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Product – Market Fit
First Growth Venture Network
           Jeff Bussgang
   General Partner, Flybridge Capital
Senior Lecturer, Harvard Business School
             March 29, 2012

                                CONFIDENTIAL PRESENTATION | PAGE1
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


                                   CONFIDENTIAL PRESENTATION | PAGE2
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)




                                           CONFIDENTIAL PRESENTATION | PAGE3
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
                                                                     4
                                          CONFIDENTIAL PRESENTATION | PAGE4
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

                                                                5
                                     CONFIDENTIAL PRESENTATION | PAGE5
Crossing The Chasm




               CONFIDENTIAL PRESENTATION | PAGE6
Where are You?
    Before Product-Market Fit:                After Product-Market Fit:
    Search & Validation                       Scaling & Optimization
•    Lean startup approach                    • Building a robust, feature-rich
•    Hunch-driven hypotheses                     product
•    Minimum viable product (MVP)             • Crossing the chasm
•    Customer development process             • Metrics, analytics, funnels
•    Selling to early adopters                • Designing for virality &
•    Pivoting                                    scalability
•    Bootstrapping                            • Challenges with corporate
                                                 partnerships
•    Small, founding team
                                              • Building a brand
•    Product-centric culture;
     informal roles                           • Scaling the team; more
                                                 formal roles
•    Early in sales learning curve
                                              • Scaling a sales force
Source: HBS Prof. Tom Eisenmann, J.Bussgang                  CONFIDENTIAL PRESENTATION | PAGE7
Tools/Techniques
•   Structured idea generation   •   Conversion funnel analysis
•   Business model generation    •   Landing page optimization
•   Customer discovery process   •   SEM/SEO optimization
•   Focus groups                 •   Inbound marketing design
•   Customer survey              •   PR strategy
•   Persona development          •   Customer support analysis
•   Competitor benchmarking      •   Product feature prioritization
•   Wireframing                  •   Sales pitch
•   Prototype development        •   Lead qualification
•   Usability testing            •   Bus dev screening
•   Charter user program         •   Net Promoter Score
•   A/B test                     •   Lifetime value vs. Customer
                                     acquisition costs
                                                                             8
                                                  CONFIDENTIAL PRESENTATION | PAGE8
Customer Development
                          vs. Product Development

                           Product Development
              Concept/      Product     Alpha/Beta             Launch/
              Bus. Plan      Dev.          Test                1st Ship




                          Customer Development

             Customer      Customer     Customer               Company
             Discovery     Validation   Creation               Building




Source: Steve Blank
                                                     CONFIDENTIAL PRESENTATION | PAGE9
“Lessons Learned” Drives Funding


                      Business     Test       Lessons
Concept                 Plan     Hypotheses                        Series A
                                              Learned




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



Source: Steve Blank
                                                    CONFIDENTIAL PRESENTATION | PAGE10
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”
                                                                      CONFIDENTIAL PRESENTATION | PAGE11
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”
                                                                      CONFIDENTIAL PRESENTATION | PAGE12
Product – Market Fit
First Growth Venture Network
           Jeff Bussgang
   General Partner, Flybridge Capital
Senior Lecturer, Harvard Business School
             March 29, 2012

                               CONFIDENTIAL PRESENTATION | PAGE13

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Product market fit fgvn 3-2012

  • 1. Product – Market Fit First Growth Venture Network Jeff Bussgang General Partner, Flybridge Capital Senior Lecturer, Harvard Business School March 29, 2012 CONFIDENTIAL PRESENTATION | PAGE1
  • 2. 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 CONFIDENTIAL PRESENTATION | PAGE2
  • 3. 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) CONFIDENTIAL PRESENTATION | PAGE3
  • 4. 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 4 CONFIDENTIAL PRESENTATION | PAGE4
  • 5. 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 5 CONFIDENTIAL PRESENTATION | PAGE5
  • 6. Crossing The Chasm CONFIDENTIAL PRESENTATION | PAGE6
  • 7. Where are You? Before Product-Market Fit: After Product-Market Fit: Search & Validation Scaling & Optimization • Lean startup approach • Building a robust, feature-rich • Hunch-driven hypotheses product • Minimum viable product (MVP) • Crossing the chasm • Customer development process • Metrics, analytics, funnels • Selling to early adopters • Designing for virality & • Pivoting scalability • Bootstrapping • Challenges with corporate partnerships • Small, founding team • Building a brand • Product-centric culture; informal roles • Scaling the team; more formal roles • Early in sales learning curve • Scaling a sales force Source: HBS Prof. Tom Eisenmann, J.Bussgang CONFIDENTIAL PRESENTATION | PAGE7
  • 8. Tools/Techniques • Structured idea generation • Conversion funnel analysis • Business model generation • Landing page optimization • Customer discovery process • SEM/SEO optimization • Focus groups • Inbound marketing design • Customer survey • PR strategy • Persona development • Customer support analysis • Competitor benchmarking • Product feature prioritization • Wireframing • Sales pitch • Prototype development • Lead qualification • Usability testing • Bus dev screening • Charter user program • Net Promoter Score • A/B test • Lifetime value vs. Customer acquisition costs 8 CONFIDENTIAL PRESENTATION | PAGE8
  • 9. Customer Development vs. Product Development Product Development Concept/ Product Alpha/Beta Launch/ Bus. Plan Dev. Test 1st Ship Customer Development Customer Customer Customer Company Discovery Validation Creation Building Source: Steve Blank CONFIDENTIAL PRESENTATION | PAGE9
  • 10. “Lessons Learned” Drives Funding Business Test Lessons Concept Plan Hypotheses Series A Learned Do this first instead of fund raising (or raise seed round to test hypotheses…rigorously) Source: Steve Blank CONFIDENTIAL PRESENTATION | PAGE10
  • 11. 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” CONFIDENTIAL PRESENTATION | PAGE11
  • 12. 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” CONFIDENTIAL PRESENTATION | PAGE12
  • 13. Product – Market Fit First Growth Venture Network Jeff Bussgang General Partner, Flybridge Capital Senior Lecturer, Harvard Business School March 29, 2012 CONFIDENTIAL PRESENTATION | PAGE13

Editor's Notes

  1. In rough terms, tools in the left column are used pre-PMF, and those in the right post-PMF. A/B tests are used in both phases.