A step-by-step guide to reaching product market fit, false positives, budget and technologies costs and the logic behind finding the right business case and technology solution.
Notes and metrics are from product development and build out for ConsumerBell.com
Author: Ellie Cachette
www.elliecachette.com
2. background mission test cases references
P roduct Market Fit is the burn point of ascompany. An increasedpoint
in which to not increase
always explained the “pre-burn,” or the
a burn
often can speed up the time to Product Market Fit, or PMF, but it can be
difficult to truly understand at which point the “fit” has actually been
“fitted.”
In some spaces, environmental factors can change, adding positive or
negative value - but is always paced out.
When you are a market leader, product disrupter or a general business
creator, you often have to create a market to create a product to create a fit.
Thought leaders in the space include Ash
Muraya, Michael Karnjanaprakorn, Ricky
Yean, Sean Ellis and Jeff Busgang.
While everyone agrees on the
general theory of product market
fit, seeing real life examples of it
or data is hard to find.
Here is our story at
ConsumerBell of reaching
Product Market Fit.
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3. background mission test cases references
Our Timeline
to Product Market Fit
hypothesis 3
hypothesis 2
hypothesis 1
san francisco new york san francisco
may 2010 - jan 2011 feb 2011 - aug 2012 aug 2012 - present
pre pm / fit (flat growth) product market fit conversion option first second
driver driver
Most agree the growth rate pre-PMF is long and flat. But the
question often asked is “just how long?”
12
products built
Our market has been scattered, needing plenty of disruption in
several areas, so we had to wonder where exactly our “fit” was. 370k
total burn
Being a startup, we initially defined “fit” as something someone
would pay us within six months.
One could argue we’ve made several products that could have been
36
months
2
a hit - had we given the sales cycle more time. However as a startup
with minimal burn and without a clearly defined “market,”
fundraising was not ideal. cross-country
moves
Build, solve and get paying customers was always our motto.
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4. background mission test cases references
The Problem
Recalls are costly & inefficient.
There was a personal inspiration for solving the problem around
product recalls, which will be at the end of this document as a Foreword.
The main quest has been to solve the inefficiencies surrounding product
recalls. At the core, we wanted to minimize the risk of class action lawsuits,
which we predict to be a growing space in the future.
We boiled down product recalls into particular business “Hypotheses:”
What is the problem?
Recalls are Recalls are Recalls are
common. expensive. dangerous.
Are recalls common Are recalls expensive Are human and animal
enough to pursue a enough to pursue a lives at stake?
solution? solution?
yes. yes. yes.
4,000 per year $30m-50m each numerous deaths
on average 1000s injuries
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Total Costs in US Dollars & Headcount
$200,000
total costs
$120,000
total costs
$50,000
total costs
hypothesis 1 hypothesis 2 hypothesis 3
May 2010 - Sept. 2010 Jan. 2011 - Nov. 2011 Jan. 2012 - Jan. 2013
HYPOTHESIS #1 HYPOTHESIS #2 HYPOTHESIS #3
Recall information is hard to Manufacturers want control Retailers need accurate recall
find. If we collect it, consumers of their recall information. information and will pay for it.
will use our service.
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6. background mission test cases references
The Market
input
9 google
merchant 12 inventory
monitoring 11 api
company 8 upload
tool 5 making
safety easier 12 magento
consumer
facing facing
6 website 4 marketplace 4 submit a
complaint
1 submit a
complaint 3 ring
the bell 2 wordpress
the output
Recall
Space
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Minimum Viable Product (MVP)
versus
Minimum Sellable Product (MSP)
We Product (MVP) in all cases. However, the
Viable
were able to successfully reach Minimum
paying customer has always been on the enterprise
or retail side - customers unfamiliar with small start-
ups. Reaching a Minimum Sellable Product (MSP)
much different.
When bootstrapping or running a lean organization, growth
the favorite product methodology is “lean” or to
iterate often and quickly. However for enterprise-
focused products, there needs to be enough time
to understand and calculate what’s transition
to growth
interesting to what is sellable.
Even when PMF is achieved, other
mvp vs. msp
issues can arise, such as user leakage
and access to data changing (as we saw
with the Rapleaf scandal). Minimum Viable Product Minimum Sellable Product
Price Plan
In industries that need overall API
disruption, it is confusing what the Active Users
Recall Info
right PMF is because the environment
CRM Integrations
to culture a PMF isn’t solid. Company Logins
Buyer Identified
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The Journey to
Minimum Sellable Product
A Case Study
The biggest indicator to many on the
“Journey to PMF” is giving a set time for
an idea at length until we had fully explored it
and understood it and knew what to do next.
something to work; if it doesn’t, then pivoting
or changing the idea is necessary. Had we stopped or wiped the drawing board
clean for the sake of it, we never would have
For us at ConsumerBell, we never gave a hard organically learned about the areas when we
deadline for giving up. We always examined should have.
Problem/ Product/
Solution Fit Market Fit Scale
focus: validated learning focus: growth
experiments: pivots experiments: optimizations
Helpful things pre-PMF
• Access to engineering; knowledge of engineering • Knowing how to explain the product (user marketing)
• Knowing how much to charge contractors • Understanding basic business principles (like
profitability and how far to take it)
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Startup Curve The Startup Curve is an unproven line of
motion most startups go through.
NBC special
Long hours &
First angel little capital
investor! Upside of
Buyer
Top 7 Women
in Tech
The
Manufacturer Promised
Top 15
Springboard
interest Land
Acquisition of
A Release of Liquidity
Improvement
Cash Infusion First sale!
$$$$$$$$$
Consumer
Activity Press The Crash of
Ineptitude
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Hypothesis Check
The key to each hypothesis was to understand false positives and areas which to
measure the market’s response.
There are so many opportunities and areas that can have a PMF. It excites me to
think of a world that will always change. This is probably where the phrase “ideas are
cheap” originates from.
There are thousands of ideas to execute and so little time until they expire!
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HYPOTHESIS #1
Recall information is hard to find, if we collect it then
consumers will use our service (consumer-focused).
$5,000 hard costs
$50,000 soft costs PROBLEMS
Data structure / organization
Consumer-facing
#1 Submit a Complaint #2 Ring the Bell mobile app #3 Submit with feeds
dates: may 2010 - june 2010 june 2010 - august 2010 august 2010 - sept. 2010
tech: weebly + ajax pieceable wordpress
cost: n/a - in-house n/a - in-house $5000
Lessons Learned
• Matching complaints (aggregating) is difficult.
• Broadcasting information is difficult to target and
DATES
be effective.
May 2010 - Jan. 2011
HEADCOUNT
Environmental Factors Two employees
• Twitter was a fairly new platform, making it easy to get PRODUCTS
attention and penetrate. 1, 2, 3
• Facebook was a great channel for sharing important information, but
difficult to get fans as company/brand pages were a new concept.
• No feeds or APIs of recall data (CPSC, FDA, etc) existed yet
so getting data was a very manual process.
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HYPOTHESIS #2
$20,000 hard costs Companies (Manufacturers) want control of their
$200,000 soft costs recall information and consumers complaints.
DATES PROBLEMS
March 2011 - May 2012 Manufacturer education, false positives
HEADCOUNT (expressed manufacturer interest was mislead-
Six employees ing), understanding manufacturer culture
PRODUCTS
4, 5, 6
#4 Submit a Complaint PHP #5 Marketplace #6 Making Safety Easier
dates: january 2011 - march 2011 march 2011 - november 2011 january 2011 - november 2011
tech: php ruby on rails weebly + iwidget
cost: n/a - in-house $20,000 $100 + in-house
month costs
january $3000
Lessons Learned
february $5000 • Others easily mistook our company or product for a non-profit
march $38,000 • Companies have no desire to have more work (new app, new tool,
new corporate rules around it)
april $23,000
may $22,000 Environmental Factors
$13,000
• Ahead of its time
june
• Social media wasn’t mature yet
july $38,000 • Manufacturers were not familiar with external web-based apps
august $13,000
september $15,000
Takeaway
• Spent too much time on “Marketplace” (6 months)
october $15,000 • Marketplace wasn’t executed properly in terms of initial customer
november $9000
december $6000
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HYPOTHESIS #3
Retailers need accurate recall information and will pay for it.
$20,000 hard costs PROBLEMS
$40,000 soft costs Create urgency of product, figuring out price point
and faster user acquisition cycle.
Company-facing
#7 Dual User Site #8 Inventory Monitoring #9 Upload Tool
dates: january 2012 - july 2012 may 2012 - september 2012 october 2012
tech: php xls php
cost: n/a - in-house n/a - in-house n/a - in house
#10 Google Merchant #11 API #12 Magento
dates: november 2012 january 2013 february 2013
tech: php php magento + php
cost: n/a - in-house n/a - in-house $20,000
Lessons Learned
• Retailers most at risk: in between consumers & manufacturers
DATES • Multiple products give multiplied risk
Jan. 2012 - Feb. 2013 • Need automated format for recall information
• Shipping recalled items violates Amazon Terms of Agreement
HEADCOUNT
Environmental Factors
Three employees
PRODUCTS • E-Commerce growth
7, 8, 9, 10, 11, 12
• Increasing online inventories
• Mature platforms for easy integration (Shopify, Magento)
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14. background mission test cases references
Next steps: out-winning any potential connections made in thethe company too
soon, leveraging lessons learned and the
competitors, not selling
process.
When we started ConsumerBell, we wanted to ensure public safety and make sure
no one would be painfully affected by a recall in the future like one of our
founders experienced (see foreword for more info).
While new as an organization, we did some smart things.
Key Observations
and Smart Things we did
Picked a great attorney at We didn’t overbuild in tech
tech firm & set up a C-Corp. for Hypothesis 3, unlike
Hypothesis 2.
Moved cross-country.
Gained another community and 1 cease & desist
We “followed the pain.”
set of expertise.
fired
5 employees
E-commerce clients walked us
3
through the process.
Did not accept COO. and advisors
Once there is a PMF,
2
An investor pushed a COO onto us,
but we declined. Had we brought lawsuit threats: another set of issues
them on, we would not have is uncovered:
entered hypothesis 3.
120,000 miles traveled
• Scaling the product
• Fastest distribution models
Kept company lean. • Talent for above steps
• Understanding of true
B2B SaaS is now “hot.” customer cost & the
maximum value to charge
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Eachout. As a firsttook roughlyspace, the
flush
hypothesis
mover in a
a year to If you can’t sell it, marketing materials
can’t sell it. People will give advice
key in the beginning is to learn as fast as around patents, but there will be too
possible, not as cheap as possible - all the many changes.
while positioning the company for
flexibility. One thing that was in common with
each hypothesis is that our margins kept
Time cannot be wasted creating improving as we would have hypothesis
supporting marketing materials until at which signals ability to estimate with
least one client had paid for the service. accuracy.
Initial investor feedback told us we did not have a market.
We would not have found our PMF if we had
given up after hypothesis #2.
We would not have found PMF if we kept listening to false positives
from hypothesis #2 (increased interest, high price points).
In cases of high burn, it got us to PMF faster.
In cases of slow burn, our team was small & reliant on the CTO & myself
(it’s these cases that show the “value” of a founder & independence from other labor or capital drains)
The more time out of the office the more product progress was made:
“talk to your customers”
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Foreword
Founder’s Note: Ellie Cachette
My father was infected with HIV and Ilater died fromoutcontaminated product. I wanted
to make sure it never happened again so had to figure
a
what went wrong in his situation.
It was discovered later that the true problem was the recall of the contaminated product was
poorly managed.
In late 2009, while having a full-time job, I started to investigate why recalls are managed
poorly and all the problems surrounding recalls.
In May 2010, I started ConsumerBell full-time to address and solve the problem.
Resources
and thank yous
Jeff Bussgang
http://www.slideshare.net/bussgang/intelligently-class-12-2012-15581410
Mike K Blog
http://www.mikekarnj.com/blog/2012/11/05/reaching-the-startup-holy-grail-product-market-fit/
Ahava Studios & Press
http://www.ahavastudios.com
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