Product/Market Fit – The Importance of Getting it RightSean Jacobsohn

Norwest Venture Partners

@sjacobsohn

Mark Organ

Influitive

@markorgan

Justin MooreAxcient@justinrmoore

Product/Market Fit Questionnaire

• 1) Diversity of customers (1, 3, or 5 points)

• 2) Engagement (1, 3, or 5 points)

• 3) Churn (1, 3, or 5 points)

• 4) Commitment level (1, 3, or 5 points)

• 5) Virality (1, 3, or 5 points)

1) Diversity of CustomersHow many customers you DID NOT know before starting the company?

• (1 point) All my customers are fellow startups in my incubator class.

• (3 points) All my customers are other tech companies in Silicon Valley.

• (5 points) My customers span the country and are outside of my network.

2) EngagementHow core is your product to your customer’s business?

• (1 point) Users log-in once every month or two in sporadic bursts.

• (3 points) Users log-in several times a month. Some periods of high engagement, and other periods don’t need the product.

• (5 points) Users leverage the product daily to get their job done. If we removed the product, they would experience a major loss in productivity.

3) ChurnWhat is the rate at which you are losing customers?

• (1 point) We have not starting measuring churn yet. We need more data to assess why we are losing customers: pricing, service, competition, uptime, etc.

• (3 points) We are experiencing 2-4% per month churn or 24-48% a year. Customers are actively giving us unsolicited feedback on how to improve the product.

• (5 points) We are experiencing 0-1% per month or up to 12% churn a year.

4) Commitment LevelDo you have customers on pilot programs?

• (1 point) My customers have committed to pilots and likely are testing other products in the market too.

• (3 points) My customers are committing to the product on a month-to-month basis, while some customers are starting to sign annual commitments.

• (5 points) My customers are primarily committing to 1-3 year deals. Customers are making meaningful financial commitments relative to their size.

5) Word of Mouth and ViralityHow are you acquiring new customers?

• (1 point) All of our sales require outbound cold calling or networking.

• (3 points) Our sales are mixed between outbound cold calling and inbound leads. People are starting to search for solutions in my market.

• (5 points) Most of our sales are generated from inbound leads and customer referrals.

Product/Market Fit Assessment

• 0-9 points: You are at product testing phase and defining what business you are in. Don’t hire salespeople yet, but get market feedback outside of your local tech community.

• 10-17 points: You are getting early validation that your product solves a potential pain point. It might be time to hire two sales reps. If both perform well then your product resonates with the market.

• 18-25 points: You likely have achieved product-market fit as you are solving an important recurring pain point for customers who are parting with real money. Its time to invest in go-to-market to accelerate what’s already starting to work.