If a startup fails to achieve product/market fit, it will fail.
1-2 years is generally the limit before a startup runs out of capital or its team falls apart.
Reducing The TTPMF
One way is to copyexisting products that have already achieved P/M fit. However, cloning a product 100% carries weaknesses such as:
- Inability to grow the market
- Subjected to incumbent competitors' control of market
- Cannot compete with network effect of existing products
Therefore, startups should preserve 80% of the product’s characteristics and reinvent 20%, creating enough product differentiation to grow past the incumbent competitors. Reduce TTPMF to focus on marketing optimizations without sacrificing long-term strategic value.
Product-market fit (PMF): The definitions of PMF are broken into pre-product and post-product:
- Pre-product, look for:
- Visible excitement
- People who are eager to spend moneyfor it now are a better signal of interest and PMF
- Post-product, look for:
- Retention: If the product-market fit flattens off at some point, it means that there is product/market fit for some market or audience.
- Surveys: You have PMF if over 40% of your users would be very disappointed if your product went away.
- Exponential organic growth:If major brands get in contact with you organically and your users spontaneously market your app to other people, you are close to PMF.
- Cost-efficient growth:
- Burn Multiple = Net Burn / Net New ARR
- “The higher the Burn Multiple, the more the startup is burning to achieve each unit of growth. The lower the Burn Multiple, the more efficient the growth is.”
- A sales yield of greater than 1.0 also indicates PMF.
- CAC < LTV
- Acquisition cost of a customer is less than the lifetime value of one.
- Sustainable acquisition is a better signal of interest and PMF.
- Customers are excited for your product: Customers are willing to pay for your product just as fast as you launch it.
- People are using your product even if it is not working properly sometimes.
- If a company gets larger despite poor execution and management, it is a great measure of product/market fit.
PMF isn’t a one-time, discrete point in time. The factors that determine PMF are subject to change because of the volatility of competitors and market segments.