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YOU’RE TOO FOCUSED ON
PRODUCT/MARKET FIT
SaaSFest 2016 Presentation
Brian Balfour - http://reforge.com - http://coelevate....
SLIDES AVAILABLE AT…
HTTP://COELEVATE.COM/SAASFEST16
Brian Balfour - http://reforge.com - http://coelevate.com
“Product/market fit means being in a good
market with a product that can satisfy that
market.”
- Marc Andreessen
“PRODUCT MARKET FIT IS THE ONLY THING THAT MATTERS”
The mantra has led to tunnel vision among many entrepreneurs.
Copyrigh...
THIS TUNNEL VISION LEADS TO
FOUR INCORRECT THOUGHTS…
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://...
BAD THOUGHT #1
PRODUCT FIRST, MARKET SECOND
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
“We built this amazing virtual goods p...
What’s Needed To Build $100M+ Company
MARKETPRODUCT
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
Solution then Problem
LANGUAGE MATTERS
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
PRODUCTMARKET
What’s Needed To Build $100M+ Company
IF WE START WITH THE MARKET,
WE START WITH THE PROBLEM
FIRST THEN THE SOLUTION
Copyright: Brian Balfour and Reforge Inc. h...
1Market <> Product Fit
We need to think about the market first, not the product.
What’s Needed To Build $100M+
BAD THOUGHT #2
PRODUCT AND DISTRIBUTION SILOS
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
“We are focused on product/market fit r...
Most Think About Them In Silos
PRODUCT ACQUISITION
IF YOU TREAT THE TWO IN ISOLATION YOU’LL
END UP WITH SQUARE PEG -> ROUND HOLE
PRODUCTS ARE BUILT TO TAKE
ADVANTAGE OF SPECIFIC
CHANNEL
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, htt...
Products Built For Channels
Virality
1. Quick Time To Value - Virality needs short cycles to work which requires QTV.
2. B...
As new channels emerge, past companies are destroyed and new companies are
created because of product <> channel fit.
New C...
“The kitchen sink approach
doesn’t work.  Most companies
get zero distribution channels to
work.  If you get just one
chan...
%OFTOTALDISTRIBUTION
CHANNELS
The Power Law Of Distribution
Power Law of Distribution
Most high growth companies get 70% o...
Power Law Examples
TripAdvisor, Yelp, Glassdoor B2C Content/SEO
Facebook, WhatsApp,
Evernote, Dropbox, Slack
Virality
Supe...
Think About Them Together
PRODUCT ACQUISITION
PRODUCTMARKET
What’s Needed To Build $100M+ Company
CHANNEL
2Product <> Channel Fit
Products are built to tap into specific channels. You can’t treat the two in silos.
1Market <> Prod...
BAD THOUGHT #3
CHANNEL AND MODEL SILOS
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
“We are going to create a $25/user tie...
MODELS ARE BUILT TO FIT WITH
A CHANNEL
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
The ARPU <-> CAC Spectrum
LOW
ARPU
CAC
HIGH
ARPU
CAC
Viral
B2C SEO
Paid
Enterprise
Sales
B2B Content
Inside Sales
The ARPU <-> CAC Spectrum
LOW
ARPU
CAC
HIGH
ARPU
CAC
Viral
B2C SEO
Paid
Enterprise
Sales
B2B Content
Inside Sales
Dangerous
The ARPU <-> CAC Spectrum
LOW
ARPU
CAC
HIGH
ARPU
CAC
Viral
B2C SEO
Paid
Enterprise
Sales
B2B Content
Inside Sales
Dangerou...
The ARPU <-> CAC Spectrum
LOW
ARPU
CAC
HIGH
ARPU
CAC
Viral
B2C SEO
Paid
Enterprise
Sales
B2B Content
Inside Sales
Dangerou...
The ARPU <-> CAC Spectrum
LOW
ARPU
CAC
HIGH
ARPU
CAC
Viral
B2C SEO
Paid
Enterprise
Sales
B2B Content
Inside Sales
Dangerou...
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
LOW
ARPU
CAC
HIGH
ARPU
CAC
The ARPU <-...
PRODUCTMARKET
What’s Needed To Build $100M+ Company
CHANNELMODEL
Channel <> Model Fit
Specific channels fit with specific models. 3
2Product <> Channel Fit
Products are built to tap into spe...
BAD THOUGHT #4
MODEL AND MARKET SILOS
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
“On it!”
“Build a new $100M line of bu...
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
LOW
ARPU
CAC
HIGH
ARPU
CAC
One Year In...
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
“Wait, these customers don’t look like...
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
Credit: Point Nine Capital
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
Credit: Point Nine Capital
PRODUCTMARKET
CHANNELMODEL
What’s Needed To Build $100M+
X
PRODUCTMARKET
CHANNELMODEL
Market or Model?
1. Choose to
keep the
model.
2. Change
the market.
PRODUCTMARKET
CHANNELMODEL
Market or Model?
2. Change
everything
else.
1. Choose
the market
PRODUCTMARKET
CHANNELMODEL
We Chose The Market…
Cut The $10
Tier
Doubled
Down on
Content +
Inside Sales
Shifted $10
Featur...
THE END RESULT WAS
GROWING FROM $0 - $10M ARR
IN 2 YEARS.
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, ht...
Channel <> Model Fit
Specific channels fit with specific models. 3
2Product <> Channel Fit
Products are built to tap into spe...
PRODUCTMARKET
CHANNELMODEL
What’s Needed To Build $100M+
Example In The Email Marketing Space
Product Market Model Channel
Marketo
Email Marketing
(Heavily Customizable)
Enterpris...
THE FITS ARE ALWAYS
CHANGING
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
The “Fits” Are Constantly Evolving and Moving
PRODUCTMARKET
CHANNELMODEL
WHEN ONE COMPONENT
CHANGES, THE OTHERS NEED
TO CHANGE WITH IT
Copyright: Brian Balfour and Reforge Inc. http://reforge.com...
Happens more often in B2C, but will happen in B2B
Product/Channel Fit Breaking
Initial Adapts
‣ Pinterest grows via
viral ...
THEY BREAK MORE OFTEN IN B2C
BUT FOR B2B…
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.c...
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
Outbound Email
Becoming saturated, facilitated by the
widespread use of sales automation tools.
Content Marketing
Hitting ...
HAVE HYPOTHESES FOR THE
OTHER COMPONENTS. DON’T
THINK ABOUT THEM IN SILOS.
Copyright: Brian Balfour and Reforge Inc. http:...
HTTP://COELEVATE.COM/SAASFEST16
Brian Balfour - http://reforge.com - http://coelevate.com
THANKS!
Brian Balfour - http://reforge.com - http://coelevate.com
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You're Too Focused on Product/Market Fit - Brian Balfour at SaaSFest 2016

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Over the past ten years, software gurus have been preaching the notion that you need to find product/market fit. Balfour presents an extremely cogent argument that because of the speed of technology now, this advice is no longer valid. In reality, you need to find market, product, channel, model fit (in that order). Balfour lays out his argument in this presentation at Price Intelligently's SaaSFest 2016 by cataloging his experience over his career and view of the market.

Published in: Leadership & Management

You're Too Focused on Product/Market Fit - Brian Balfour at SaaSFest 2016

  1. 1. YOU’RE TOO FOCUSED ON PRODUCT/MARKET FIT SaaSFest 2016 Presentation Brian Balfour - http://reforge.com - http://coelevate.com
  2. 2. SLIDES AVAILABLE AT… HTTP://COELEVATE.COM/SAASFEST16 Brian Balfour - http://reforge.com - http://coelevate.com
  3. 3. “Product/market fit means being in a good market with a product that can satisfy that market.” - Marc Andreessen
  4. 4. “PRODUCT MARKET FIT IS THE ONLY THING THAT MATTERS” The mantra has led to tunnel vision among many entrepreneurs. Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
  5. 5. THIS TUNNEL VISION LEADS TO FOUR INCORRECT THOUGHTS… Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
  6. 6. BAD THOUGHT #1 PRODUCT FIRST, MARKET SECOND
  7. 7. Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com. “We built this amazing virtual goods platform, and now going to sell it to games, social networks, dating sites, and more.”
  8. 8. What’s Needed To Build $100M+ Company MARKETPRODUCT
  9. 9. Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com. Solution then Problem
  10. 10. LANGUAGE MATTERS Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
  11. 11. PRODUCTMARKET What’s Needed To Build $100M+ Company
  12. 12. IF WE START WITH THE MARKET, WE START WITH THE PROBLEM FIRST THEN THE SOLUTION Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
  13. 13. 1Market <> Product Fit We need to think about the market first, not the product. What’s Needed To Build $100M+
  14. 14. BAD THOUGHT #2 PRODUCT AND DISTRIBUTION SILOS
  15. 15. Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com. “We are focused on product/market fit right now, once we have that we’ll test a bunch of different acquisition channels.”
  16. 16. Most Think About Them In Silos PRODUCT ACQUISITION
  17. 17. IF YOU TREAT THE TWO IN ISOLATION YOU’LL END UP WITH SQUARE PEG -> ROUND HOLE
  18. 18. PRODUCTS ARE BUILT TO TAKE ADVANTAGE OF SPECIFIC CHANNEL Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
  19. 19. Products Built For Channels Virality 1. Quick Time To Value - Virality needs short cycles to work which requires QTV. 2. Broad Value Prop - Value prop needs to be applicable to large % of users network (branching factor) 3. Network Makes Product Better - Product value gets better with more of your network on it. Paid Marketing UGC SEO 1. Quick Time To Value - Users have less patience to find value when clicking on an ad. 2. Med to Broad Value Prop - Value prop needs to be broad enough due to targeting constraints. 3. Transactional Value - Product is built to extract transactional value. 1. UGC - Users create millions of pieces of unique content by using the product. 2. Motivation To Contribute - Product needs to have motivation to contribute.
  20. 20. As new channels emerge, past companies are destroyed and new companies are created because of product <> channel fit. New Channels Create New Companies VR ??? Social MobileCasual
  21. 21. “The kitchen sink approach doesn’t work.  Most companies get zero distribution channels to work.  If you get just one channel to work you have a great business.  If you try for several but don’t nail one, you’re finished. Distribution follows the power law.” - Peter Thiel
  22. 22. %OFTOTALDISTRIBUTION CHANNELS The Power Law Of Distribution Power Law of Distribution Most high growth companies get 70% or more of their acquisition from one channel during their early life. Channel One Channel Two Channel Three Channel Four
  23. 23. Power Law Examples TripAdvisor, Yelp, Glassdoor B2C Content/SEO Facebook, WhatsApp, Evernote, Dropbox, Slack Virality Supercell, DraftKings, Squarespace Paid Marketing
  24. 24. Think About Them Together PRODUCT ACQUISITION
  25. 25. PRODUCTMARKET What’s Needed To Build $100M+ Company CHANNEL
  26. 26. 2Product <> Channel Fit Products are built to tap into specific channels. You can’t treat the two in silos. 1Market <> Product Fit We need to think about the market first, not the product. What’s Needed To Build $100M+
  27. 27. BAD THOUGHT #3 CHANNEL AND MODEL SILOS
  28. 28. Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com. “We are going to create a $25/user tier to increase LTV and acquire customers via content marketing.”
  29. 29. MODELS ARE BUILT TO FIT WITH A CHANNEL Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
  30. 30. The ARPU <-> CAC Spectrum LOW ARPU CAC HIGH ARPU CAC Viral B2C SEO Paid Enterprise Sales B2B Content Inside Sales
  31. 31. The ARPU <-> CAC Spectrum LOW ARPU CAC HIGH ARPU CAC Viral B2C SEO Paid Enterprise Sales B2B Content Inside Sales Dangerous
  32. 32. The ARPU <-> CAC Spectrum LOW ARPU CAC HIGH ARPU CAC Viral B2C SEO Paid Enterprise Sales B2B Content Inside Sales Dangerous Too Much Friction The monetization tends to be too much friction to take the advantage of the low CAC channels.
  33. 33. The ARPU <-> CAC Spectrum LOW ARPU CAC HIGH ARPU CAC Viral B2C SEO Paid Enterprise Sales B2B Content Inside Sales Dangerous ARPU Doesn’t Support CAC Your ARPU doesn’t support the higher CAC channels.
  34. 34. The ARPU <-> CAC Spectrum LOW ARPU CAC HIGH ARPU CAC Viral B2C SEO Paid Enterprise Sales B2B Content Inside Sales Dangerous $25/userFree $10/user
  35. 35. Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com. LOW ARPU CAC HIGH ARPU CAC The ARPU <-> CAC Spectrum Viral B2C SEO Paid Enterprise Sales B2B Content Inside Sales Free $10/user $50/user
  36. 36. PRODUCTMARKET What’s Needed To Build $100M+ Company CHANNELMODEL
  37. 37. Channel <> Model Fit Specific channels fit with specific models. 3 2Product <> Channel Fit Products are built to tap into specific channels. You can’t treat the two in silos. 1Market <> Product Fit We need to think about the market first, not the product. What’s Needed To Build $100M+
  38. 38. BAD THOUGHT #4 MODEL AND MARKET SILOS
  39. 39. Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com. “On it!” “Build a new $100M line of business, with a freemium model.”
  40. 40. Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com. LOW ARPU CAC HIGH ARPU CAC One Year In - $3M+ ARR Viral B2C SEO Paid Enterprise Sales B2B Content Inside Sales Free $10/user $50/user
  41. 41. Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com. “Wait, these customers don’t look like core HubSpot customers.”
  42. 42. Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com. Credit: Point Nine Capital
  43. 43. Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com. Credit: Point Nine Capital
  44. 44. PRODUCTMARKET CHANNELMODEL What’s Needed To Build $100M+ X
  45. 45. PRODUCTMARKET CHANNELMODEL Market or Model? 1. Choose to keep the model. 2. Change the market.
  46. 46. PRODUCTMARKET CHANNELMODEL Market or Model? 2. Change everything else. 1. Choose the market
  47. 47. PRODUCTMARKET CHANNELMODEL We Chose The Market… Cut The $10 Tier Doubled Down on Content + Inside Sales Shifted $10 Features to $50 tier. Expanded features in $50 Tier
  48. 48. THE END RESULT WAS GROWING FROM $0 - $10M ARR IN 2 YEARS. Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
  49. 49. Channel <> Model Fit Specific channels fit with specific models. 3 2Product <> Channel Fit Products are built to tap into specific channels. You can’t treat the two in silos. 1Market <> Product Fit We need to think about the market first, not the product. What’s Needed To Build $100M+ Model <> Market Fit Your model must fit with the markets pain and perceived value of your solution. 4
  50. 50. PRODUCTMARKET CHANNELMODEL What’s Needed To Build $100M+
  51. 51. Example In The Email Marketing Space Product Market Model Channel Marketo Email Marketing (Heavily Customizable) Enterprise High ACV Outbound Sales HubSpot Email Marketing (All In One) Mid Market Med ACV Content/Inside Sales Partnerships Mailchimp Email Marketing (Touchless, Simple) SMB Freemium (Low ACV) Virality All of these are $2B+ Companies
  52. 52. THE FITS ARE ALWAYS CHANGING Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
  53. 53. The “Fits” Are Constantly Evolving and Moving PRODUCTMARKET CHANNELMODEL
  54. 54. WHEN ONE COMPONENT CHANGES, THE OTHERS NEED TO CHANGE WITH IT Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
  55. 55. Happens more often in B2C, but will happen in B2B Product/Channel Fit Breaking Initial Adapts ‣ Pinterest grows via viral sharing to Facebook product is more multiplayer • Facebook grows on web via email virality Breaks ‣ Facebook shuts down platform API’s. ‣ Pinterest adapts to UGC SEO for acquisition channel product becomes more single player • Mobile emerges and time spent shifts • Facebook buys Instagram/ Whatsapp, and builds Messenger
  56. 56. THEY BREAK MORE OFTEN IN B2C BUT FOR B2B… Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
  57. 57. Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
  58. 58. Outbound Email Becoming saturated, facilitated by the widespread use of sales automation tools. Content Marketing Hitting max consumption point, saturation of email popups, etc. Facebook Ads Competition increasing with out inventory increasing increasing costs
  59. 59. HAVE HYPOTHESES FOR THE OTHER COMPONENTS. DON’T THINK ABOUT THEM IN SILOS. Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
  60. 60. HTTP://COELEVATE.COM/SAASFEST16 Brian Balfour - http://reforge.com - http://coelevate.com
  61. 61. THANKS! Brian Balfour - http://reforge.com - http://coelevate.com

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