product market fit fgvn 3-2012

CONFIDENTIAL PRESENTATION | PAGE1

Product – Market FitFirst Growth Venture Network

Jeff BussgangGeneral Partner, Flybridge Capital

Senior Lecturer, Harvard Business SchoolMarch 29, 2012


Session 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


Leading Thinkers/Books/Blogs

• Geoffrey Moore: Crossing the Chasm (read this!)

• Steve Blank: Customer Development Process (read Four Steps to the Epiphany)

• Eric Ries: Lean Startups (read this too!)

• Mark Leslie: Sales Learning Curve (HBR article)

• Sean Ellis: Lean Startup Marketing (great blog)

• Tom Eisenmann: Launching Tech Ventures (great blog)


The Lean Startup• Many startups fail because they waste capital and

time developing and marketing a product that no one wants

• Lean startups rapidly and iteratively test hypotheses about a new venture based on customer feedback, then quickly refine promising concepts and cull flops

• Being lean does NOT mean being cheap, it is a methodology for optimizing—not minimizing—resources expenditures by avoiding waste

• Being lean does NOT mean avoiding rigorous, analytical or strategic thinking

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Lean Startup Principles

• No idea survives first customer contact, so get out of the building ASAP to test ideas

• Goal: validation of business model hypotheses, based on rigorous experiments and clear metrics

• Minimum viable product (MVP): smallest set of features/marketing initiatives that delivers the most validated learning

• Rapidly pivot your MVP/business model until you have validation and product-market fit (PMF)

• Don’t scale until you have PMF

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Crossing The Chasm


Where are You?

Before Product-Market Fit: Search & Validation

• Lean startup approach• Hunch-driven hypotheses• Minimum viable product (MVP)• Customer development process• Selling to early adopters• Pivoting• Bootstrapping• Small, founding team• Product-centric culture;

informal roles• Early in sales learning curve

After Product-Market Fit: Scaling & Optimization• Building a robust, feature-rich

product• Crossing the chasm• Metrics, analytics, funnels• Designing for virality &

scalability• Challenges with corporate

partnerships• Building a brand• Scaling the team; more

formal roles• Scaling a sales force

Source: HBS Prof. Tom Eisenmann, J.Bussgang


Tools/Techniques

• Structured idea generation• Business model generation• Customer discovery process• Focus groups• Customer survey• Persona development• Competitor benchmarking• Wireframing• Prototype development• Usability testing• Charter user program• A/B test

• Conversion funnel analysis• Landing page optimization• SEM/SEO optimization• Inbound marketing design• PR strategy• Customer support analysis• Product feature prioritization• Sales pitch• Lead qualification• Bus dev screening• Net Promoter Score• Lifetime value vs. Customer

acquisition costs

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Company

Building

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


“Lessons Learned” Drives Funding

ConceptBusiness

PlanLessons Learned Series A

Do this first instead of fund raising(or raise seed round to test hypotheses…rigorously)

Test Hypotheses

Source: Steve Blank


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”


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? How scale?

• 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”


Product – Market FitFirst Growth Venture Network

Jeff BussgangGeneral Partner, Flybridge Capital

Senior Lecturer, Harvard Business SchoolMarch 29, 2012