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Journey to Product Market Fit

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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

Journey to Product Market Fit

  1. 1. A Deeper Look:Product Market Fit Ellie Cachette
  2. 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.elliecachette . com product market fit : consumerbell , march 2013 page 1
  3. 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.elliecachette . com product market fit : consumerbell , march 2013 page 2
  4. 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 injurieselliecachette . com product market fit : consumerbell , march 2013 page 3
  5. 5. background mission test cases references 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.elliecachette . com product market fit : consumerbell , march 2013 page 4
  6. 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 Spaceelliecachette . com product market fit : consumerbell , march 2013 page 5
  7. 7. background mission test cases references 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 Identifiedelliecachette . com product market fit : consumerbell , march 2013 page 6
  8. 8. background mission test cases references 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)elliecachette . com product market fit : consumerbell , march 2013 page 7
  9. 9. background mission test cases references 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 Ineptitudeelliecachette . com product market fit : consumerbell , march 2013 page 8
  10. 10. background mission test cases references 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!elliecachette . com product market fit : consumerbell , march 2013 page 9
  11. 11. background mission test cases references 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.elliecachette . com product market fit : consumerbell , march 2013 page 10
  12. 12. background mission test cases references 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 $6000elliecachette . com product market fit : consumerbell , march 2013 page 11
  13. 13. background mission test cases references 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)elliecachette . com product market fit : consumerbell , march 2013 page 12
  14. 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 chargeelliecachette . com product market fit : consumerbell , march 2013 page 13
  15. 15. background mission test cases references 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”elliecachette . com product market fit : consumerbell , march 2013 page 14
  16. 16. background mission test cases references 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.comelliecachette . com product market fit : consumerbell , march 2013 page 15