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Product – Market Fit

First Growth Venture Network

Jeff Bussgang (Flybridge Capital),

Ari Paparo (Nielsen)

March 10, 2011

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Panel Objectives

• Explain what people mean when they use the phrase, “Product Market Fit” (PMF), plus:

– Customer Development Process

– Lean Start-Up Theory

• Help you devise your approach to achieving PMF

• Making sure you don’t waste a lot of money before you find PMF

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Leading Thinkers

• Geoffrey Moore: Crossing the Chasm

• Steve Blank: Customer Development Process

• Eric Ries: Lean Startups

• Mark Leslie: Sales Learning Curve

• Sean Ellis: Lean Startup Marketing

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Where Are You?

Before-Product Market Fit

• Minimum viable product (MVP)

• Customer development process

• Selling to early adopters

• Lifetime value of customer

• Pivoting

• Bootstrapping

• Small, founding team

• Product-centric culture

After-Product Market Fit

• Building a robust, feature-rich product

• Crossing the chasm

• Metrics, analytics, funnels

• Designing for virality & scalability

• Scaling a sales force

• Challenges with corporate partnerships

• Building a brand

• Scaling the exec team

Source: HBS Prof. Tom Eisenmann, J.Bussgang

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Crossing The Chasm

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Lean Startup Principles

• Nail it then scale it

• Rapid hypothesis testing about market, pricing,

customers (customers & markets unknown)

• MVP (Minimum viable product)

• Low burn by design (no scaling until revenue)

• Metrics, iteration, agile development

• Learn fast (fail fast)

Source: Eric Ries, Sean Ellis

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CompanyBuilding

Customer Development

CustomerDiscovery

Customer Developmentvs. Product Development

Concept/Bus. Plan

Product Dev.

Alpha/Beta Test

Launch/1st Ship

Product Development

CustomerValidation

Customer Creation

Source: Steve Blank

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Foursquare Case Study

• From inception, best practices in PMF:– MVP

– Product-centric culture and founding team

– $1.35m Series A

– Responded to every email, tweet

– Hunch-driven, not metrics-driven

– The founders were the target customer

• Contextual factors– Tech trends enabled success: iPhone/apps, LBS/GPS, social media

– Impact of geography (NYC), launch (SXSW) and VC (Fred Wilson)

– Game mechanic, playful, entertaining

Source: Pikorski, Eisenmann, Bussgang, HBS Case Study: “FourSquare”

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Foursquare Case Study (2)

• Post PMF Challenges:– Tech founder as scalable CEO

– $20m Series B - expectations

– Pressure to be more analytical

– Competitive response to Facebook, Yelp

– The founders no longer can do it all

– Monetization pressures – when to run experiments?

• Questions:– Who is foursquare’s customer – the consumer or the business?

– What social failure is foursquare solving?

– When should foursquare focus on monetization vs. consumer scale?

– Has foursquare crossed the chasm?

Source: Pikorski, Eisenmann, Bussgang, HBS Case Study: “FourSquare”

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“Lessons Learned” Drives Funding

ConceptBusiness

PlanLessons Learned

Series A

Do this first instead of fund raising

Test Hypotheses

Source: Steve Blank

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Product – Market Fit

First Growth Venture Network Panel

Jeff Bussgang (Flybridge Capital),

Ari Paparo (Nielsen)

March 10, 2011