The Elusive Product-Market Fit: Why Maintaining It is Harder than Finding It

By Miles Clements

The product-market fit (PMF) concept is certainly useful for entrepreneurs and managers, and should be used as a guiding principle during any technology venture’s launch process.  However, in today’s startup environment, it is important to recognize that PMF is not a static concept, but a target that moves in rapid lockstep with the evolution of your competitive landscape and customer base.  Given the unprecedented speed at which copycats can scale and the frictionless mechanisms available for swift early customer acquisition, the conditions surrounding initial PMF have changed.  Accordingly, PMF is today a concept that must be not only attained, but also monitored and re-invented over time.  Bearing this in mind, entrepreneurs should be careful not to over-rely on the traditional indicators of PMF.

Famed entrepreneur and VC Marc Andreesen tells us that, “product-market fit means being in a good market with a product that can satisfy that market.”  You can feel when it’s happening, he says, because “customers are buying the product just as fast as you can make it—or usage is growing just as fast as you can add more servers.”  Similarly, Eric Ries refers to an “engine of growth” as the indication that PMF has been attained.  There seems to be consensus, then, that rapid growth is at least one portent of PMF.

To me, however, this notion of a growth engine as affirmation of PMF is worrisome.  Entrepreneurs today have at their disposal far too many tools and mass distribution channels to spur rocketship growth, that growth itself cannot possibly imply sustainable PMF.  There are, in my opinion, two key developments that have shifted the paradigm for attaining this crucial milestone:

  • Viral mechanics/social distribution:  Previously, building scale through traditional distribution channels was a more tiresome, deliberate process.  Selling products through a sales force or attracting users to online platforms took time, resources, and ample marketing dollars.  In that world, startups could not reach critical mass without being in a vibrant market and providing a product that consumers wanted.  As such, growth was indeed a good proxy for PMF.  Today, however, entrepreneurs can tap the app store (with a 30% tax) or build on top of a social distribution platform like Facebook or Twitter to reach hundreds of millions of consumers instantly and cheaply.  Consider the difference between eHarmony manually attracting users to its dating marketplace, compared to Zoosk doing so by sitting on top of Facebook.  eHarmony may prove to be a more sustainable and enduring business, but the speed at which Zoosk gained scale exemplifies the manner in which contemporary startups can grow faster than ever.  In this regard, modern “growth engines” can be misleading.  

  • Ease of copycatting:  Perhaps a direct result of companies being able to reach scale prior to attaining PMF or building barriers to entry, in today’s startup world copycats arise faster than ever before.  As a successful venture’s competitive landscape becomes flooded with pure knock-offs and (worse yet) clones that slightly enhance or augment the original business model, customer desires and willingness to pay certain price points can evolve.  Thus, the widespread market entry of copycats can change user expectations and impose new requirements on PMF.  

I outline a few illustrative examples below:

  • Groupon had perhaps the most obvious PMF of all time, and now many question whether it has PMF at all.  Originally launched as The Point, the startup’s first iteration allowed users to build campaigns asking people to give money or do something as a group, but only once a “tipping point” of people agreed to participate.  Founder Andrew Mason noticed that by far the most common use case was for merchants to promote group deals.  One historic pivot later, Groupon took off.  It had seemingly cracked the local advertising market, a feat that had long eluded even the largest tech giants.  At the same time, it provided a value proposition that consumers craved.  With a win-win solution, Groupon was labeled by Forbes as the fastest-growing company ever, and it debuted on the public market with a $13 billion valuation. But the growth engine was misleading: copycats flooded the market, merchants found declining marginal utility in subsequent daily deal offers, and the core value proposition was called into question.  Today Groupon’s market value has cratered, and acquisition rumors (ZocDoc? GrubHub?) suggest that the search for PMF has begun anew.  But is it too late? [break here] 

  • OMGPOP achieved stunning success with its Draw Something social gaming app, which skyrocketed to the top of the App Store best seller list in a matter of days.  As CEO Dan Porter infamously tweeted, “it took AOL 9 years to hit 1 million users.  It took Facebook 9 months.  It took Draw Something ~9 days.”  Less than 2 months after Draw Something’s launch, and with 50 million downloads, its parent company was snapped up by Zynga for up to $210 million.  But never has a socially-propelled, App Store-distributed “growth engine” been so misleading.  Within 3 months of Zynga’s acquisition, gameplay had declined by ~30%.  Months later the stock was down 50% as analysts questioned management’s judgment.  If growth indeed guaranteed PMF, in this case, it was only valid for an incredibly short period of time. 

My argument is not that PMF is an antiquated concept; on the contrary, finding and understanding it is core to any technology venture.  My concern is simply that “growth engines” can be misleading, and are easier to harness in the modern startup world.  As viral mechanics and social distribution stimulate unprecedented growth in a wide swath of companies, and as rapid copycats change the value proposition and customer demands in attractive markets, founders should regard PMF as an ongoing goal rather than a one-time milestone.


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