1. Product – Market Fit
First Growth Venture Network
Jeff Bussgang
General Partner, Flybridge Capital
Senior Lecturer, Harvard Business School
March 29, 2012
CONFIDENTIAL PRESENTATION | PAGE1

2. Session Objectives
• Explain what people mean when they use the
phrase, “Product Market Fit” (PMF), plus:
– Customer Development Process
– Lean Start-Up Theory
• Help you devise your approach to achieving PMF
• Making sure you don’t waste a lot of money
before you find PMF
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3. Leading Thinkers/Books/Blogs
• Geoffrey Moore: Crossing the Chasm (read this!)
• Steve Blank: Customer Development Process (read Four
Steps to the Epiphany)
• Eric Ries: Lean Startups (read this too!)
• Mark Leslie: Sales Learning Curve (HBR article)
• Sean Ellis: Lean Startup Marketing (great blog)
• Tom Eisenmann: Launching Tech Ventures (great blog)
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4. The Lean Startup
• Many startups fail because they waste capital and
time developing and marketing a product that no
one wants
• Lean startups rapidly and iteratively test hypotheses
about a new venture based on customer feedback,
then quickly refine promising concepts and cull flops
• Being lean does NOT mean being cheap, it is a
methodology for optimizing—not minimizing—
resources expenditures by avoiding waste
• Being lean does NOT mean avoiding rigorous,
analytical or strategic thinking
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5. Lean Startup Principles
• No idea survives first customer contact, so get
out of the building ASAP to test ideas
• Goal: validation of business model hypotheses,
based on rigorous experiments and clear metrics
• Minimum viable product (MVP): smallest set of
features/marketing initiatives that delivers the
most validated learning
• Rapidly pivot your MVP/business model until you
have validation and product-market fit (PMF)
• Don’t scale until you have PMF
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6. Crossing The Chasm
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7. Where are You?
Before Product-Market Fit: After Product-Market Fit:
Search & Validation Scaling & Optimization
• Lean startup approach • Building a robust, feature-rich
• Hunch-driven hypotheses product
• Minimum viable product (MVP) • Crossing the chasm
• Customer development process • Metrics, analytics, funnels
• Selling to early adopters • Designing for virality &
• Pivoting scalability
• Bootstrapping • Challenges with corporate
partnerships
• Small, founding team
• Building a brand
• Product-centric culture;
informal roles • Scaling the team; more
formal roles
• Early in sales learning curve
• Scaling a sales force
Source: HBS Prof. Tom Eisenmann, J.Bussgang CONFIDENTIAL PRESENTATION | PAGE7

8. Tools/Techniques
• Structured idea generation • Conversion funnel analysis
• Business model generation • Landing page optimization
• Customer discovery process • SEM/SEO optimization
• Focus groups • Inbound marketing design
• Customer survey • PR strategy
• Persona development • Customer support analysis
• Competitor benchmarking • Product feature prioritization
• Wireframing • Sales pitch
• Prototype development • Lead qualification
• Usability testing • Bus dev screening
• Charter user program • Net Promoter Score
• A/B test • Lifetime value vs. Customer
acquisition costs
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9. Customer Development
vs. Product Development
Product Development
Concept/ Product Alpha/Beta Launch/
Bus. Plan Dev. Test 1st Ship
Customer Development
Customer Customer Customer Company
Discovery Validation Creation Building
Source: Steve Blank
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10. “Lessons Learned” Drives Funding
Business Test Lessons
Concept Plan Hypotheses Series A
Learned
Do this first instead of fund raising
(or raise seed round to test hypotheses…rigorously)
Source: Steve Blank
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11. foursquare Case Study
• From inception, best practices in PMF:
– MVP
– Product-centric culture and founding team
– $1.35m Series A
– Responded to every email, tweet
– Hunch-driven, not metrics-driven
– The founders were the target customer
• Contextual factors
– Tech trends enabled success: iPhone/apps, LBS/GPS, social media
– Impact of geography (NYC), launch (SXSW) and VC (Fred Wilson)
– Game mechanic, playful, entertaining
Source: Pikorski, Eisenmann, Bussgang, HBS Case Study: “foursquare”
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12. foursquare Case Study (2)
• Post PMF Challenges:
– Tech founder as scalable CEO
– $20m Series B - expectations
– Pressure to be more analytical
– Competitive response to Facebook, Yelp
– The founders no longer can do it all
– Monetization pressures – when to run experiments? How scale?
• Questions:
– Who is foursquare’s customer – the consumer or the business?
– What social failure is foursquare solving?
– When should foursquare focus on monetization vs. consumer scale?
– Has foursquare crossed the chasm?
Source: Pikorski, Eisenmann, Bussgang, HBS Case Study: “FourSquare”
CONFIDENTIAL PRESENTATION | PAGE12

13. Product – Market Fit
First Growth Venture Network
Jeff Bussgang
General Partner, Flybridge Capital
Senior Lecturer, Harvard Business School
March 29, 2012
CONFIDENTIAL PRESENTATION | PAGE13