Behind every start-up is an idea of how some part of our world can work with greater efficiency or in a way that provides more value. However, what makes a great idea into a real business is product market fit. This product-market fit is the ability of a founder and their team to find a market with enough consumers to pay for their product.
This business owner above can stay in business and even open another location if she can sell enough product at a price that yields a level of revenue which covers her rent, inventory, shipping, staff and all of her other life and business costs.
Finding Real Customers - Theory behind and the Steps Before Product-Market Fit
One of the more recent and notable mentions of the term "product-market fit" rests in a 2007 article (now on LinkedIn) written by venture capital investor Mark Andreessen, partner at Andreessen Horowitz.
While in that specific blog post he stops short of explicitly defining what product market fit is, he does a great job of eliminating any other causes of a successful startup company.
In Marc's estimation, too often too much credit is given to a great product and a great team. In other words, when we talk about the feats of Mark Zuckerberg and Steve Jobs, we allocate 99.9% of conversation time discussing the software, the hardware and the founder.
Only a sliver of attention is given to the customer and the environment that either needed or did not need the product.
Marc Andreessen, partner at Venture Capital Firm, Andreessen Horowitz pictured above (Photo from Forbes.com)
For Andreessen and many other investors, they have seen tons of great products and have met incredibly talented founders and engineers who can seemingly drive an idea ahead while in their sleep.
More importantly, they have seen a lot of great ideas led by great talent crash and burn because no one was buying the product at a sustainable rate.
However, when individual consumers have a real need for a solution, any product will suffice and thus sell. In fact, small time entrepreneurs will hack together ideas until a polished and well-engineered solution presents itself (ie the Brooklyn dollar cab).
So! Markets love great products, and in fact will love any decent product.
And they will pay more for the best product that they want and/or need. But a founder cannot create a market for a product, even a really good and well built product, if the consumers in that market feel as though they do not need it.
Product Market Fit defined...Finally
I have met like 2 people who have downloaded and used Lyft because of the product and their experience with the brand. The other 80 got great promo-codes and/or get lower fares compared to Uber.
So this brings us to an actual definition of product-market fit, one I found by Quora user, Henry Hobhouse: “Product/Market fit is when it becomes possible to monetize a product, at a scale, that makes the business sustainable.”'
In more simplistic terms, a company has product/market fit when they can sell enough of a product or service at a price that allows for them to cover their costs of living, operation, growth and product development.
This price is not subsidized by investment dollars and covers the real costs of that product- it is not a ploy to attract the attention of new customers. Often when you see a company with tons of promotions, they're simply trying to find their "market" and grow their number of users.
However, one can assume that that business has product market fit when they can keep charging the same price forever and retain roughly the same number of customers.
Medvis Jackson is a web designer at Hindsite, curator at Kulchah and avid cricket fan. You can follow him @medvisjackson for his random thoughts.