“A value hypothesis is an attempt to articulate the key assumption that underlies why a customer is likely to use your product. Identifying a compelling value hypothesis is what I call finding product-market fit. A value hypothesis identifies the features you need to build, the audience that’s likely to care, and the business model required to entice a customer to buy your product. Companies often go through many iterations before they find product-market fit, if they ever do.”
— Andy Rachleff, CEO of Wealthfront
A startup's lifecycle can be grouped into two phases: pre–product-market fit (PMF) and post–product-market fit. When your startup is pre-PMF, your singular focus is getting to PMF. But what exactly does that road from seed to PMF look like?
We sat down with Spiros Xanthos, founder of Omnition (observability platform for microservices-based applications), to walk through what he identified as “the five phases from seed to product market fit” and the process he used to take his company from idea to acquisition in less than 18 months. It’s worth disclaiming that there's no one right route to product market fit. We captured Spiros’ experience and learnings to help founders navigate what is often the toughest leg of the entrepreneurial journey: going from an idea to a sales ready product. For each of the five phases, there is one primary goal and different objectives across customer conversations, product, and team.
In this first phase, the primary goal is to understand if a real market pain exists. If you’re going to spend the next five to seven years building something, you want to be as sure as possible that a real market opportunity exists. If you’re still employed with another company, this is when you might quit your job and set off on your journey.
This phase is what Spiros likes to call “Interview Plus.” It’s the phase where your customer conversations shift from unstructured conversations to more targeted feedback sessions. The goal is to understand the customer’s specific high-priority problems and test initial mockups.
By phase 3, you’ve spoken to what feels like countless customers and gathered detailed, meaningful feedback. Your goal now is to confirm your understanding of your customer’s major problems and design a solution. Rapid iteration is critical to make sure that what the initial workflows you build accurately captures and solves the customer pain you’ve heard in earlier conversations.
In phase 4, your goal is to work with your top three design partners to make sure that the full product you’re building meets their needs and is usable in their environments.
The fifth phase before PMF is all about accelerating your company’s growth. The focus is no longer on validation, but on selling. The goal is to create a repeatable sales process with evangelical supporters of your solution. (A customer reference is something you have to arm twist to get; an evangelist is someone you can’t get off the phone.)
With a full team, early signs of traction, and a working product, raising Series A funding might also be an appealing option to help accelerate growth, but not before those fundamental milestones are achieved. As Steve Blank put it,
“Founders need to ask themselves the hard questions: Have we identified a problem a customer wants solved? Does our product solve these customer needs? If so, do we have a viable and profitable business model? Have we learned enough to go out and consistently sell the product? Are the sales and business plans realistic, scalable, and achievable?”
Founders on their way to PMF work to find those answers as they progress through each phase of the journey. Through extensive customer feedback and quick iteration, they are able to fill in more of the blank space and build something that customers need and are willing to pay for.