How long it took different companies to find product-market fit
lennysnewsletter.com
lennysnewsletter.com
I've seen this happen multiple times.
The sales team were always underselling the software (often just giving it away for free to land consultancy contracts); promising the moon to "large" companies because it looked amazing to get such a name on our homepage and looked good at the monthly company meeting.
But the reality of large companies is that they are a many-headed beast, and just because you've sold some software to "BigCompany", doesn't actually mean much if you've actually just sold to the 4 person HR department of a local branch of a sub-division spin-off.
That department leverages their "BigCo" name to get the world at a knock-down price, while the small company is throwing everything at chasing the promise of huge future revenues "when BigCo roll out fully" which never materialises, or happens in name only.
Very often it turns out it's only ever "Dave" that had even heard of your small company / product and was just using it for some other BigCo political games. As soon as he leaves BigCo, because he leveraged "his HR transformation project" into a better job offer elsewhere, you struggle to even get a single person at BigCo to pick up the phone. To be fair, they'll happily keep paying your invoices for the contract, but remember you sold at a loss for the promise of future revenue which is now never coming.
But hey, it's okay, because your own sales team have also moved on and are now promising that if you just rush in feature Y then we're sure to get a sale with MegaCorp. ( Repeat endlessly, to the stress of the rushed development team whose time has just been undersold again. )
Every weekly the sales team had the same bigcos "in the pipeline" as six months ago and they weren't replying to emails. But you have to help us get that SOW ready by tomorrow so we can send it to them.
The reality is, most times you have no options and that whale is your highest likelihood exit
The reality is, this is what being in a market with what are effectively monopolies looks like. You either bully your way to the top or have to deal with being bullied till you can get out.
Yeah, what a nightmare that must be.
I’m being a little glib here — I understand that if you’re making $200M at a cost of $400M and your investors are expecting $2B and you stop growing… you’re in deep shit.
But christ, people, can’t we get a little perspective?
Though most VC funding seems to have the explicit goal of "Burn cash to drive out competition so you have a monopoly, then abuse your market position to wring your locked-in customers dry", which feels awful from a consumer POV.
If you make 150-200 M in revenue and can't grow bridge the gap from revenue to profit to sustain operations you have a serious problem on your hands. I think you need a bit of perspective on what that means as you now have a lot of dependent workforce that you likely have to layoff to bridge it.
Yes it is impressive to make it to that point of revenue but your future is looking difficult especially as you probably have layoffs in the future - which is awful.
VCs want you to go big or go home so they want you to hire. Hiring decreases your runway dramatically.
$100 million lasts practically forever for 2 people. $100 million lasts through most problems for 10-15 people. $100 million doesn't last very long at all for 100 people.
Outside where? The EU? Plenty long... like 5 years?
150K per employee on average with overhead (additional benefits, tax contributions, health care -- whatever other expenses). 15,000,000 a year.
Add in real estate, equipment, other capital expenses. Yeah, looks like ~5 years.
And nobody is getting $100 million anymore. Good raises are now in the $10 million range and that doesn't last long at all even if you only have a small number of employees.
It's like doing an experiment and only counting the "successful" results - this is worse than "bad science", it's intentionally misleading science that actually sets us back.
We really don't need any more survivor bias. Please go interview some failed startup founders. There might have been a crucial difference in step 2 of these 5 steps that successful founders did and failed founders didn't, but we won't know about it because there's no data from failed founders.
Most likely the failed companies didn't find it but possibly were close or other issues sank the company. Curious actually if there are companies that found product market fit and didn't survive. That's an interesting group.
This is a contradiction as PMF is defined as having BOTH successful business relationship and product used.
Where are these failed companies with useful products that people are using?
> Achieving PMF is just one stage of a startup's journey. Once PMF is achieved, the company still needs to scale, navigate competition, manage its finances well, adapt to changing market conditions, etc. Mistakes in any of these areas could lead to failure even with a strong PMF.
> For example, one of the first successful smartwatches, Pebble had a great product-market fit with a passionate user base. Yet, they struggled against larger competitors like Apple and Fitbit and eventually had to sell their IP and shut down.
And that’s what’s playing out irl- companies that last are ones that keep investors happy
The product is fungible and incidental - if you can use other means to force product adoption then PMF is irrelevant
And I don't think "keeping investors happy" is the key, either. Plenty of successful founders with unhappy investors.
I'm struggling to see how you could force adoption of a product in a way that matters. The example given was Pebble, who were struggling against Apple. Apple still needed PMF, despite their market dominance. If their product was so bad that it didn't solve the market need, then it would have failed despite their money and effective monopoly. I don't think PMF is irrelevant, it's just not the only necessary thing. You can still fail despite having PMF, but you have to have PMF to succeed.
Why are they there? Has nothing to do with product capabilities
There's even more trash that doesn't get used and we never hear about (or hear about and decide not to use). A lot of that is produced by large companies with big budgets.
It would have been great if he'd incorporated those into the article. I bet there's a ton of interesting stuff to learn from that.
My company (we’re multi-product) has been working on a new product that ticks a lot of the boxes that are proposed here, but that is still nowhere near PMF.
There are > 100 paying customers who pay ~$30k for the product.
There is a small set of these customers who absolutely love the product.
That’s steps 1-3 done.
But… Overall retention is low (varies between 55-60%).
Sales are pretty flat and seem like a real struggle. Customer acquisition cost is 130-150%.
Just because you got these first 3 milestones doesn’t mean that the rest naturally follow.
My view on this product stalling is that it doesn’t really get the results that the customers think it’s going to and they cool on the idea and stop using it, but… you have companies like Snowflake that went to market claiming to be the one data platform to rule them all, which was also a large over-promise (it’s more expensive, slower, complicated than what they promised) but it grew explosively and IPOed.
Even towards the end of the journey that this article describes there’s still major rolls of the dice that affect the outcome.
Assuming you have a yearly terms (which you should, if at all possible), try to identify customers who might churn (using the product less, etc.) and spend some time with them -- literally, just send them an email to hop on a call. Try to understand why they are using the product less. Do the same with the ones who love you. Figure out what is different.
Usually, this will grow into a "customer success" role, but it has to start somewhere.
edit: it also refused my connection on port 25
That's Tautology of the Year material.
Of course, you could be purposefully giving your product away while building the premium, paid-for features. I think that applies to some of these companies, and I'd be more curious about the time from launching that version to paid customers.
This seems really true to me. Though the nature of the search for PMF with more segments changes after passing some milestones. It’s more difficult to make large changes in the product once you have a basic level of traction and growth.
So well said, I never really internalized this until just now
Building a great product is the challenge. Once you choose target customer and problem to solve, PMF is trivial but the hard work is still ahead. iPhone, Falcon 9, Starlink - none of these ever pondered PMF. They set out to build the most batshit amazing product for a specific purpose, and you can add Figma to that list
The whole concept of PMF seems to be based on the lottery-ticket view of startups, "I don't know who is the customer or what they need, but someday I will randomly stumble across it".
Really? Page and Brin were focused on public web pages and links from before Google existed, through their PhD research [1], so switching to intranet seems strange.
Is a dead company just the same as one that never found PMF? Is that how survivorship bias is accounted for?
So, jidoka[0]?
Perhaps it's a shared trait among great makers. Like an industrious person feels their work is never done, a good maker feels they've never fully achieved PMF.
My B2B SaaS Userdoc is going well, but certainly not at the growth level of those AI image generation apps I see all over Twitter