Product/Market Fit (2007)

http://web.stanford.edu/class/ee204/ProductMarketFit.html

by rahooligan • 12 years ago

44 20 12 years ago

web.stanford.edu

ar7hur• 12 years ago

    There is one high-profile, highly successful software entrepreneur
    right now who is burning through something like $80 million in venture 
    funding in his latest startup and has practically nothing to show for it 
    except for some great press clippings and a couple of beta customers

I'm wondering who Marc is talking about? (it was in 2007). Any idea anybody?

presty• 12 years ago

If it were 2014, I would say Lucas Duplan

api4• 12 years ago

Color? Or was that later?

nostrademons3• 12 years ago

It was later. The news stories about Color came out around 2010/2011. It couldn't have been 2007, because Color is a mobile app and the iPhone didn't come out until 2007 (actually, it apparently launched 4 days after Marc wrote this essay).

I'm looking through the TechCrunch headlines of June 2007 and coming up empty. No idea what it could be.

endlessvoid94• 12 years ago

Could it be twitter?

dang2• 12 years ago

The submitted title ("The only thing that matters") was rewritten to be linkbait. That breaks more than one of HN's rules about titles. Please don't do that.

Edit: My apologies—it was the original title of the piece. However, I don't think we'll change it back. The title used by the reblogger is still less baity.

nostrademons3• 12 years ago

FWIW, the original title of the piece on Marc Andreesen's blog was "The only thing that matters":

http://web.archive.org/web/20070701074943/http://blog.pmarca...

The submitter probably remembered the piece, went hunting for it, and then submitted it under its original title rather than the reblogged version.

dang2• 12 years ago

Good catch. Thanks!

andrewescott• 12 years ago

Nice to be reminded of this piece. However, it sparked a thought when he mentioned micropayments as a market that was guaranteed to doom start-ups that were trying to launch product in that space. Is the current crop of mobile payments startups set for the same fate? For example, Square couldn't get Square Wallet to a winning position. And if it is the market that is the fault, is it specifically the market in the United States, e.g. will mobile payments succeed in Europe before it succeeds in the US because it's a more fertile market for this sort of stuff?

gatehouse• 12 years ago

Marc A.'s firm has invested in bitcoin infrastructure companies which is in that direction.

api4• 12 years ago

I'd add Dropbox alongside VMWare as a company that unlocked a huge "sleeper" market.

Fundamentally I don't think those are counterexamples to the product-market fit thesis. These are cases where the huge market does exist, but it's a hard and finicky market. Nobody's quite managed to hit it yet. In many cases this is because nobody quite understands it, or everyone underestimates how hard it is.

Another good article on this from 2012:

http://www.mikekarnj.com/blog/2012/11/05/reaching-the-startu...

nostrademons3• 12 years ago

And Facebook and Google.

Actually, all 4 of those companies are very interesting because of the presence of previous incumbents who everybody assumed were playing in a small market. Before VMWare there was SoftPC (remember them?). Before DropBox there was YouSendIt and literally dozens of other competitors (many VC firms turned down DropBox because they claimed the space was too crowded). Before Google there was AltaVista, Lycos, Excite, Infoseek, etc. Before Facebook there was LiveJournal and clones, EZBoard, Xanga, etc.

I think this illustrates one of the complexities of Marc's "The product just has to basically work" thesis. Yes, but...you have no idea if dramatically improving the product quality will unlock a huge market that's been sitting on the sidelines because existing alternatives are too hard to use or don't actually solve the problem. It's like market size is a step function of product quality: most of the time, improving product quality has little effect on the number of people who use your product or how much money they pay you, but certain improvements unlock a whole new class of user. And the only way to figure out what those improvements are is to build them and see if a massive number of new users show up.

api4• 12 years ago

"And the only way to figure out what those improvements are is to build them and see if a massive number of new users show up."

That's sort of what I wrote here:

https://www.zerotier.com/blog/?p=74

You can't test those markets with mockups and quick hacks, at least not easily. Those markets have a tendency to sit on the sidelines for a long time, since only a lunatic would actually build a real product just to test a market.

Despite having the business school dogma of "test the market before actually building something" banged into my head with a hammer by every MBA-ish type I've run into, I am still skeptical of it. I don't think it's always possible to test without building.

YouSendIt and all the other file sharing sites were really pretty simple hacks, exactly the kind of "MVP" that a b-school sort would suggest tossing together to determine if anyone cares about sending each other files. Dropbox on the other hand was a seriously hard piece of engineering. The first time I used it, I immediately thought "whoa, that was not easy to build." You see, the file sharing problem is not the file sharing problem. It's really a distributed database problem in disguise. All the others built file sharers, but Dropbox built a centrally-supervised distributed database ala BigTable or GPFS.

mgummelt• 12 years ago

"This is the story of search keyword advertising"

Google certainly didn't win because they had a "good enough" product in a strong market. They won because they had by far the best product in a strong market.

nopinsight• 12 years ago

The market is probably the most important factor for businesses using Blue Ocean strategy [1] targeting uncontested market space. However, competition is probably a more important factor in established markets. (Anyone having an alternative viewpoint is welcomed to discuss it here.)

For example, any startup has a minuscule chance to become a substantial player in search keyword advertising market today, given the resources and market positions of Google. Google had the chance because all the market leaders in those years did not have a very good product and few user were very satisfied with their search results.

Today, if you and your team are geniuses, maybe you can do a bit better than Google. But enough to entice a large portion of users to switch before Google can catch up with you? Highly unlikely. This point, to a different extent, also applies to other markets.

In addition to product-market fit, we will need to consider the strength of competition in the market before jumping in. How would our offering significantly improve a part of the user's life is they decide to adopt it?

[1] http://en.wikipedia.org/wiki/Blue_Ocean_Strategy

netcan• 12 years ago

I think it's very hard to generalize about these things. There are as many traps as there are insights when looking at stories retrospectively. It's not necessarily clear if an ocean is blue or not (red?).

First, satisfaction is hard to judge accurately in retrospect so it's hard to say things like 'people were not really satisfied with search at the time'. There were search engines before google. People thought they were pretty good. Google showed them otherwise. People were famously happy with shoulder mounted boom boxes for portable music before Walkmans came out.

Google could be surpassed the same way if a new search engine (or new way of finding things online) took off. If it's a feature in the search engine, they could add it, but if it's something that interferes or competes with their various goals like advertising clicks, or social media stuff they might be in trouble.

These things are by definition hard to speculate about.

Facebook's market was not a 'new market' depending on the narrative you subscribe to it either evolved from a a college hot or not site or it took over a market that Myspace was dominating.

Whatsapp is competing successfully in a fairly well defined and mature market. So is Waze. Timing was really important in both these cases.

Is Waze a new market (social maps), a merger of two markets (maps + satnav) or a small but feisty shark in a bloody red ocean?

If a new site called furkl.me came out with a look up site for people that worked really well and people started furkling instead if googling their blind dates, is that a blue ocean (people lookup) or a red ocean (google/search)? What if they quietly added companies to the mix? Then products?

It's hard to tell the difference between a beachead into an existing market or a new market.

'Blue vs Red Ocean' is very similar to 'penetration vs differentiation' that's always been in the Marketing 101 textbooks. It's mostly related to pricing strategy. The synopsis is that you can either price competitively, maintain a low margin and focus on efficiency and try to get volume or you can price high, focus on differentiation and sell less.

You can be Dell or you can be Apple, but you can't be both. Differentiation is good for new markets or niche players in established ones. Penetration is for big players in established markets, or those who aspire to be.

The big difference in startup world is that software has no marginal cost, it's often free and 'business models' are only occasionally based on charging people money in exchange for a good or service. That means pricing strategy is not conventional.

domiono• 12 years ago

I don't think this is valid anymore. The author states that team is more important than product. However, if you have a great team you will always have a great product. If you have a bad team, you will never have a good product. For that reason, team = product, so product is removed from the equation.

Then you have these three statements

1. When a great team meets a lousy market, market wins

This is probably true, since a great team can win in any market, no matter how small - or they simply open a new market.

2. When a lousy team meets a great market, market wins.

I don't think this is correct as this is not the case for 99 out of 100 startups and it normally only holds true in really, really strong markets. However, in most cases, a lousy team means a lousy product, means no product market fit.

As an example you can take Facebook. Insane market, however, it took an extremely good team, in our case Mark Zuckerberg with a unique launch strategy to finally open that market of social networks.

3. When a great team meets a great market, something special happens.

This holds true and this basically happened with Facebook, Twitter, Amazon, Instagram and all of the unicorn startups.

bengali3• 12 years ago

I agree that 'lousy team' could describe a team that can't deliver squat. In that case market will get what it needs from somewhere else, because the pull is that strong.

Maybe i'm going too far, but i interpreted this for point #2 from an earlier statement a few lines up:

"The market needs to be fulfilled and the market will be fulfilled, by the first viable product that comes along"

ie: In this case the market wins, but not necessarily by getting what it needs from that 'lousy' team

edpichler• 12 years ago

I really liked the article. Anyone knows if this guy wrote any good book?

Product/Market Fit (2007)

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