Finding product-market fit (PMF) is an evergreen challenge for early-stage startups. It is the process of ensuring that your product resonates with your target market by addressing a genuine demand. We will delve into the nuanced journey of discovering and aligning PMF with your company's values, emphasizing the importance of staying focused, adaptable, and true to your brand's identity.
The definition of PMF often seems elusive, but it is crucial to make it tangible for African startups. It doesn't imply scaling to millions of customers instantly. Instead, it means finding evidence that your product or service resonates with a specific customer segment.
According to Shola Akinlade, CEO of Paystack, his company achieved product-market fit between 2018 and early 2019, which is more than two years after launch. “My definition of product-market fit is when the customers you want, want you,” Shola said on a webinar by Founders Factory Africa. “The indicator was being able to finally attract the patronage of the companies we wanted to serve.”
This metric evolves with your startup's stage, with Series A marking the critical point where PMF becomes imperative. Investors seek moderate consumer usage at this stage, and as you approach a Series B round, assessing your product's position relative to the total addressable market (TAM) is vital.
“Attaining product-market fit before series A is a clear indicator that the business is on the way to success and profitability,“ David Messan, CEO of First Founders, a venture studio told Bendada. “Because there is demand and the product is better than the alternative.”
“If there's no product-market fit then the product isn't resonating with its core audience, then there's no point in scaling because you are wasting money,” says Peter Oriaifo, Principal at Oui Capital. “Series A is when to start scaling traditionally so product market fit is imperative.”
At its core, PMF represents the elusive sweet spot where your product meets market demand. However, this definition evolves as your startup progresses. In the early stages, PMF might entail having a group of dedicated users who find value in your offering.
However, as you scale, the definition becomes more quantitative, involving metrics like revenue, churn rate, and customer acquisition cost. This evolution mirrors your startup's maturity and the expectations of investors. “There are different ways to asses product market fit but an easy one is if people are paying for the product and coming back consistently. In large numbers,” Oraifo added.
“As you can imagine a company earning $3 million revenue from loyal customers is believed to have product market fit, hence why many growth investors see $3 million as a key revenue milestone,” according to Oraifo.
“In the case where a startup has not gotten to product market fit yet at series A, this might pose a bit of doubt,” says Messan. “There would need to be a new approach to customer development.”
The PMF journey is a winding road marked by experimentation and discovery. Initially, your product idea is a hypothesis. To validate it, you must embark on a journey of experimentation. Start by identifying your target audience and their pain points. Then, develop a minimal viable product (MVP) to test your assumptions. This iterative process involves gathering feedback, making adjustments, and constantly refining your product.
According to David Messan, investors become committed when you demonstrate what he calls the “customer’s customer syndrome” - this means when your customer begins to sell for you, then you are very well on the path towards product market fit which attracts significant investment to scale.
Aligning PMF with Company Values
Discovering PMF isn't solely about the numbers; it's also about aligning it with your company's values. Metrics that echo your brand's principles make your product more compelling to both users and investors. Monthly active users, for instance, might be misleading; a user's mere presence doesn't necessarily indicate engagement or advocacy. Startups must find metrics that reflect their core values and resonate with their audience.
While quantitative metrics like revenue and user growth are essential, they must align with your company's values. Start by defining your core values. Are you committed to sustainability, inclusivity, or innovation? These values should guide your PMF strategy. For instance, if sustainability is a core value, consider metrics like the environmental impact of your product or the percentage of customers who appreciate your eco-friendly initiatives.
It's important to strike a balance between staying true to your values and achieving growth. While values provide a moral compass, growth fuels your ability to make a more significant impact. Finding this equilibrium is challenging, but it's a hallmark of successful startups.
Maintaining focus is paramount as startups navigate their PMF journey. Successful products often have a narrow focus and excel in delivering on specific value propositions. To build a better product and impress investors, you must channel all your energy and resources into this focus. It's crucial to safeguard your startup's precious resources and not dilute your efforts by chasing too many opportunities.
One strategy to maintain focus is to build a minimum viable product (MVP). An MVP is a stripped-down version of your product that includes only the essential features. It allows you to test your concept with real users and gather valuable feedback. By focusing on the core value your product provides, you can iterate and refine your offering more effectively.
Feature creep, the gradual addition of unnecessary features, occurs when the gradual addition muddles your product's original intent. Many startups are enticed by the idea of catering to every user's whims, resulting in a bloated, confusing product that loses its clarity and purpose.
Peter Oriaifo says this reflects poor product strategy and investors prefer to see founders building efficiently rather than just jumping on trends. To navigate this challenge, it's crucial to stay true to your core values and focus on addressing your users' most pressing needs. Rather than succumbing to the allure of endless features, prioritize those that align with your vision and bring tangible value to your target audience. This disciplined approach safeguards your PMF from veering off course and ensures a more purposeful product evolution.
Adapting and Scaling
The world of technology is in perpetual motion, and PMF isn't a static target. Startups must be prepared to adapt and refine their PMF as technology evolves or they scale. However, maintaining a focused approach is essential even during these transformative moments. The best products continuously communicate with consumers, gather feedback, and evolve in response to changing needs while staying true to their core values.
In today's digital age, adaptation is essential for survival. African startups must embrace change and be agile in responding to shifting market dynamics. This agility extends to both technological innovations and evolving customer expectations because the point where a startup starts scaling is a thrilling but challenging phase. It's vital to scale with purpose, ensuring that your growth aligns with your PMF and core values. Scaling without a clear strategy can lead to misalignment and inefficiencies. Consider how each expansion decision contributes to your mission and values.
Expanding into new segments should be a strategic decision based on observed consumer demand rather than a hasty reaction to perceived opportunities. Waiting to see organic consumer traction signals to investors that you're responsive to market dynamics. This will increase investor confidence and willingness to support your growth strategies.
To ensure the sustainable growth and alignment of your startup with its product-market fit and values, it's essential to adopt a demand-driven expansion strategy. This means closely tracking user behavior and actively soliciting their feedback.
By diligently monitoring your audience's interactions with your product or service, you can detect emerging patterns and pinpoint areas of high interest. When you notice a significant surge in demand for a specific feature or offering, it becomes a clear indicator that further exploration and expansion in that direction are warranted. This approach not only minimizes risks but also solidifies your startup's commitment to delivering value that resonates with both your PMF and your core values.
Aligning PMF with your company's values isn't just a strategic choice; it's a commitment to delivering value to your customers. Startups that find this alignment and maintain focus are better positioned to navigate the evolving tech landscape successfully. As technology continues to reshape markets, it's crucial to adapt while staying true to your brand's identity and principles.