Over the past ten years, software gurus have been preaching the notion that you need to find product/market fit. Balfour presents an extremely cogent argument that because of the speed of technology now, this advice is no longer valid. In reality, you need to find market, product, channel, model fit (in that order). Balfour lays out his argument in this presentation at Price Intelligently's SaaSFest 2016 by cataloging his experience over his career and view of the market.

1. YOU’RE TOO FOCUSED ON
PRODUCT/MARKET FIT
SaaSFest 2016 Presentation
Brian Balfour - http://reforge.com - http://coelevate.com

2. SLIDES AVAILABLE AT…
HTTP://COELEVATE.COM/SAASFEST16
Brian Balfour - http://reforge.com - http://coelevate.com

3. “Product/market fit means being in a good
market with a product that can satisfy that
market.”
- Marc Andreessen

4. “PRODUCT MARKET FIT IS THE ONLY THING THAT MATTERS”
The mantra has led to tunnel vision among many entrepreneurs.
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.

5. THIS TUNNEL VISION LEADS TO
FOUR INCORRECT THOUGHTS…
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.

6. BAD THOUGHT #1
PRODUCT FIRST, MARKET SECOND

7. Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
“We built this amazing virtual goods platform, and now
going to sell it to games, social networks, dating sites,
and more.”

8. What’s Needed To Build $100M+ Company
MARKETPRODUCT

9. Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
Solution then Problem

10. LANGUAGE MATTERS
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.

11. PRODUCTMARKET
What’s Needed To Build $100M+ Company

12. IF WE START WITH THE MARKET,
WE START WITH THE PROBLEM
FIRST THEN THE SOLUTION
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.

13. 1Market <> Product Fit
We need to think about the market first, not the product.
What’s Needed To Build $100M+

14. BAD THOUGHT #2
PRODUCT AND DISTRIBUTION SILOS

15. Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
“We are focused on product/market fit right now, once
we have that we’ll test a bunch of different acquisition
channels.”

16. Most Think About Them In Silos
PRODUCT ACQUISITION

17. IF YOU TREAT THE TWO IN ISOLATION YOU’LL
END UP WITH SQUARE PEG -> ROUND HOLE

18. PRODUCTS ARE BUILT TO TAKE
ADVANTAGE OF SPECIFIC
CHANNEL
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.

19. Products Built For Channels
Virality
1. Quick Time To Value - Virality needs short cycles to work which requires QTV.
2. Broad Value Prop - Value prop needs to be applicable to large % of users network (branching factor)
3. Network Makes Product Better - Product value gets better with more of your network on it.
Paid Marketing
UGC SEO
1. Quick Time To Value - Users have less patience to find value when clicking on an ad.
2. Med to Broad Value Prop - Value prop needs to be broad enough due to targeting constraints.
3. Transactional Value - Product is built to extract transactional value.
1. UGC - Users create millions of pieces of unique content by using the product.
2. Motivation To Contribute - Product needs to have motivation to contribute.

20. As new channels emerge, past companies are destroyed and new companies are
created because of product <> channel fit.
New Channels Create New Companies
VR
???
Social MobileCasual

21. “The kitchen sink approach
doesn’t work. Most companies
get zero distribution channels to
work. If you get just one
channel to work you have a
great business. If you try for
several but don’t nail one,
you’re finished. Distribution
follows the power law.”
- Peter Thiel

22. %OFTOTALDISTRIBUTION
CHANNELS
The Power Law Of Distribution
Power Law of Distribution
Most high growth companies get 70% or more
of their acquisition from one channel during their
early life.
Channel One Channel Two Channel Three Channel Four

23. Power Law Examples
TripAdvisor, Yelp, Glassdoor B2C Content/SEO
Facebook, WhatsApp,
Evernote, Dropbox, Slack
Virality
Supercell, DraftKings,
Squarespace
Paid Marketing

24. Think About Them Together
PRODUCT ACQUISITION

25. PRODUCTMARKET
What’s Needed To Build $100M+ Company
CHANNEL

26. 2Product <> Channel Fit
Products are built to tap into specific channels. You can’t treat the two in silos.
1Market <> Product Fit
We need to think about the market first, not the product.
What’s Needed To Build $100M+

27. BAD THOUGHT #3
CHANNEL AND MODEL SILOS

28. Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
“We are going to create a $25/user tier to increase LTV
and acquire customers via content marketing.”

29. MODELS ARE BUILT TO FIT WITH
A CHANNEL
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.

30. The ARPU <-> CAC Spectrum
LOW
ARPU
CAC
HIGH
ARPU
CAC
Viral
B2C SEO
Paid
Enterprise
Sales
B2B Content
Inside Sales

31. The ARPU <-> CAC Spectrum
LOW
ARPU
CAC
HIGH
ARPU
CAC
Viral
B2C SEO
Paid
Enterprise
Sales
B2B Content
Inside Sales
Dangerous

32. The ARPU <-> CAC Spectrum
LOW
ARPU
CAC
HIGH
ARPU
CAC
Viral
B2C SEO
Paid
Enterprise
Sales
B2B Content
Inside Sales
Dangerous
Too Much Friction
The monetization tends to be too much friction
to take the advantage of the low CAC channels.

33. The ARPU <-> CAC Spectrum
LOW
ARPU
CAC
HIGH
ARPU
CAC
Viral
B2C SEO
Paid
Enterprise
Sales
B2B Content
Inside Sales
Dangerous
ARPU Doesn’t Support CAC
Your ARPU doesn’t support the higher CAC
channels.

34. The ARPU <-> CAC Spectrum
LOW
ARPU
CAC
HIGH
ARPU
CAC
Viral
B2C SEO
Paid
Enterprise
Sales
B2B Content
Inside Sales
Dangerous
$25/userFree $10/user

35. Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
LOW
ARPU
CAC
HIGH
ARPU
CAC
The ARPU <-> CAC Spectrum
Viral
B2C SEO
Paid
Enterprise
Sales
B2B Content
Inside Sales
Free $10/user $50/user

36. PRODUCTMARKET
What’s Needed To Build $100M+ Company
CHANNELMODEL

37. Channel <> Model Fit
Specific channels fit with specific models. 3
2Product <> Channel Fit
Products are built to tap into specific channels. You can’t treat the two in silos.
1Market <> Product Fit
We need to think about the market first, not the product.
What’s Needed To Build $100M+

38. BAD THOUGHT #4
MODEL AND MARKET SILOS

39. Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
“On it!”
“Build a new $100M line of business, with a freemium
model.”

40. Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
LOW
ARPU
CAC
HIGH
ARPU
CAC
One Year In - $3M+ ARR
Viral
B2C SEO
Paid
Enterprise
Sales
B2B Content
Inside Sales
Free $10/user $50/user

41. Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
“Wait, these customers don’t look like core HubSpot
customers.”

42. Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
Credit: Point Nine Capital

43. Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
Credit: Point Nine Capital

44. PRODUCTMARKET
CHANNELMODEL
What’s Needed To Build $100M+
X

45. PRODUCTMARKET
CHANNELMODEL
Market or Model?
1. Choose to
keep the
model.
2. Change
the market.

46. PRODUCTMARKET
CHANNELMODEL
Market or Model?
2. Change
everything
else.
1. Choose
the market

47. PRODUCTMARKET
CHANNELMODEL
We Chose The Market…
Cut The $10
Tier
Doubled
Down on
Content +
Inside Sales
Shifted $10
Features to
$50 tier.
Expanded
features in
$50 Tier

48. THE END RESULT WAS
GROWING FROM $0 - $10M ARR
IN 2 YEARS.
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.

49. Channel <> Model Fit
Specific channels fit with specific models. 3
2Product <> Channel Fit
Products are built to tap into specific channels. You can’t treat the two in silos.
1Market <> Product Fit
We need to think about the market first, not the product.
What’s Needed To Build $100M+
Model <> Market Fit
Your model must fit with the markets pain and perceived value of your solution. 4

50. PRODUCTMARKET
CHANNELMODEL
What’s Needed To Build $100M+

51. Example In The Email Marketing Space
Product Market Model Channel
Marketo
Email Marketing
(Heavily Customizable)
Enterprise High ACV Outbound Sales
HubSpot
Email Marketing
(All In One)
Mid Market Med ACV
Content/Inside Sales
Partnerships
Mailchimp
Email Marketing
(Touchless, Simple)
SMB
Freemium
(Low ACV)
Virality
All of these are $2B+ Companies

52. THE FITS ARE ALWAYS
CHANGING
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.

53. The “Fits” Are Constantly Evolving and Moving
PRODUCTMARKET
CHANNELMODEL

54. WHEN ONE COMPONENT
CHANGES, THE OTHERS NEED
TO CHANGE WITH IT
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.

55. Happens more often in B2C, but will happen in B2B
Product/Channel Fit Breaking
Initial Adapts
‣ Pinterest grows via
viral sharing to
Facebook product is
more multiplayer
• Facebook grows on
web via email virality
Breaks
‣ Facebook shuts
down platform API’s.
‣ Pinterest adapts to
UGC SEO for
acquisition channel
product becomes
more single player
• Mobile emerges and
time spent shifts
• Facebook buys
Instagram/
Whatsapp, and
builds Messenger

56. THEY BREAK MORE OFTEN IN B2C
BUT FOR B2B…
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.

57. Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.

58. Outbound Email
Becoming saturated, facilitated by the
widespread use of sales automation tools.
Content Marketing
Hitting max consumption point, saturation of
email popups, etc.
Facebook Ads
Competition increasing with out inventory
increasing increasing costs

59. HAVE HYPOTHESES FOR THE
OTHER COMPONENTS. DON’T
THINK ABOUT THEM IN SILOS.
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.

60. HTTP://COELEVATE.COM/SAASFEST16
Brian Balfour - http://reforge.com - http://coelevate.com

61. THANKS!
Brian Balfour - http://reforge.com - http://coelevate.com