journey to product market fit
DESCRIPTION
A step-by-step guide to reaching product market fit, false positives, budget and technologies costs and the logic behind finding the right business case and technology solution. Notes and metrics are from product development and build out for ConsumerBell.com Author: Ellie Cachette www.elliecachette.comTRANSCRIPT
A Deeper Look: Product Market Fit
Ellie Cachette
product market fit: consumerbell, march 2013elliecachette.com page 1
background mission test cases references
P roduct Market Fit is always explained as the “pre-burn,” or the point in which to not increase the burn point of a company. An increased burn often can speed up the time to Product Market Fit, or PMF, but it can be difficult to truly understand at which point the “fit” has actually been “fitted.”
In some spaces, environmental factors can change, adding positive or negative value - but is always paced out.
When you are a market leader, product disrupter or a general business creator, you often have to create a market to create a product to create a fit.
Thought leaders in the space include Ash Muraya, Michael Karnjanaprakorn, Ricky Yean, Sean Ellis and Jeff Busgang.
While everyone agrees on the general theory of product market fit, seeing real life examples of it or data is hard to find.
Here is our story at ConsumerBell of reaching Product Market Fit.
Most agree the growth rate pre-PMF is long and flat. But the question often asked is “just how long?” Our market has been scattered, needing plenty of disruption in several areas, so we had to wonder where exactly our “fit” was. Being a startup, we initially defined “fit” as something someone would pay us within six months.
One could argue we’ve made several products that could have been a hit - had we given the sales cycle more time. However as a startup with minimal burn and without a clearly defined “market,” fundraising was not ideal.
Build, solve and get paying customers was always our motto.
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Our Timelineto Product Market Fit
background mission test cases references
may 2010 - jan 2011 feb 2011 - aug 2012
hypothesis 1
aug 2012 - present
new yorksan francisco san francisco
hypothesis 2
hypothesis 3
pre pm / fit (flat growth) product market fit conversion option second driver
firstdriver
12products built
370ktotal burn
36months
2cross-country moves
The Problem
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What is the problem?
missionbackground test cases references
There was a personal inspiration for solving the problem around product recalls, which will be at the end of this document as a Foreword.
The main quest has been to solve the inefficiencies surrounding product recalls. At the core, we wanted to minimize the risk of class action lawsuits,
which we predict to be a growing space in the future.
We boiled down product recalls into particular business “Hypotheses:”
Recalls are costly & inefficient.
Recalls are dangerous.
Are recalls common enough to pursue a
solution?
Recalls are common.
yes.
Are recalls expensive enough to pursue a
solution?
Recalls are expensive.
yes.
Are human and animal lives at stake?
yes.
4,000 per year $30m-50m eachon average
numerous deaths 1000s injuries
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hypothesis 1 hypothesis 2 hypothesis 3May 2010 - Sept. 2010 Jan. 2011 - Nov. 2011 Jan. 2012 - Jan. 2013
$50,000total costs
$200,000total costs
$120,000total costs
Total Costs in US Dollars & Headcount
missionbackground test cases references
HYPOTHESIS #1Recall information is hard to
find. If we collect it, consumers
will use our service.
HYPOTHESIS #2Manufacturers want control
of their recall information.
HYPOTHESIS #3Retailers need accurate recall
information and will pay for it.
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The Market
missionbackground test cases references
companyfacing
consumerfacing
input
outputtheRecallSpace
9 googlemerchant 12 inventory
monitoring 11 api
8 uploadtool 5 making
safety easier 12 magento
6 website 4 marketplace 4 submit acomplaint
1 submit acomplaint 3 ring
the bell 2 wordpress
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Minimum Viable Product (MVP)
Minimum Sellable Product (MSP)versus
missionbackground test cases references
to understand and calculate what’s interesting to what is sellable.
Even when PMF is achieved, other issues can arise, such as user leakage and access to data changing (as we saw with the Rapleaf scandal).
In industries that need overall disruption, it is confusing what the right PMF is because the environment to culture a PMF isn’t solid.
API
Recall Info
Company Logins
Price Plan
Active Users
CRM Integrations
Buyer Identified
Minimum Viable Product Minimum Sellable Product
mvp vs. msp
transition to growth
growth
We were able to successfully reach Minimum Viable Product (MVP) in all cases. However, the paying customer has always been on the enterprise or retail side - customers unfamiliar with small start-ups. Reaching a Minimum Sellable Product (MSP) much different.
When bootstrapping or running a lean organization, the favorite product methodology is “lean” or to iterate often and quickly. However for enterprise-focused products, there needs to be enough time
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The Journey to Minimum Sellable Product
A Case Study
The biggest indicator to many on the “Journey to PMF” is giving a set time for something to work; if it doesn’t, then pivoting or changing the idea is necessary.
For us at ConsumerBell, we never gave a hard deadline for giving up. We always examined
an idea at length until we had fully explored it and understood it and knew what to do next.
Had we stopped or wiped the drawing board clean for the sake of it, we never would have organically learned about the areas when we should have.
Problem/Solution Fit
Product/Market Fit Scale
focus: validated learningexperiments: pivots
focus: growthexperiments: optimizations
missionbackground test cases references
• Access to engineering; knowledge of engineering• Knowing how much to charge contractors
• Knowing how to explain the product (user marketing)• Understanding basic business principles (like
profitability and how far to take it)
Helpful things pre-PMF
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Helpful things pre-PMF
test casesbackground references
Startup Curve The Startup Curve is an unproven line of motion most startups go through.
First angelinvestor!
Long hours & little capital
Consumer Activity
A Release ofImprovement
The Crash ofIneptitude
Manufacturerinterest
Acquisition ofLiquidity
Upside of Buyer
ThePromised
LandTop 15 Springboard
Top 7 Womenin Tech
Cash Infusion
Press
First sale!$$$$$$$$$
NBC special
mission
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The key to each hypothesis was to understand false positives and areas which to measure the market’s response.
There are so many opportunities and areas that can have a PMF. It excites me to think of a world that will always change. This is probably where the phrase “ideas are cheap” originates from.
There are thousands of ideas to execute and so little time until they expire!
test casesbackground references
Hypothesis Check
mission
Lessons Learned• Matching complaints (aggregating) is difficult.• Broadcasting information is difficult to target and
be effective.
Environmental Factors• Twitter was a fairly new platform, making it easy to get
attention and penetrate. • Facebook was a great channel for sharing important information, but
difficult to get fans as company/brand pages were a new concept.• No feeds or APIs of recall data (CPSC, FDA, etc) existed yet
so getting data was a very manual process.
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dates:
tech:
cost:
may 2010 - june 2010
weebly + ajax
n/a - in-house
june 2010 - august 2010
pieceable
n/a - in-house
august 2010 - sept. 2010
wordpress
$5000
#1 Submit a Complaint #2 Ring the Bell mobile app #3 Submit with feeds
HYPOTHESIS #1Recall information is hard to find, if we collect it then
consumers will use our service (consumer-focused).
PROBLEMS Data structure / organization
Consumer-facing
$5,000 hard costs
$50,000 soft costs
DATES
HEADCOUNT PRODUCTS
May 2010 - Jan. 2011
Two employees
1, 2, 3
test casesbackground referencesmission
Lessons Learned• Others easily mistook our company or product for a non-profit• Companies have no desire to have more work (new app, new tool,
new corporate rules around it)
Environmental Factors• Ahead of its time• Social media wasn’t mature yet• Manufacturers were not familiar with external web-based apps
Takeaway• Spent too much time on “Marketplace” (6 months)• Marketplace wasn’t executed properly in terms of initial customer
dates:
tech:
cost:
january 2011 - march 2011
php
n/a - in-house
march 2011 - november 2011
ruby on rails
$20,000
january 2011 - november 2011
weebly + iwidget
$100 + in-house
#4 Submit a Complaint PHP #5 Marketplace #6 Making Safety Easier
january
february
march
april
may
june
july
august
september
october
november
december
$3000
$5000
$38,000
$23,000
$22,000
$13,000
$38,000
$13,000
$15,000
$15,000
$9000
$6000
month costs
HYPOTHESIS #2Companies (Manufacturers) want control of their
recall information and consumers complaints.
PROBLEMS Manufacturer education, false positives
(expressed manufacturer interest was mislead-
ing), understanding manufacturer culture
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$20,000 hard costs
$200,000 soft costs
DATES
HEADCOUNT PRODUCTS
March 2011 - May 2012
Six employees
4, 5, 6
test casesbackground referencesmission
Lessons Learned• Retailers most at risk: in between consumers & manufacturers• Multiple products give multiplied risk• Need automated format for recall information• Shipping recalled items violates Amazon Terms of Agreement
Environmental Factors• E-Commerce growth • Increasing online inventories• Mature platforms for easy integration (Shopify, Magento)
dates:
tech:
cost:
january 2012 - july 2012
php
n/a - in-house
may 2012 - september 2012
xls
n/a - in-house
october 2012
php
n/a - in house
#7 Dual User Site #8 Inventory Monitoring #9 Upload Tool
dates:
tech:
cost:
november 2012
php
n/a - in-house
january 2013
php
n/a - in-house
february 2013
magento + php
$20,000
#10 Google Merchant #11 API #12 Magento
HYPOTHESIS #3Retailers need accurate recall information and will pay for it.
PROBLEMS Create urgency of product, figuring out price point
and faster user acquisition cycle.
Company-facing
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DATES
HEADCOUNT PRODUCTS
Jan. 2012 - Feb. 2013
Three employees
7, 8, 9, 10, 11, 12
$20,000 hard costs
$40,000 soft costs
test casesbackground referencesmission
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Next steps: out-winning any potential competitors, not selling the company too soon, leveraging lessons learned and the connections made in the process.
When we started ConsumerBell, we wanted to ensure public safety and make sure no one would be painfully affected by a recall in the future like one of our founders experienced (see foreword for more info).
While new as an organization, we did some smart things.
Picked a great attorney at tech firm & set up a C-Corp.
Moved cross-country.Gained another community and
set of expertise.
Did not accept COO.An investor pushed a COO onto us,
but we declined. Had we brought
them on, we would not have
entered hypothesis 3.
Kept company lean.
B2B SaaS is now “hot.”
referencesbackground test casesmission
Key Observationsand Smart Things we did
1 cease & desist
5fired employees
3and advisors
2lawsuit threats:
120,000miles traveled
We didn’t overbuild in tech for Hypothesis 3, unlike Hypothesis 2.
We “followed the pain.” E-commerce clients walked us
through the process.
Once there is a PMF, another set of issues is uncovered:• Scaling the product
• Fastest distribution models
• Talent for above steps
• Understanding of true
customer cost & the
maximum value to charge
Initial investor feedback told us we did not have a market.
We would not have found our PMF if we had given up after hypothesis #2.
We would not have found PMF if we kept listening to false positives
from hypothesis #2 (increased interest, high price points).
In cases of high burn, it got us to PMF faster.
In cases of slow burn, our team was small & reliant on the CTO & myself
(it’s these cases that show the “value” of a founder & independence from other labor or capital drains)
The more time out of the office the more product progress was made:
“talk to your customers”
If you can’t sell it, marketing materials can’t sell it. People will give advice around patents, but there will be too many changes.
One thing that was in common with each hypothesis is that our margins kept improving as we would have hypothesis which signals ability to estimate with accuracy.
Each hypothesis took roughly a year to flush out. As a first mover in a space, the key in the beginning is to learn as fast as possible, not as cheap as possible - all the while positioning the company for flexibility.
Time cannot be wasted creating supporting marketing materials until at least one client had paid for the service.
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referencesbackground test casesmission
Jeff Bussganghttp://www.slideshare.net/bussgang/intelligently-class-12-2012-15581410
Mike K Bloghttp://www.mikekarnj.com/blog/2012/11/05/reaching-the-startup-holy-grail-product-market-fit/
Ahava Studios & Presshttp://www.ahavastudios.com
Foreword
My father was infected with HIV and later died from a contaminated product. I wanted to make sure it never happened again so I had to figure out what went wrong in his situation. It was discovered later that the true problem was the recall of the contaminated product was poorly managed.
In late 2009, while having a full-time job, I started to investigate why recalls are managed poorly and all the problems surrounding recalls.
In May 2010, I started ConsumerBell full-time to address and solve the problem.
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referencesbackground test casesmission
Resourcesand thank yous
Founder’s Note: Ellie Cachette