That Randy Brown

Getting to Product Market Fit

I spent a few years running an incubator startup. It was a lot of fun to get into a room, throw around ideas, decide to build something, then show it to the world. Tons of fun. I'll never do it again.

None of the ideas that came out of that led to users, much less revenue. We would evaluate what we were going to build on the merit of the idea, and from this came what might be the most important lesson I've learned about startups: the true value of an idea is almost entirely encapsulated by the size of its market.

These days, I talk a lot about networks over products--an expansion of code is a liability: we should build for people, and a network that is interested in a potential product is the number one indicator of whether I should build it or not.

To that end, I've devised the following tiered evaluation criteria for pursuing a new thing:

  1. If I can get people to talk about it with me, I've identified an opportunity.

Instead of talking about solutions, these days, I start by talking about common problems and opportunities. Problems faced day to day by engineers or founders or parents. If people will talk to me about it, we have a shared experience, a shared need, a common desire. If I can find enough people (used to, 5 was enough--these days I think 20 – 25 is better), then maybe there's something worth making.

Most ideas die here. Usually I don't have the network of people with the shared problem. Sometimes a solution to the problem is prohibitively expensive, either in time or effort.

  1. If I can get people to use a tool, I've identified a solution.

Say I do pursue something. I have an audience of people for which some desire occupies a significant enough of their mental or physical or emotional energy that they are willing to go along for the ride. Maybe they just want miniatures for their board game. Maybe they want a custom GPT to help them find something. If people will use it consistently, now I have a solution that speaks to an identified desire.

In this phase, one of the things that is really important is to pay attention to what people say as much as what they do. I thought, for instance, that I wanted an opinionated task management system that didn't need to be configured or customized. But when I built one with my team, I almost immediately started adding client side customization because all of us actually wanted something different. This is incidentally what led me to market segments in task management.

  1. If I can get people to pay for it, I've identified a product.

In the world of free tiers, paying users is a very hard problem. Users is a hard problem. If I can get someone to pay for a tool, I know I've created a value added solution, or a product. Something that adds enough value to people's lives that they are willing to pay for it. I have a host of tools I've built for myself that I host online, and through that, pay for. In general, I think that the multiplier on value has to be very high. A person will pay 1 dollar a month to save the equivalent of 1000 dollars or something. Any smaller ratio creates a great deal of friction to payment.

  1. If I can get people to pay me more than it cost, I've found PMF or PSF.

Most folks can begin looking to raise capital at this point--especially if their problem is one of unit economics: with enough scale, they'll be profitable. These days, I shoot for my first customer to cover my operating costs, or for every unit sold to cover its own cost at minimum. If I am paying for a service so that I can use it, getting just one more user makes it break even. Two paying users can make it possible for me to scale it to others.

However, I don't think the real trick of PMF isn't in the income. It's in the fact that PMF means that the perceived value of a product is greater than the cost of the product. The idea that something can add more to a person's life than it takes from them, or from the group of people invested (via time or energy) into the solution, means it is more likely to be providing a net positive for the world.