2014 So What Is Product Market Fit Anyways? Chris Burry

European Innovation Academy:
So What is Product Market Fit Anyways?
Chris Burry, Co-CEO
US Market Access Center

 Together, we are starting on a journey of personal
growth
 The next few weeks should be a
process of discovery
o Learn more about yourself
o Entrepreneurship
o Building a business
o The realities of this new, “flat”
world we live and work in
Welcome to The Jungle……
© US Market Access Center Inc 2013
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 But you have to climb
the mountain with
your team.
 We can’t climb it for
you.
 But we can help…
Your mentors are your mountain guides….
© US Market Access Center Inc. 2014
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 Founded in 1995 as the 1st program to help non-US
entrepreneurs succeed in Silicon Valley
 Since then, we have helped
o 1,500+ companies
o From 50+ countries
 Offices in San Francisco and
Menlo Park
 Active programs with more
than 20 countries
The USMAC in 60 Seconds
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 Serial entrepreneur
o Software company in university (tiny exit)
o Hardware company – fail
o 2nd software company – nice exit; dumbest thing
o 2nd hardware company – break even
o 3rd software company – epic fail
o 1st professional services firm – huge win
o USMAC – doing very well
o 3rd hardware company (angel / board member) – ?????
 Investor (Angel and VC)
And who is Chris Burry?
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The Entrepreneurial Challenge
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The Entrepreneur faces many challenges on the road
to success…
The Entrepreneur’s Challenge
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How do I
build it? How can I
finance it?
Will anyone
buy it?
How do I
hire the
right team?
Who can
advise me? How much
do I charge?

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So… where are you going to end up?

Do you want to end up here?
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Or End up here….
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Reality Check Please!
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 It is hard work
 It takes time
 It takes practice
 There is no magic
formula

Think of yourself as a bread maker
 Seems simple….
o Start with some flour
o Add some water
o Some sugar
o Maybe some salt
o Add some yeast
o Mix it together
o Bake it for a while
 And you get BREAD!!!!
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Easy right?

I’ve been trying to learn to bake bread….
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Different recipes for different tastes and purpose
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Let’s brainstorm for a minute.
What do you think are typical
causes of failure? (And it is not
bad luck)
Research shows 3 key reasons:
Technical – Product fails
Execution – Team fails
Market – No one wants to buy it
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Why to most startups fail?

What is the number one cause of failure?
The #1 company-killer is
lack of market.
- Marc Andreessen
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In other words…
More startups fail from
a lack of customers
than from a failure of
product development

You aren’t providing any benefit to your
customer
You haven’t found an effective way to
communicate the benefits of your
product or services
So why don’t people buy?
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So how do we improve the odds?
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Failure rate for new products and ideas is high…

1. Accept that you don’t
“create” reality, your
customers do
2. Try really hard to trust
3. Learn to sell (this is how
you get customers!)
© US Market Access Center Inc 2013
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So where do we begin? By rewiring your brain

Business Model vs. Cash Runway
You are using up money…. until
Business Model Changes Over Time
Plan
A
Plan
B
Plan
C
Plan
D
Plan
E
Wall
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You are in search of a business model that scales
 The problem and solution are
UNKNOWN
 What the customer values is
UNKNOW
 All unknowns must be tested
 Money is scarce & time is short
 Multiple models will fail before you succeed (pivot)
Accerated Learning is the Key
Think Different: Business model not technology
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Old Thinking:
How long until
you have burned
all your cash?
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How long does your company have to live?

Lean Thinking:
How many pivots do you
have left until you have
burned all your cash?
Or in other words,
this is your startup…..
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How long does your company have to live?

So what can we do differently?
Stand the model on its head and learn
before you burn…
By putting customers at the center of
product development
… and accelerating learning
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Lean Startup in 3 Minutes
Follow-on to “Customer Development”
introduced by Steve Blank in 2005
Based personal experiences of startup
failure and success
Inspired by Lean Manufacturing & Agile Methods
Focus on eliminating of waste and reducing risk
Learn early and learn often
Pivot’s are the application of learning
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The problem and solution are UNKNOWN and
must be tested
You are in search of a business model that lets you
scale
Multiple models will fail before you succeed
(pivot)
Money is scarce and time is short
You need a systematic path to a business model
that works!
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Lean Startup Assumptions

Build - Test – Learn Loop
Customer Development
Product Development
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Business Model Canvas and Test
Source: How #bmgen and #custdev fit perfectly « Business Model Alchemist
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… In A Systematic Discovery Process
Illustration source: Running Lean, Ash Maurya
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We begin with the customer and
some simple questions:
1. What is the customer’s problem
you trying to solve?
2. How do you know they have this
problem?
3. How big is their pain associated
with this problem
4. How much money are they willing to pay?
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So where do we begin?

Why do people buy things?
People spend their money because they are
experiencing “pain” of some sort
o I my car is broken and can’t be fixed and I need a
car to go to work
o I am hungry and I want something to eat so I am no
longer hungry
o I get bored sitting on the bus and want something
that I can use to amuse myself.
My ‘pain’ and your ‘pain’ may not be the same
Customer Defined Value: Say what?
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You don’t get to tell customers what they want
or need… you don’t get to define their pain
Understanding their ‘pain’ is the key to selling
You job is to help them understand how your
product or service is going to make their pain go
away … better … faster … cheaper than any of the
other alternatives
And yes… marketing and advertising can be used
to create need / want / perception of pain… but it
is VERY hard to do
Customer Defined Value: So what?
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Russ Fraden, co-founder of Social Shield ($2m seed
round, $10m ‘A’ round, and acquired by Avira) once
told me, “You don’t have a business unless”
There are real people, with real money
Who have a real problem (need, or want)
And they are willing to pay you to make their
problem go away
The Customer, not you
decides if you have a business
Do you have a business?
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Is this business worth building?
Reasonably smart people
can rationalize anything but
entrepreneurs are
especially gifted at this.
But wait….. There is another question
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Bringing it together – Product / Market Fit
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Some definitions according to Marc Andreessen
 The caliber of a startup team can be defined as the
suitability of the CEO, senior staff, engineers, and other
key staff relative to the opportunity in front of them.
 The quality of a startup's product can be defined as how
impressive the product is to one customer or user who
actually uses it: How easy is the product to use? How
feature rich is it? How fast is it? How extensible is it? How
polished is it? How many (or rather, how few) bugs does it
have?
 The size of a startup's market is the number, and growth
rate, of those customers or users for that product
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According to Andreessen
When asked which matters most – team, product or
market. His response was:
 I'll assert that market is the most important factor in
a startup's success or failure.
 In a great market -- a market with lots of real
potential customers -- the market pulls product out
of the startup.
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According to Andreessen…
You can obviously screw up a great market -- and that
has been done, and not infrequently -- but assuming
the team is baseline competent and the product is
fundamentally acceptable, a great market will tend to
equal success and a poor market will tend to equal
failure.
Market matters most.
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If you have to ask whether you have
Product/Market Fit,
the answer is simple: you don’t.”
- Eric Ries, The Lean Startup
So how do I know if I have it?
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How would you feel if you could no longer use [your
product or service]?
1. Very disappointed
2. Somewhat disappointed
3. Not disappointed (it isn’t really that useful)
4. N/A – I no longer use [product]
If you find that over 40% of your users are saying that
they would be “very disappointed” without your
product, there is a great chance you have PMF
Another take… ask your customers this
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Understand the difference between an MVP and an
MVS…
 An MVP is the smallest solution that delivers
customer value.
 An MSP is the smallest solution that you can
actually sell. Often more complicated and
expensive than an MVP.
Some thoughts on this
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What In The World Is A Value Proposition?
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Customer
Problem NeedSolution Value Created Competition
Mantra
WOW Statement
Executive Summary
Speed Date Pitch
Full Pitch
VALUE PROPOSITION
Source: Curt Carlson, “The Five Disciplines of Innovation”

How do you create and deliver customer value that is
clearly greater than the competition?
1. Customer Problem– What is the problem you are
solving?
2. Solution – What is the unique approach you are
taking to solving this problem?
3. Value Created – How does the customer benefit?
4. Competition – How is what you are doing better
than the competition and/or alternatives?
A Value Proposition in Four Not So Easy Steps
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 The closer you are to a “NEED,” the higher the
value
1. I want lunch right now, but I don’t need it
(because I had breakfast)
2. I need FOOD right now because I haven’t
eaten in 5 days
 In which case would you be willing to pay more
money?
Some other examples?
Customer Problem: Need vs. Want
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Technology Insight
1. Moore’s Law
2. New scientific
discoveries
3. New manufacturing
approach
4. Typically applies to
hardware, clean tech
and biotech
2 Kinds of “Approach”
Market Insight
1. Value chain disruption
2. Deregulation
3. Changes in how
people work, live and
interact and what they
expect
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Where Value Comes From
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Comes from Technical Insight Comes from Market Insight
Smaller
More Efficient
Faster
Simpler
Lower
cost Better
Bundling
Better
Branding
Better
Distribution

 “Hard” (measurable benefits) are ALWAYS better
 “Soft benefits” rarely command top dollar
Give me some examples of hard
and soft benefits for products
in the market
Some thoughts on benefits
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 Be careful how you define the problem, because it
changes the competition
Problem – Customer needs a new car
Problem – Customer needs to get to work
 Biggest competition is almost always?
Some thoughts on competition
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Do nothing…. Is your bigges competitor
Some thoughts on competition
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Lot’s of talk about customer
 Customer pain
 Customer problem
 Customer value
 Customer benefit
 A market is a common group of customers
 Knowing your customer is KEY
 This afternoon…. The Customer Persona
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Let’s Connect
US Market Access Center
10 South Third Street, 3rd Floor
San Jose, CA 95113
Our Headquarters
facebook.com/usmarketaccess
@usmarketaccess
linkedin.com
Groups – US Market Access Center
San Francisco
Palo Alto
San Jose
+1 (214) 673-5187
Phone
cburry@usmarketaccess.com
Email
Chris Burry
Co-CEO
Contact
www.usmarketaccess.com

2014 So What Is Product Market Fit Anyways? Chris Burry

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2014 So What Is Product Market Fit Anyways? Chris Burry