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Steve Hoy

Product/Market Fit

Product/Market Fit has become a truism and mantra in startup circles, with much associated bullshit. Time to simplify.

It was Andy Rachleff, founder of Benchmark Capital, who first put a name to this concept, which was later popularised in 2007 by Marc Andreessen of Andreessen Horowitz, a venture capital firm. The term was coined in order to help understand the reason for startup failures; was it a poor team, or a poor product, or a poor market? Conversely, when a startup succeeds investors want to know why so they can back other companies with similar characteristics. Is there a great team, a fantastic product, a superb market?

The simple concept of Product/Market Fit, which I’ll shorten to PMF, has become commonplace in startup-land. It is now glibly and routinely trotted out by people who work at startups, the VCs who fund them, commentators, and in recent years management theory pundits who, un-content with the simplicity of the concept are complicating things by dividing it into stages and introducing ancillary concepts such as the risible “go-to-market fit”.

PMF just means: are you making sales? That’s it, really.

An established business does not concern itself with talk of PMF; it tests a new product in the market and if it sells, makes more of it and offers it to a wider market. If it doesn’t sell, chalk it up to experience and write off the expense. After all, there are plenty more products in the pipe.

A startup has a different problem, namely survival. It must reach break-even before the ability to raise funds dries up. Instead of conceptualising a startup as a very small established business, with market research, market requirements documents and product specification documents, the whole enterprise is a research project with one aim - deliver a product that people want to buy.

The point in a startups’ life where people want to buy the product is PMF. Before PMF the company is burning money and should only be working on getting to PMF, nothing else. After PMF the startup becomes a scale-up, and should be aggressively selling to anyone and everyone who will buy the product with the aim of reaching break-even. After PMF you have customers for whom your product solves a valuable problem and they will have opinions and feature requests; you need to get your MVP into better shape and regularly turn out high quality product - a very different management challenge.

Face it - a startup is a machine to make revenue, and will exit successfully if the acquirer believes that the machine is an effective system for generating profits from sales. This is obvious and simple. All the talk of making the world a better place or not being evil or whatever other cliché du jour is just bollocks. The task is to make profits.

The way to understand PMF is to break it into its parts: product, market, and fit.


A product is either an item that does something or a bundle of capabilities, which fulfils a need in the buyer’s mind. The product will have functionalities which deliver benefits.

It is the customer who gets to decide what the benefits are, not the startup. If the product does not deliver those benefits customers will not buy it no matter how impressive it might otherwise be.


The market is the collection of potential buyers who have needs that are unmet, or poorly met. You might, through advertising, be able to alter the perception of need in the minds of the customers, but they mostly know what they need.

A consumer will buy if the value they assign to having their need fulfilled is greater than the price they must pay. Economists call this the consumer surplus. If consumers do not assign sufficient value to the benefits of the product they will not buy it.


‘Fitness’ is a quality, the extent to which a form is shaped right and properly adapted. ‘Fit’ is one of those words with many meanings, such as ‘run’ or ‘set’. For example, a common misunderstanding of the meaning of ‘fit’ is in the phrase “survival of the fittest”. Darwin didn’t mean those physically-fit people who are able to out-compete lesser mortals through strength and endurance. He meant those who are best adapted to their environment, those who fit it better. Such animals have the ability to survive long enough to reproduce, passing along their advantageous mutation, while the animals with lesser ‘fit’ do not survive long enough to reproduce, and so their mutations die out of the species.

In business, the ‘fittest’ company is not the leanest, meanest, most badass company, it is the company with the best products; where ‘best’ here means most profitable. This is not market share, it’s gross margin.

So does the product offered ‘fit’ with the needs of buyers? The answer is very easy - if the company is not making sales, then there is no fit. If the company is making sales then fit exists and it has reached PMF.

Achieving PMF

Which is more important, product or market? It’s the market of course, because this is business. A great product with no sales is doomed. A startup must adapt its product to the market or die.

A startup will achieve PMF when consumers assign a greater value to having their needs fulfilled than the cost of buying the product (by some material amount in order to be worthwhile). So the process of achieving PMF is one of shaping your product to fit the needs of consumers which they value.

So there it is, all very simple. Two main milestones, PMF and break-even. No sales? No PMF. While you might be able to convince people to give you money to fund your pre-PMF startup, eventually that money supply will run dry. A company that can’t reach break-even will die, although in the strange world of silicon valley startups this can take a surprisingly long time - I’m thinking of Uber here.

“Go-to market fit”, and other bullshit

The idea of PMF is so staggeringly obvious to an entrepreneur that it hardly needs explaining to them. But the vast majority of people who work in startup-land are not entrepreneurs. The VCs are not, the employees are not, the pundits and advisors and bankers are not either. Natural-born entrepreneurs are few and far between, yet many people fancy their chances. They need guidance, and there are plenty of others who will happily supply advice in the form of frameworks, checklists, books, counselling and consulting. These suppliers must sex it up a bit, because the basic concepts are just too simple (make sales, break-even). And so we have gradations of PMF, sub-stages and milestones, all presented in neat frameworks with stylish graphics.

We also have stages and sub-stages of the path to break-even, now called “go to market fit”, for heaven’s sake. I couldn’t quite believe what I’d heard when I first came across this phrase, explained in a tone of utter seriousness by a COO who quite clearly didn’t know what he was talking about. He’d read it somewhere. A cargo-cult entrepreneur.

If you have PMF then hire salespeople, plug the batteries in and send them out: don’t bullshit them with a go-to-market-fit process. Also build a team that can reliably turn out high quality outcomes for your customers.

Some might think that simplifying the stages in this way is just too simplistic. Reaching PMF is hard, and the first version of your product might well be a device to get customers to talk so you can find out what they actually value. But simplifying a thing isn’t simplistic. The concept of PMF is simple: make a product people want to buy.