Every year around this time, I get asked by First Growth Venture Network to do a tight, 10-minute presentation on the Search for Product-Market Fit as an introduction into a panel on the same topic, drawing from material from my HBS class, Launching Technology Ventures.
This year, I was joined on the panel by Beth Ferreira and Zach Weinberg, both of whom know a lot about the topic. They both have a tremendous amount of experience searching for product-market fit from (in the case of Beth) Fab.com, Etsy and (in the case of Zach) Flatiron Health, Google and Invite Media.
Below are the slides I shared, which hopefully will be useful to folks. I find that I have to update the slides each year with good thinking from many people, as well as new experiences and thoughts I have from teaching and living the material.
Not captured in the slides is the issue of investor-founder fit. At the presentation, I told the story of two entrepreneurs of mobile consumer start ups – one who received funding from a “growth-focused” seed investors and one from an “engagement-focused” seed investor.
The entrepreneur with the growth-focused hit every engagement milestone across hundreds of thousands of users, but couldn’t raise the series A because their investor didn’t feel like their growth rate was fast enough – something they weren’t even aiming for! Without the financial support of their seed investor, the company was unable to raise their series A and sadly had to shut down.
The entrepreneur with the engagement-focused investor iterated and iterated against fewer than 1000 users, improving the product – and the associated key performance indicators – thoughtfully and methodically. This entrepreneur impressed their engagement-focused investor so much with their learning and experimentation process that they raised a terrific series A – pre-emptively.
The moral of the story? It’s not just about optimizing your search for product-market fit. It’s also about making sure you have seed investors that are aligned with the way in which you go about your journey.
Here are the slides – enjoy (and feedback welcome!):
Fgvn 3 31-2016 search for pmf from Jeffrey Bussgang
Interested to get your sense of what fit looks like for a b2c play, like Pinterest. Pretty sure they never hit LTV:CAC>3 before taking on more serious investment. Tx, M
This is a GREAT point. Pinterest delayed monetization (as did our portfolio companies MongoDB, Crashylitcs, BetterCloud and Codecademy – something you can do both B2C and B2B) and so the LTV was zero and LTV:CAC math irrelevant. You have to focus more on engagement and a future belief in willingness to pay, which has been the case for all of those companies…in spades. Thanks!
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