Opinion
Startup Community: Creating value through PMF
Thomas N Horsted
March 24th, 2019
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This article is more than 5 years old.
Once it fits, everything glitters (photo: Pexels)
Product/market Fit (PMF) is a common concept in the startup world, but while widely applied in conversations concerning new high-growth companies, what does it really mean? And how do you measure it? Let’s begin!
A useful mental model
Understanding PMF can be a useful mental model for the interplay between business, the product and customers in a startup.
Learning about it will help inspire new ways to create value for your customers and grow your business.
So, what is it?
Marc Andreesen, a US entrepreneur, investor and software engineer, called it “the only thing that matters” in a post back in 2007, when he coined the term.
“Product/market fit means being in a good market with a product that can satisfy that market, he explained, which is a bit vague, but a beginning.
When it’s not happening
PMF is equally detectable when it isn’t happening.
“The customers aren’t quite getting value out of the product, word of mouth isn’t spreading, usage isn’t growing that fast, reviews are kind of ‘blah’, the sales cycle takes too long and deals never close,” ventured Andreesen.
And when it is
You can always feel PMF when it is happening.
“The customers are buying the product just as fast as you can make it – or usage is growing as fast as you can add more servers,” continued Andreesen.
“Money from customers is piling up in the company account. You’re hiring sales and customer support staff and reporters are calling because they’ve heard about you and want to talk to you about it.”
Signs of success
A complimentary definition, and more concrete way to think about it, is when your customers are spreading and selling your product for you. When people understand and use your product enough to recognise its value – that’s a big win.
But when they begin to share their positive experience with others – when you can replicate the experience with every new user who your existing users tell – then you have PMF on your hands.
Your customers are becoming your sales people.
About
Thomas N Horsted
Thomas (@thomas_hors) is the former co-founder of Startup Guide – The Entrepreneur’s Handbook and a former startup scout for IKEA Bootcamp. He is currently the COO for Tiimo, a Danish startup delivering an assistive app to kids with ADHD, autism and brain damage. He is also a limited partner and investor in The Nordic Web Ventures, which invests in early-stage Nordic startups
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