Welcome to the DataFox Blog

Illusion and Reality in Product Market Fit

Alison Wagonfeld, operating partner at Emergence Capital, interviews Hiten Shah, co-founder of Quick Sprout, and David Cancel, CEO of Drift, on finding product-market fit. The three talked about focusing on the customer, how to hire in the early days, and the dangers of relying on friends and family as early customers.

Over the next three days, DataFox will summarize the SaaStr 2016 panels. If you miss the tactical theater or strategy stage, are networking on the ground, or didn’t get a chance to attend this great conference, we’ve got you covered.

View all SaaStr 2016 panel summaries

Special thanks to Jason Lemkin of SaaStr for putting on this conference and giving us the chance to publish these summaries.

In a nutshell:

  • Optimize for learning and hire generalists, especially as you’re still determining product-market fit.
  • You can lose product-market fit as easily as you find it, so invest in customer success.
  • Get people to pay for your product. The difference between charging $2 and giving something away for free is huge.

How to determine product-market fit

Cancel argues that revenue is the gold standard in determining product-market fit: having lots of non-paying users may give you a false positive, but if people are willing to pay for your product, then you’re on to something. Shah, on the other hand, says you can focus on other factors early on - inbound requests, social media activity, and attention from influencers, for example.

It’s important, though, to validate your ideas early and often. Your ego can quickly get wrapped up in the product, blinding you to the fact that you’re looking at the wrong persona, or simply building something that isn’t valuable.

Cancel noted that retention is just as much of an indicator of product-market fit as revenue. Shah reflected that achieving fit doesn’t mean you’ll keep it, and that listening to customers and understanding why they switch in or out will help you refine your value proposition.

Hiring a team that can pivot quickly

Cancel and Shah recommended that you avoid hiring specialists when you aren’t sure of what your product will look like. They had a few specific hiring tips, including:

  • Hire generalists who are able to experiment and iterate rapidly.
  • Bring in people with different skill sets and experiences, to get a new set of eyes on your product and bring fresh insights.
  • Hold off on scaling until you know what you’re building.

(While we’re on the subject, DataFox is hiring too!)

Validating your business with paying (and non-paying) customers

Finally, the pair had some thoughts around how paying and non-paying customers can validate your product-market fit:

  • Fund your business on cash flow until you hit product-market fit; use venture funding to scale, not validate, your ideas.
  • It’s fine to get customers to pay before you actually have a product, but delivering on paid value isn’t enough - you have to ensure that you retain those customers.
  • Both Cancel and Shah warned against relying on friends and family for early revenue. As users, they’re fine, but if you’re getting money from personal relationships, you need to take a look at whether objective observers would find it valuable.  

Check out all of our SaaStr panel summaries here, follow us on Twitter at @datafoxco to see live tweets of the event, and visit SaaStr itself for more great content.