At Copilr we see many startups raising capital. The main reasons for raising capital are:
Scaling the product team to produce more output
Scaling the sales team to boost sales
And here, of course, are the pitfalls! In both scenario's Product-Market Fit is crucial.
Our advice:
Don’t scale your product team to produce more output. Make sure that you (only) work on finding product-market fit with your MVP.
Don’t scale your sales team if you don’t have PMF. Without this validation, a business cannot grow nor scale. If you scale too early you can easily kill your business.
A major cause of failure is lack of product-market fit. To put it in Marc Andreessen’s words: (in 2007!!!)
When a great team meets a lousy market, the market wins.
When a lousy team meets a great market, the market wins.
When a great team meets a great market, something special happens.
How to determine if you have product-market fit
Given the emotional roller coaster of being a (co-) founder, the decision can easily be swayed by your mood on a given day. You want to remove this emotional swing.
There is a key question to get qualitative information on PMF: How would you feel if you could no longer use our product
Very disappointed
Somewhat disappointed
Not disappointed
I no longer use the product.
If 40% of your users are saying that they would be “very disappointed” without your product, there is a great chance you can build sustainable and scalable customer acquisition. This is how you find your Product-Market Fit Score
This benchmark was found by comparing results across 100 start-ups,
Start-up people say that ‘you can feel product-market fit when it’s happening’. We believe that in many cases this is possible. But the PMF score is still useful as an objective indicator.
Source: Testing Business Ideas by David Bland
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