive advantage is to make something great.”
Despite the fact that Phil would have gotten a much better reaction from the local crowd if he had said that product/market fit was kinda me arse, his conceptualization of PMF is too linear and assumes that the only way to achieve it is to seek out a market need and then build a product to meet that need. PMF is far more circular than that, markets are dynamic and product need to be too. Start by building a product you love and then go find the market for it, find a gap in the market and build something you love to fix it. Either way, you are not precluded from making things you love, but remember that a great product without a market will not a successful company make – after all, why are we all building apps for Android and iOS while ignoring Windows Phone? If you’re lucky, a great app for Windows Phone might sell 5% of what it would sell if it were developed for the leading mobile operating systems. No matter how great your product, market is king.
What does this have to do with me arse?
So, I’m not in agreement with Phil Libin in that I don’t think for a second that product/market fit is a bullshit concept. What I do think is bullshit is the increasing number of SaaS companies claiming product/market fit either prematurely or with no foundation at all. That puts me far more in the Ben Horowitz camp who, like his founding partner Marc Andreesen, is a successful VC who invests in SaaS companies and can smell bullshit from a mile away. In an excellent post back in 2010, Horowitz called out the four myths of product/market fit and, given the recent surge in self-proclaimed product/market fit, I think it’s high time for a reminder:
- Myth #1: Product market fit is always a discrete, big bang event
- Myth #2: It’s patently obvious when you have product market fit
- Myth #3: Once you achieve product market fit, you can’t lose it.
- Myth #4: Once you have product-market fit, you don’t have to sweat the competition.
These myths are Horowitz’s way of explaining that it would be great if we could all just find a product/market fit and raise lots of money to build a big company, but things are not always that straight forward. There is such thing as partial product/market fit, you may have reached the magic point but not realized it, you can achieve it and then lose it due to changing market dynamics, or a competitor could come along and blow you out of the water. So how do you know when you have achieved product/market fit and how do you maintain it?
The Product/Market Fit Talent Show
The analogy that springs to mind here is of the X-Factor contestant whose mom told him he was a great singer, he sang for a few close friends and they told him he was awesome too. So off he goes, full of self-confidence and belief in his own ability only to have Simon Cowell tear him to shreds after he butchers some classic ballad or other. The talent in this case is product/market fit and the judging panel is made of all Andreessen, Horowitz, and lastly Brad Feld. Simon Cowells one and all – no room for false praise or feigned optimism here – if you don’t have product/market fit, you will be told in no uncertain terms. So, how do you avoid that gut-wrenching moment when your dreams come crashing down around you? Well, the latest addition to the panel, Brad Feld, provides a very useful guide to assessing your product/market fit based on your company’s MRR and building on Horowitz’s four myths.
At $0 MRR, you do not have market fit. Your singing voice will probably sound great in your own head but don’t book Carnegie Hall just yet – if no one is willing to pay, you don’t have product/market fit. At $1 – $10k MRR you have what Feld calls the “illusion of product/market fit”, in other words your mom says you have a lovely voice. Her heart is in the right place but she’s probably lying to you and your product may still be kind of shit. Ok, so at $10k to $100k MRR you must have some “semblance” of talent – you’ve entered a local talent show and came second – not bad, kid! From $100k to $500k MRR you are an up-and coming star in the SaaS scene with talent to burn and at $500k to $1m you are a bona fide star and your product/market fit is beyond reproach. At this point, you would do well to remember myths #3 and #4. SaaS like show business is fickle, it’s a tough crowd and you don’t want to be a one hit wonder. You will need to keep up with changing trends and preferences while also fighting off the competition who seek to replicate your success in order to be the Madonna of the SaaS industry. Do that, and you may avoid that embarrassing moment when you boast your Product/Market Fit only to hear those most dreaded of words: “me arse.”
By Michael Cullen @michaelcullen87