🧠 Deep dive — the ultimate guide to product-market-fit
Get 10 startup experts together and you'll get 10 definitions — and none will be actionable. But the product-market fit spectrum is. Let's stage-gate your startup.
Hey friend 👋
You should probably stop worrying about product-market fit.
Despite all the energy around it — and all the theorising, bloviating, and pontificating — it’s the last thing that matters!
Literally.
Once you have PMF, the startup work is done.
So why is it always the next thing we’re trying to find?
It’s time for a better way to think about startup progress.
Let’s dive deep 👇
If you google around or ask the AI for exactly what product-market fit is, you’re likely to get junk like this:
“Product-market fit means being in a good market with a product capable of satisfying that market.” — Marc Andreessen
“…when a man walks up to a bar and tells 10 people about your product.” — Sean Ellis
“…when people who know they want your product are happy with what you’re offering.” — Andrew Chen
“…when you create a product that people want to buy.” — Steve Blank
The takeaway?
Product-market fit is a some kind of hand-wavy art. You know it when you see it.
Ephemeral.
And that’s what makes PMF just not a very useful concept: it’s not actionable.
A more helpful approach? The “spectrum of fit”:
Founder / market fit
Problem / customer fit
Problem / solution fit
Model / market fit
This spectrum describes the process of entrepreneurship, as well as implies basic stage-gating along the way:
Founder / market fit. First, you and your co-founders need a singular passion for (and deep familiarity with) the people and problems within a particular space or market. If you’re not the right team to do this work, nothing else matters.
Problem / customer fit. Next you have to find robust evidence of an severe and urgent unmet need by a growing group of people within your market — and you need a way to clearly identify and efficiently get in front of them.
Problem / solution fit. Then you have to develop a value proposition that resonates reliably strongly with that group of customers — offering a solution they just can’t live without any longer.
Model / market fit. Finally, you work through the validation and customer creation necessary to predictable nail exactly who you charge, how you charge, what you charge, and why all of that works together. It has to become so predictable that it becomes repeatable — and therefore scalable.
The typical definitions of product-market fit usually have it in some inactionable zone somewhere between Problem/Solution and Model/Market fits — but that’s a big gulf!
Get 10 startup experts together and you’ll get 10 PMF definitions — and none will be actionable.
But the PMF spectrum is.
Let’s break it down:
1. Founder / Market Fit
It might be counter-intuitive but the first step in finding product-market fit is a deep dive into who you are and why you’re the best person to solve a particular problem.
You need to be passionate — like really, crazy passionate — about the people and the issues in your chosen market.
Maybe you’ve spent years as a data scientist, pulling your hair out over the inefficiencies in deploying machine learning models.
That frustration? That’s your drive.
Your insider knowledge and genuine irritation with the current solutions make you the perfect person to tackle this problem.
But that doesn’t mean you have to be an industry insider! Many founders are not.
You just need a singular drive — a North Star.
You’re going to be working longer and harder than you ever have before to try turn your cockamamie scheme into a scalable enterprise. It’s gruelling.
So, to be frank… you need a reason to get out of bed every morning and get to work.
Remember the story of Airbnb?
The founders were struggling to pay their rent and ended up hosting guests on air mattresses during a design conference. This personal struggle, coupled with their creative thinking, laid the groundwork for a marketplace that addressed a common need for affordable accommodation.
Once you know the people and problems you want to spend the next few years of your life embedded with, it’s time to get to know them better than anyone else:
Conduct market research
Perform customer interviews
Get to know the big players
You have to become an expert in a market to try to sell in it.
What if you don’t have an idea yet?
Excellent! Reflect on your own experiences and passions. Where do your frustrations overlap with a large and growing market of people with the same problem?
This is the epicentre.
2. Problem / Customer Fit
It’s the right market, but is it the right problem?
Before even designing a potential solution, you need solid proof of an unmet need among a clearly identifiable group of people.
And this is where a lot of founders make a deadly mistake: they’re looking at an important problem, but not an urgent one. This leads to the slow startup suicide.
No one pays for a solution to a non-urgent problem, no matter how severe the pain is.
You need a severe, urgent, unmet need.
And this is the point in the startup process where familiar tools enter the chat:
These all push toward the same end:
A really well defined niche of people
Within a large and growing market of similar people
Whom you can easily and efficiently get in front of
Who have an severe and urgent unmet
That you feel you can solve.
None of which is based on your gut, and all of which is backed by evidence.
For a simple example, let’s look at Dropbox.
They saw a common problem: users needed an easy way to store and share files. By talking to users, they confirmed this need was both widespread and urgent. This validation helped them pinpoint a clear target market of individuals and businesses craving reliable cloud storage.
They then gathered robust evidence that the problem was real by launching a simple landing page test, which garnered tens of thousands of signatures overnight.
Boom.
3. Problem / Solution Fit
Right market, right customer, right problem.
But do you have the right solution?
The goal of the Problem/Solution Fit phase is to validate a value proposition that hits home with your target customers.
And not just a little bit!
It has to slay.
You want a solution your customers feel they just can’t live without anymore. When you show it to them, you see the whites of their eyes pop and they ask how they can buy it right now.
It’s a magic moment.
Discovering and validating that solution is really hard, but it’s not complicated:
Develop an hypothesis.
Analyse, synthesise, rinse, repeat.
In other words: build, measure, learn.
This is a highly iterative process, and one where you should be highly skeptical of early positive results. Remember:
The first principle is that you must not fool yourself and you are the easiest person to fool.
— Richard Feynman
Slack is a great example of this. It started as an internal tool for a game development company, but what resonated was that teams needed a better way to communicate. Their business wasn’t what they thought it was!
To recap:
Create a test and get it into the hands of your customers.
Listen to their feedback, and make adjustments.
Rinse and repeat until you have unbridled enthusiasm.
Then: keep tweaking until you become indispensable.
4. Model / Market Fit
You’ve got the desirability box checked off, and you’ve started making inroads into viability and feasibility, but it’s time to double down.
None of this matters if you can’t turn it into a scalable enterprise.
So the final step in your journey toward product-market fit is aligning your business model with the market. This means finding a predictable, repeatable way to generate revenue that scales.
It’s not just price. It’s charging:
Who
How
Where
When
What
It’s also discovering and validating the optimal mix of business model patterns (freemium, pay-per-use, ultimate luxury, insurance, etc).
And, of course — it’s also ensuring you can do that with a customer acquisition cost (CAC) sufficiently less than the average lifetime value (LTV) of the customer so that you can scale this into an interesting business.
The process for developing model/market fit is fundamentally the same as for problem/solution fit, but instead of testing for general resonance, we’re testing directly for financial metrics:
Buying behaviour
Customer acquisition cost (CAC)
Lifetime value (LTV)
Referral rate
Monthly recurring revenue (MRR)
Net revenue retention (NRR)
Gross margin
etc.
Run experiments. Find optimal revenue models. Seek a path that’s both profitable and scalable. In other words:
Get viable.
Product-market fit isn’t a destination. It’s a process.
This is why it’s better to define it as a stage-gated spectrum.
Finding product-market fit is an iterative process that demands persistence and adaptability. Each step builds on the previous one, creating a robust foundation on which to scale.
Here’s a quick recap:
Founder / Market Fit: Your passion and background make you the right person for this problem.
Problem / Customer Fit: Validate a severe, unmet need through customer discovery.
Problem / Solution Fit: Validate your solution and iterate based on customer feedback.
Model / Market Fit: Find a repeatable, scalable business model.
Put another way: start with a genuine passion for solving specific problems, validate the urgency of those problems with potential customers, develop a solution that truly resonates, and refine your business model to scale efficiently.
And remember:
Product-market fit isn’t a destination. It’s a process.
See you next week,
—jdm
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