What VCs know about product-market fit that founders don’t

Product-market fit means a company has “very happy customers who want to buy more and who recommend your products to their peers.”

But the concept of Product-Market Fit has been far more simple and useful for VC investors (who created the term) than it has been for startup entrepreneurs.

Three reasons why:

1) Product-market fit means customers think your product is “amazing” with an NPS of 9 or 10 out of 10.

Not “OK” or “good”–only “amazing” and “I love it.” That’s a very high bar.

Most founders think they have product-market fit when they have customers who use their product and continue to pay for now. That bar isn’t high enough.

It’s very difficult to scale a business with customers who just tolerate your product.

2) Experienced VC investors know that 20%-50% of your early customers are sustainable, happy, product-market fit customers.

Most founders don’t see that that the best subset of their early customers are the only ones they should be chasing to scale up their business.

“Focus to Grow” is counterintuitive when you are in desperate startup growth mode.

3) High product-market fit (= high Net Promoter Score) only happens when you learn which customers are bad fits–and you find a way to scare them away and not sell to them.

This can be done through messaging, branding, pricing, targeting–and your product.

This is very difficult for startup founders to understand, but it is catnip to VC investors when you say this:

“When we started, we sold to anyone who would buy our product. We ran those experiments and now we know that we have a great fit with this specific 10% of our market who loves what we do. We are focused on them right now and maybe we’ll sell to the others someday. For now, we can get big just focusing on our best-fit customers.”

Remember, if your product doesn’t suck, at least 50% of the reason for your churn and bad product reviews is caused by who you let in the door with your marketing and sales.

Product-market fit requires you to say no to most of your potential customers and focus on only the best ones. Most of your “potential customers” in your wider market are actually bad fits for you right now.

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