A relatively young term in an entrepreneur’s vocabulary is “product-market fit” (PMF). Attributed to Marc Andreessen in 2009, this term, has a relatively simple meaning but one that’s hard to really get a sense of:
Product/market fit means being in a good market with a product that can satisfy that market.
If you go after an awesome market – growing fast, has excellent demand and a great growth curve, then you’ve got 90% product-market fit, even though technically 50% of the challenge in any startup is coming up with a good product.
Lets assume you are going after a great market.
How do you know its a great market? Besides the fact that its large (obvious) the speed of adoptionis tremendous.
What then makes a product “fit” a market?
First there are 3 important assumptions I make:
1. The best team does not necessarily create the best product.
2. The best product does not necessarily win in the market.
3. It is rare for startups or entrepreneurs to create markets.
A product “fits” a market when
1. Your metrics for adoption of your product exceed adoption of all your “competitors” combined (Instagram had more downloads in 1 week than other competitors did in 6 months)
2. There are so many missing features in your product but its still being sought after (HotorNot had no other features except an upvote and downvote)
3. The problem you solve for the user is such a big one that they are willing to forgive the lack of “nice to have” capabilities (during its early days, Twitter kept crashing daily)
The first point (metric) answers the question – What should I measure to know when I have achieved PMF?
The second point (features) answers – How can I tell?
The third point is the most important. To know about problems that are painful and large there’s one thing you need to learn, i.e. Learn how to ask the right questions!
Relevant links that I would highly recommend you read:
1. Jeff Bussgang on why early in the product cycle entrepreneurs should be hunch and not data driven.
2. Andrew Chen on “When” has a product-market fit been achieved?
4. Patrick’s perspectives on steps to product-market fit.