Iterate to innovate: The founder’s guide to product-market fit


Product-market fit is the milestone every successful startup needs to hit. This guide gives you insight into how to gauge market response and adjust your approach as you find the sweet spot of market demand and business growth.
Product-market fit (PMF) is the key to startup success. But what exactly is PMF?

Investor Marc Andreessen describes PMF as, “being in a good market with a product that can satisfy that market.”

I’ve had a lot of experience in the startup trenches, trying to find PMF — including at my former company, Nimble Storage.

PMF means creating a product that enough people want to buy to achieve your company's growth vision. If you want to build a billion-dollar company, you need to create a product that will get you there within your desired timeframe. That's the essence of PMF — making something people truly want, at a scale that matches your ambitions. 

Get this right, and you're on the path to startup glory. You can make a lot of other mistakes and still reach your goals. But if you don’t have PMF, it doesn’t matter how great your idea is — you’re not going to get where you want to go.

Let’s get into the details.

Why does PMF matter?

PMF is make-or-break for any startup. Here are three key reasons why reaching it is so crucial:
  • Lack of PMF is the most common cause of startup failure. No matter how much funding you raise or how stellar your team is, you’re not going to thrive without it.
  • Sales and marketing costs will dwarf product development costs over time. Many founders don't realize this, but over time, sales and marketing will be far more expensive than developing your product. Getting the product right is essential before you sink money into advertising, PR, sales teams and other go-to-market efforts. I’ve seen too many technical founders blame Sales for lack of success when the simple fact is that enough customers don’t want their product.
  • You avoid wasting resources selling the wrong product. Too many startups rush into launching before they have PMF, only to realize later that they’ve built something no one wants. This leads to endless, expensive pivots. It's far better to put in the work upfront to find the right fit before blowing your budget selling a product that won't get traction.
Getting PMF aligns your solution with real market demand and sets you up for sustainable growth.

But finding your footing will also depend on what kind of market you’re entering.

PMF in existing markets vs. new markets

Achieving PMF in an existing market is often easier. At Nimble, we had a big advantage when we were getting started: There was already a storage market, and we had a deep understanding of that audience, what their needs were and what they were already buying. We just needed to figure out where our product stood in comparison to our competition.

Some companies also take an existing market and expand it when they disrupt the market with new technology that creates a better customer experience. The iPod entered a modest market and transformed it into a colossal one. Apple’s secret with the iPod was being exponentially better than the competition. The same goes for Google for search engines and Facebook for social networking.

As a rule of thumb, aim to be at least 10 times better than the competition to capture an existing market. Significantly improving what's already available can turn an existing market into your market.

Venturing into a new market, on the other hand, can be fraught with uncertainties. There are no existing customers, no clear market leaders to challenge, and often no blueprint on what to build. This is where customer intimacy becomes crucial. It is absolutely possible to gain a foothold in a new market. Uber, Amazon Web Services, VMware and Slack all created new markets from scratch.

These products succeeded because they were intimately aware of potential customer needs — often before the customers themselves were. Dropbox, for example, offered simplicity and breadth in file syncing, something investors initially couldn't grasp due to the failure of previous, less user-friendly products. To succeed in a new market, concentrate on understanding and meeting unrecognized customer needs. You’ll need to offer innovation that resonates so profoundly that it shapes the market itself.

How do you know you’ve achieved PMF?

Trying to figure out if you’ve hit PMF can be challenging, but customer engagement can give you a tangible metric.

I’ve had hundreds of these types of conversations, and over time, I’ve learned to gauge the depth of customer interest and investment. You’re looking for more than just a cursory nod of approval — you want the potential customer to get excited and be willing to engage.

You’re seeking a commitment: Will prospects use the product once it’s available? Can you count on them to be a beta? You want customers who are ready to take a step forward with you. If, by the end of your discussion, they’re eager to be beta testers or run a POC (proof of concept), that's a powerful signal you've struck a chord.

Of course, this level of engagement doesn’t happen overnight. It requires customer intimacy and a deep dive into their current frustrations and needs, which should ideally occur before any major engineering efforts begin. It’s this upfront investment in understanding and solving real problems that position you for PMF — when customers are interested and ready to act.

What to do if you’re struggling to find PMF

If customers aren't resonating with your offer and you’re not finding PMF, you’ll need to iterate. You have three levers to pull: your product, your messaging or your target customer.

If you’re thinking about pivoting, consider: 
  • Rethinking your product: Is there a feature missing? Is the user experience intuitive enough? Most often, it's the product itself that needs adjustment.
  • Refining your messaging: Perhaps you’re not communicating the full value of your product. Consider changing your messaging to highlight how your product solves specific pain points.
  • Reassessing your target customer: Maybe the customers you thought would need your product actually don't — but there might be another group that does. Broadening or shifting your target market can sometimes help you uncover new opportunities.
The key to finding PMF — and knowing when and how to pivot — is building a community. This community can start with relevant friends and acquaintances or people attracted to your blogs, tweets or vision. These are the people who will give you feedback on how they currently do things and tell you how your solution could be significantly better. When you have a product or prototype, this community will become your beta testers.

It’s best to build a community even before you build a product. If you can’t even build a community around your product idea, that’s a sign you should consider pivoting. The good news is that it’s cheapest to pivot when you don’t yet have a product. Once the community engages, you can lean on them to evaluate the product, messaging and targeting.

This iterative process is essential, so prepare your team and your investors to embrace it, especially in the early stages of your company. Pivots aren’t always prompted by competition — genuine feedback should also guide your decisions. Iteration could mean a complete overhaul or subtle tweaks, but it's all aimed at aligning your product more closely with market needs.

In "The Lean Startup," Eric Ries says pivoting is a way of life for startups for this very reason. It's a cycle of proposing, testing and refining — not just the product but also how it's presented and to whom it's directed. Listen to your customers, and be prepared to pivot based on their feedback, because that's how you'll inch closer to PMF.

Iterate to innovate: Your guide to navigating PMF

Here are some key things to think about in your journey to nailing down PMF:

  • Defining PMF involves aligning a product with a market large enough to fulfill your growth goals.
  • In existing markets, leverage deep market knowledge to create products that are significantly better than what's currently available.
  • For new markets, prioritize deep customer conversations to uncover and meet unmet needs.
  • Build a community that will give you feedback even before you build a product
  • Lack of customer engagement is a prompt to reevaluate and iterate on key aspects of your business.
  • Adopt a mindset of flexibility and be ready to pivot as needed to refine your PMF.

Have any ideas or suggestions to improve this article?