True product-market fit is a minimum viable company

My dad always told me the first rule of business is "know your customer."

I don't really want to rag on someone who's clearly more successful and experienced than me but I read this article and I don't know what it's trying to say beyond, "know your customer."

Another quote from him, "you don't know a market until you're in it."

It's impossible to tell what product market fit is unless you're actually out there trying to fit something into it a real market. Like with the Lyft example (as presented) screams to me like pure luck. How did they know the market valued those things? How did they evaluate which elements had the best ROI to get right, and how to prioritize?

I just feel like this article is shockingly light on insight. But then again, we often need someone to smack us with common sense. On the other hand, most smart people know when they're pounding a square peg into a misshapen hole. The hard part is knowing what shape the hole is or if it even exists, and that's the kind of content I wish this article had more of.

Tangent: is there a market for a book full of business-isms and one liners? I've been pushing my dad to write one for years...

"Delight is seeing your customer’s pupils dilate because they’re so ecstatic about your 10x change."

IMO this kind of small-scale and shortsighted focus is holding SV-style innovation back. Twitter has no route to profit (last I heard) but it is a key factor in modern global events, for good or bad.

We need more Elon Musk-style megaprojects and fewer Facebook killers.

In my opinion, a successful startup proves a market exists, it doesn’t have to fit a product to it. But it’s important to create IP relevant to exploiting the market. A very successful startup demonstrates multiple angles on one or more markets. A startup going for ipo can then go for fully exploiting these markets. A startup going for acquisition will let the acquirer do that. The acquirer is purchasing proof of market and relevant IP for exploiting it.

Basically, I’d say product market fit is mostly bs for startups. A great startup will be a string of demos uncovering a market. Product market fit is for maturing and mature companies to worry about.

The underlying problem with the 'product-market fit' hyperbole is one of degree.

1) Ok, so they like your product, but how much? 2) Is it that much better than substitutes? 3) Really how big is the market? 4) Some will live it, some won't, what does that ratio look like? 5) How much customisation did each of those customers need?

This concept of 'product-market fit' is almost ridiculous frankly. In reality, investors want to see a material 'lift off' i.e. in their investments they want to see startups that have a product that is just 'taking off' and 'flying out the door' ... but this is an excessively optimistic view of 'product market fit'. By some SV definitions, most companies never had 'product-market fit'.

Another day, another bloviating "think piece" written by a consumer VC. When will we call out this content free garbage for what it is?

Minimum viable product, minimum viable company, all of these masquerade the idea casino that many large consumer VCs function inside of which occlude their mechanisms and numbers. Consumer VC is a historically poor performing asset class that funnels pension money into lightweight marketing experiments that enrich the operators much more so than the institutional asset holders via the greater fool theory. The exceptions (Facebook, Google, etc) prove the rule (WeWork).

By the way, let's take those two classes (FB/G vs WeWork) into consideration. If you want to read a better article about corporate craft, read this article [1] by a Two Sigma investor. The hypothesis is very simple: gross margins matter, and it's challenging to build a company with defensibly high valuation without them.

You'll notice that while Facebook and Google are high margin businesses with giant valuations, WeWork raised on premises that were out of line with the reality of their margins, and which were subsequently brought back down to earth.

Build a company with high margins and taking on VC capital will become a choice, not a necessity. That's the way it should be.

“If you’re unsure whether you have a strong value proposition, look at your word of mouth”

It’s so difficult to track word of mouth because you can only see it as unattributed growth on your product, but I definitely agree it’s probably the single most important metric for P/M fit. One way to really know if you’re on to something is if people start mentioning your own product to you not knowing you’re the maker.

Luckily there are things like f5bot.com which are also greatly helpful!

I still don’t understand why VCs (or anyone else for that matter) consider unprofitable unicorns “success”.

Excerpt(s):

"When I reflect on the failures, the root cause inevitably stems from misconceptions around the nature of product-market fit. Founders are blindly searching for growth because they see that as the proof of product-market fit when in fact they should be focused on insight and customer development first as that is more likely where product market fit will be found."

[...]

Lyft’s cumulative delight overcame a customer’s investment within the customer’s first ride:

o A rider was first delighted when expecting a long lag time after ordering the car… then realizing it will arrive in only 3 minutes!

o The second delight was fist-bumping the driver — it felt like a friend coming to pick you up.

o The third delight was the interior of the car — it’s not a grungy, smelly cab, but a normal car your friend might own.

o The fourth delight was the ambiance (music, water) and chatting with the friendly driver.

o The fifth delight was the price, much less expensive than a cab ride.

A week into the Lyft launch, one of our associates ran into my office with his eyes wide, shouting, “You have NO idea what you have on your hands. I’ve taken 6 Lyfts this week alone and it’s a GAME CHANGER!”

Delight is seeing your customer’s pupils dilate because they’re so ecstatic about your 10x change."