What Is Product-Market Fit? Product-Market Fit In A Nutshell

Don Valentine from Sequoia Capital might have coined the term. While Marc Andreessen from A16z popularised it as “being in a good market with a product that can satisfy that market.” According to Andreessen, that is when a product or service has its place in the market, thus enabling traction for the company offering that product or service.

Company	Problem	Solution	Outcome
Facebook	Limited social connections in universities	Online platform for students to connect	High user engagement within Harvard; expansion to other universities
Amazon	Limited book selection in physical stores	Online bookstore with vast selection	Positive customer feedback and sales growth
Dropbox	File synchronization between devices	MVP video showcasing cloud-based storage	Positive response to MVP video; further product development
Airbnb	Lack of affordable lodging for conference attendees	Renting air mattresses in apartment	Successful initial lodging solution for niche market
Slack	Communication challenges within the team	Internal team communication tool (Slack)	Strong adoption within the company; pivot to business communication
Instagram	Complex photo editing and sharing	User-friendly photo-sharing app	Rapid user growth and engagement; acquisition by Facebook
Uber	Difficulty hailing a taxi on demand	Ride-hailing app for convenient transport	Fast adoption by riders and drivers; expansion to new markets
Airbnb (Expanding)	Travelers seeking unique lodging experiences	Platform for renting unique accommodations	Growth of host listings and guest bookings
LinkedIn	Lack of professional networking opportunities	Professional networking platform	Rapid growth in users and professional connections
WhatsApp	High cost of international text messaging	Cross-platform messaging app	Rapid global adoption due to cost savings
Netflix	Inconvenience of renting DVDs from stores	DVD-by-mail and online streaming service	Transition from DVD rentals to streaming; international expansion
Google (Search)	Inefficient web search results	Improved search engine algorithms	Superior search results and user satisfaction
Spotify	Music piracy and fragmented music libraries	Music streaming platform with vast catalog	Subscription growth and reduced music piracy
Twitter	Real-time communication challenges	Microblogging platform for short updates	Rapid adoption for real-time news and communication
Tesla	Limited availability of electric vehicles	High-performance electric cars	Demand for electric vehicles with advanced technology
Airbnb (Experiences)	Lack of unique travel experiences	Platform for booking unique travel activities	Expansion into travel experiences and tours
Zoom Video	Complex and unreliable video conferencing	User-friendly video conferencing software	Widespread adoption for remote communication
Apple (iPhone)	Limited capabilities of mobile phones	iPhone with touchscreen and app ecosystem	Transformation of the smartphone industry
Twitter (Ads)	Revenue generation challenges	Advertising platform for businesses	Successful monetization through ads and promoted content
DoorDash	Limited restaurant delivery options	Food delivery platform with various restaurants	Rapid adoption for meal delivery services
Snapchat	Lack of ephemeral and interactive messaging	Messaging app with disappearing content	Popularity among younger users and unique messaging features
Airbnb (Business)	Corporate travelers seeking alternative lodging	Business travel platform for accommodations	Growth in corporate lodging bookings
Shopify	Complexity of setting up online stores	E-commerce platform with user-friendly tools	Empowering entrepreneurs to sell online
Instagram (Stories)	Competition with Snapchat’s features	Stories feature for ephemeral content	User engagement and retention through Stories
Pinterest	Discoverability and organization of ideas	Visual discovery platform	Growing user base for discovering and organizing visual content
Uber (Eats)	Limited food delivery options	Food delivery service through the Uber app	Expansion into food delivery services and convenience
Airbnb (COVID Pivot)	Impact of COVID-19 on travel industry	Longer-term rentals for remote work	Adaptation to changing market conditions
Peloton	Access to gym-quality fitness at home	High-tech home fitness equipment and classes	Growing demand for home fitness solutions
Zoom Video (COVID)	Increased demand for remote communication	Scaling video conferencing for businesses	Becoming a household name for virtual meetings and remote work
Clubhouse	Lack of audio-based social networking	Audio-based social platform	Early adoption by influencers and tech enthusiasts for audio networking

Table of Contents

Who coined the term product-market fit?

Andy Rachleff who cofounded the firm Benchmark Capital, and also a cofounder and CEO of Wealthfront in an interview with Mike Maples explains the origin of the term. As Andy Rachleff explained:

I learned it from Sequoia Capital. Don Valentine really invented it.

Don used to say, “I’m looking to invest in companies that can screw everything up and still succeed because the customer pulls the product out of their hands.”

I’m paraphrasing. I’m not sure I got that exactly right. He felt that way because the startup will screw everything up. I want a company that has such demand from the market that they can literally screw everything up and still succeed.

Don Valentine was an American venture capitalist, founder of Sequoia Capital, who shaped the Silicon Valley and helped build companies like Oracle, LSI Logic, and Cisco Systems.

Who popularized the term “Product-Market Fit”?

In an article entitled “The only thing that matters” Andreessen popularized the term:

At any given startup, the team will range from outstanding to remarkably flawed; the product will range from a masterpiece of engineering to barely functional; and the market will range from booming to comatose.

In other words, Andreessen takes into account three major factors for the success of any startup:

The team.
The product.
And the market.

He argues that if you asked Entrepreneurs and VCs of the three elements what mattered the most, they would have picked the team.

On the other hand, if you asked engineers about the most crucial element, they would argue that the product matters the most (Andreessen mentions Apple and Google as an example of that).

He takes a third path though. Rather than the team or the product, what matters is the market!

In a great market — a market with lots of real potential customers — the market pulls product out of the startup.

From here he introduces the concept of MVP or minimum viable product.

He defined it as:

The market needs to be fulfilled and the market will be fulfilled, by the first viable product that comes along…

…The product doesn’t need to be great; it just has to basically work. And, the market doesn’t care how good the team is, as long as the team can produce that viable product.

From here it is essential to understand two concepts that help startups and entrepreneurs in general to launch successful products:

The lean startup methodology.
And the MVP.

We’ll also see a third element which has become critical even before an MVP can be developed: the problem/market fit.

In other words, where the lean methodology is the “How,” the MVP becomes the “What” and the problem/market fit becomes the “Why.”

The Lean Startup Methodology in a nutshell

It officially started with an HBR article of 2013 that referred to a new phenomenon in the business world “Why the Lean Start-Up Changes Everything:”

However, the origin story started in the late 1990s.

Steve Blank, a retired serial entrepreneur had the time to think through about what he had missed in terms of business frameworks, during the years, as he started several high-tech companies.

He had noticed that the only tool available at the time was the business plan. However, not only the business plan was a static document which didn’t survive the first contact with the real world.

That document was also plenty of untestable and untested assumptions.

The patterns he noticed would be all gathered into what became a manifesto, and the foundation for the lean startup movement.

In the 2013 HBR article “Why the Lean Start-Up Changes Everything” Steve Blank defined the lean startup as:

It’s a methodology called the “lean start-up,” and it favors experimentation over elaborate planning, customer feedback over intuition, and iterative design over traditional “big design up front” development.

In a nutshell, the lean startup methodology aims at creating a repeatable process for product development to minimize the time it takes to build a product that the market wants.

This process consists of three phases:

Build.
Measure.
Learn.

Once you go through the build > measure > learn that will need to be repeated over and over, thus creating a virtuous cycle or feedback loop.

Steve Blank also highlights a few core principles at the core of the lean startup methodology:

Business plans rarely survive first contact with customers.
Five-year plans are worthless and a waste of time.
Start-ups are not smaller versions of large companies.
The lean start-up movement is about agile development.

Thus, the primary purpose is to come up with a minimum viable product (MVP) which helps companies reduce the time to market.

The Minimum Viable Product in a nutshell

Back in 2009, Eric Ries defined MVP as:

The minimum viable product is that version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort.

And he continued:

MVP, despite the name, is not about creating minimal products. If your goal is simply to scratch a clear itch or build something for a quick flip, you really don’t need the MVP. In fact, MVP is quite annoying, because it imposes extra overhead. We have to manage to learn something from our first product iteration. In a lot of cases, this requires a lot of energy invested in talking to customers or metrics and analytics.

Ash Maurya also described it as:

The smallest thing you can build that delivers customer value (and as a bonus captures some of that value back).

At the same time, other entrepreneurs like Rand Fishkin also highlighted the drawbacks of the MVP approach when you have an established brand.

Indeed when you have an established brand, it might make more sense according to Fishkin to adopt the EVP or Exceptional Viable Product approach, summarized as:

My proposal is that we embrace the reality that MVPs are ideal for some circumstances but harmful in others, and that organizations of all sizes should consider their market, their competition, and their reach before deciding what is “viable” to launch. I believe it’s often the right choice to bias to the EVP, the “exceptional viable product,” for your initial, public release.

In my view, an MVP done right should already have the features described by Fishkin EVP. However, Rand Fishkin raises an important point. A company with an established brand should be cautious the way it releases its MVP.

One classic example of what a disastrous MVP can do is Microsoft’s launch of Bing, which promised to take over the search engine industry, and replace Google as the monopolist of search and the meme of our generation (Microsoft wanted to establish the meme “bing it”) but failed miserably:

While Bing today represents a decent presence for Microsoft in the search industry (Bing makes a few billion dollars to Microsoft) it never really recovered from that MVP launch.

As of 2019, if you ask to the SEO industry (the practitioners that position their content via search) many still curl their lips at the sound of “Bing.”

Indeed, while SEOs are both a blessing and a curse for Google, that community has helped Google get better over the years.

For instance, thanks to the so-called Black SEO practices (attempts to manipulate – successfully – the Google’s algorithms) the search engine has evolved more quickly, by releasing algorithm updates that allowed it to get better and better over the years.

Product-market fit myths

In a blog post entitled The Revenge of the Fat Guy Ben Horowitz points out the four myths about product-market fit.

You might want to know them as they might compromise the all product/market fit endeavor.

Myth #1: Product market fit is always a discrete, big bang event

Some companies achieve primary product market fit in one big bang. Most don’t, instead getting there through partial fits, a few false alarms, and a big dollop of perseverance.

Myth #2: It’s patently obvious when you have product market fit

Ben Horowitz among others uses this example:

Apple’s first iPod shipped in November 2001. It took nearly two years (91 weeks, to be precise) to sell its first million units. In contrast, Apple’s iPhone 3GS shipped June 2009 and shipped 1M units in 3 days. At what point is it obvious to the original iPod team that they’ve achieved product-market fit?

In short, determining when you have reached a product-market fit might seem obvious at hindsight but not so when that is happening!

Myth #3: Once you achieve product-market fit, you can’t lose it

As product-market fit is about the market. When the market changes dramatically you might also lose product-market fit. If that happens, you need to rebuild it again to stay in business.

Myth #4: Once you have product-market fit, you don’t have to sweat the competition

A market that has a big opportunity also has massive competition. If so, the fight will be fierce and if the fight is fierce, how do you know when the time is right to battle up? Also here there is no formula, but the ability to quickly adapt becomes a key advantage.

Key problems with the Product-Market Fit

While the concept of product-market fit is extremely powerful, it also has some flaws. In most cases, what makes a product fail in the first place is the market validation, or whether customers are willing to use or spend money for a product. Therefore, it becomes very important to build a commercially viable product.

Problem/Solution Fit comes first

MVP makes you fall into the trap of building up a product even before understanding the problem the target market faces. That might delay the ability of a company to build a product that satisfies the market.

Ash Maurya describes this phenomenon in “Don’t Start With an MVP:“

You raise your odds of success significantly by spending the requisite time first defining the MVP, then validating it using an offer, before building it. Think of it as Demo-Sell-Build versus the more traditional Build-Demo-Sell approach.

Therefore, where the entrepreneurial world has stressed so much over the solution by trying to build an MVP, that has delayed the ability to deliver a product that the market wants.

Instead, by focusing on the problem first, you can understand the problem, and as Ash Maurya said it, you’ll make the market “an offer your customers cannot refuse.“

The demo > sell > build process has become common nowadays with many platforms (Kickstarter is one of them) that make it possible to validate an idea, selling it, even before the product is ready.

Key takeaways

The product-market fit can be defined as the ability of a product to satisfy the market. The market itself can be segmented to start from a niche market; throughout this process, it is critical to use a method called market segmentation.

At the same time before going to build a product through the lean startup methodology, it is essential to define the problem itself. That can be done via the problem-market fit model which goes through a process of demo-sell-build.

Thus, you will maximize the chances of success of your MVP. Once the MVP is ready, you want to keep improving it to grab more and more market share or to broaden the market wanting the product. At that point, you’ll have reached product-market fit.

However, the product-market fit isn’t something that lasts forever. If the market conditions change, you might lose your product-market fit. Therefore, you’ll have to start the process to regain your product-market fit.

The whole point of the process highlighted in this guide is about coming up with ideas that you can validate and sell even before building a product.

Today that is possible via crowdfunding platforms, or by setting up offerings and only after enough people join in, you start building a product.

Thus, in this era, where digital allows entrepreneurs to quickly and at low costs gather feedback from a large group of people. It is possible to sell something even before you’ve built it!

Product-Market Fit Highlights:

Coined by: Don Valentine from Sequoia Capital might have originated the term. Marc Andreessen from A16z popularized the concept.
Coined Origin: Don Valentine, a venture capitalist, is believed to have first mentioned the concept, emphasizing the importance of market demand driving success even if a startup has challenges.
Popularization: Marc Andreessen, in his article “The only thing that matters,” popularized the concept by highlighting the crucial role of the market in a startup’s success.
Origin of Term: Andy Rachleff, co-founder of Benchmark Capital, explained that Don Valentine used the term to describe startups with strong market demand that could succeed even if they faced challenges.
Essence: Product-market fit refers to the alignment of a product or service with a market’s demand and needs.
Importance of Market: According to Andreessen, in a great market, the market’s demand pulls the product from the startup.
Lean Startup Methodology: A methodology that emphasizes experimentation, customer feedback, and iterative design to create a repeatable process for building products.
Minimum Viable Product (MVP): The smallest version of a product that allows a team to learn from customers with the least effort.
Problem-Market Fit: Emphasizes understanding the problem the target market faces before building a solution, ensuring better market validation.
Myths About Product-Market Fit:
- It’s not always a discrete, big-bang event.
- It’s not always obvious when you achieve it.
- It can be lost due to market changes.
- Competition remains a challenge even with product-market fit.
Continuous Process: Product-market fit isn’t static; it requires ongoing adaptation to market changes.
Key Takeaway: The essence of product-market fit is aligning a product with a market’s demand, and this alignment is a dynamic process influenced by market changes and competition. The lean startup methodology and problem-market fit help entrepreneurs validate ideas and build successful products.

Case Studies

Facebook’s Early Days:
- Problem: Mark Zuckerberg recognized the problem of limited social connection within university communities. Students wanted an online platform to interact and share information within their college network.
- Solution: Facebook provided a user-friendly platform exclusively for Harvard students to create profiles, connect with classmates, and share updates.
- Achieving Product-Market Fit: Facebook achieved product-market fit by focusing on a specific problem (limited social interaction within universities) and solving it effectively. The platform quickly gained popularity at Harvard, demonstrating high user engagement. This initial success paved the way for expansion to other universities and eventually the global market.
Amazon’s Online Bookstore:
- Problem: Jeff Bezos identified the problem of limited book selection in physical stores, along with the inconvenience of shopping for books in person.
- Solution: Amazon launched as an online bookstore with a vast selection of books and the convenience of online shopping.
- Achieving Product-Market Fit: Amazon achieved product-market fit by addressing a specific problem faced by book buyers. The online platform provided a solution that was superior to traditional bookstores, attracting book enthusiasts and readers. Positive customer feedback and growing sales demonstrated product-market fit and encouraged further expansion into other product categories.
Dropbox’s MVP:
- Problem: Dropbox recognized the problem of file synchronization and sharing between multiple devices.
- Solution: They created an MVP in the form of a video demonstration, showcasing how their cloud-based file storage and sharing service would work.
- Achieving Product-Market Fit: Dropbox achieved product-market fit by testing the concept of their service through the MVP video. The positive response from viewers indicated a strong demand for a solution to the file synchronization problem. This validation encouraged them to develop the full product, which gained widespread adoption and user engagement.
Airbnb’s Early Focus:
- Problem: Airbnb addressed the problem of affordable accommodations for attendees of a design conference in San Francisco.
- Solution: They rented out air mattresses in their apartment, offering a cost-effective lodging option for conference attendees.
- Achieving Product-Market Fit: Airbnb achieved product-market fit by providing a solution to a specific problem faced by a niche market (conference attendees seeking affordable lodging). The positive response from early users demonstrated the viability of their platform. This success encouraged them to expand their offerings and target a broader audience.
Slack’s Transition:
- Problem: Slack initially aimed to create an online game but faced challenges gaining traction.
- Solution: The team shifted their focus to solving communication problems within their company by developing a team communication tool (Slack).
- Achieving Product-Market Fit: Slack achieved product-market fit by addressing communication challenges within their own organization. The tool gained popularity among their team members, showcasing strong product-market fit. This success led them to refine and market Slack as a communication platform for businesses, eventually becoming a widely used tool in various industries.

Product-Market Fit vs. Problem-Solution Fit

A few key issues with product-market fit are.

Falling into the Innovator’s bias

As highlighted in my interview with Ash Maurya, is that often, especially in the tech world, founders love the technical solution, thus trying to find a problem for it.

This is one of the major pitfalls because instead of starting with a commercial use case and working a product backward, those founders fall into the innovator’s bias.

They tend to overstate the importance of the technology (in the short term) vs. the potential problem it might solve.

While technology might become critical in the long run as its adoption scales up, initially, it’s critical to scale up the commercial use case of that technology.

One example these days is how Zuckerberg fell in love with his vision of the Metaverse, throwing billions at it without a proper commercial use case.

The huge risk is that the Metaverse, according to Zuckerberg’s vision, is primarily a gaming console, and that’s it.

For a technology to become viable at scale, it needs to have roots in wider and wider commercial applications.

Hard to measure

Another major drawback of the product-market fit is it’s very hard to measure because a bit foggy as a concept.

In short, while in theory, it seems easy to say you got product-market fit when you’re growing at super speed.

How do you know if you’re getting there? And if you’re moving in the right direction? As we’ll see, a problem-solution fit framework might be way more effective for it.

Look for a too-large market segment

Another pitfall of the product-market fit is that it makes startups look for too wide market opportunities in the early days.

While we all like to hear the story of Amazon as the everything store. Or Google, as it became the dominant search player.

And Facebook, when it opened up to the world. It’s critical to remind that before becoming the everything store, Amazon was an online bookstore.

That Facebook was a social network for a few selected colleges in the US.

And that Google was a research project at Stanford! We’ll see how we can fix this by applying a Blue Sea Strategy!

How do we fix these major drawbacks?

Fall in love with the problem first

To obviate these core issues above, we need to have a reality check, an obsession with the problem at hand.

There is a trick there, though, to understand a problem, you got to narrow down (substantially) the range of action of your product.

Why? Because the more you try to tackle big problems, the more it’ll become ambiguous and the hardest it’ll be to find a proper solution for it.

Of course, as an entrepreneur, you can tackle whatever problem you want.

But, to build a viable product and create options to scale, narrowing things down help a lot to create less noisy feedback loops!

Blue Sea Strategy: Start with a Microniche to develop your Minimum Viable Audience

To achieve that, you want to start from a Blue Sea.

This is such a narrow space in an existing marketplace that:

It is too tiny for a dominant player to go after.
Yet, interesting enough for you to build a viable business.
And where it’s easy to establish feedback loops that are valuable to iterate fast on the product.

Therefore, the first step is to develop and go after your microniche and find your Minimum Viable Audience:

Product-Market Fit vs. Founder-Problem Fit

There is also another core aspect to this.

It’s about the founder-problem fit.

In an interview by Tim Ferris with Roelof Botha, the partner at Sequoia Capital, Botha explained that well:

“It starts with an authentic identification with a problem.

I think when that founding inspiration because if you’re trying to start a business for the sake of starting a business, it’s so hard; there are so many challenges on the way to building a successful company.

If you’re doing it for the wrong reasons, you’re going to wilt, you simply won’t persevere.

But if you’re deeply motivated by what you’re doing, you’ll keep going, and you’ll overcome obstacle after obstacle and so that, to me, is one of the key starting conditions.

It is founder-problem fit!”

Thus, are you in love with the problem you’re trying to solve as a founder? The diagram below might help assess that.

Related Frameworks	Description	When to Apply
Product-Market Fit (PMF)	PMF is the alignment between a product’s features and the needs and preferences of its target market. It indicates that a product satisfies a strong market demand and has gained traction.	When assessing the viability and adoption of a new product, validating product-market fit hypotheses, or refining product development strategies.
Minimum Viable Product (MVP)	MVP is the most basic version of a product that allows a team to collect maximum learning with minimum effort. It helps validate assumptions, gather feedback, and iterate based on real user insights.	When testing assumptions and hypotheses, validating product concepts, or accelerating time-to-market by releasing early versions for user feedback.
Lean Startup Methodology	The Lean Startup Methodology emphasizes rapid iteration, experimentation, and validated learning to develop products and businesses. It advocates for building, measuring, and learning from customer feedback.	When launching startup ventures, developing new products, or navigating uncertainty and risk by adopting an iterative approach to product development.
Customer Development Process	The Customer Development Process, popularized by Steve Blank, focuses on understanding customer needs and validating product-market fit through iterative testing and customer feedback. It involves four steps: Customer Discovery, Validation, Creation, and Building.	When validating market demand, identifying customer segments, or refining product-market fit hypotheses through direct engagement and feedback from potential customers.
Jobs-To-Be-Done (JTBD) Framework	The JTBD Framework focuses on understanding the underlying motivations and goals that drive customers to “hire” a product or service to fulfill specific jobs or tasks in their lives. It helps uncover unmet needs and opportunities for innovation.	When identifying customer needs, designing user experiences, or developing products that align with customers’ desired outcomes and goals.
Problem-Solution Fit	Problem-Solution Fit is the alignment between a market problem or pain point and the solution offered by a product or service. It indicates that a product addresses a real and pressing need in the market.	When defining product value propositions, validating market needs, or refining problem-solving approaches to ensure alignment with customer pain points.
Product Adoption Curve	The Product Adoption Curve illustrates the stages through which customers adopt a new product or innovation: Innovators, Early Adopters, Early Majority, Late Majority, and Laggards. It helps understand market dynamics and plan marketing strategies.	When analyzing market adoption patterns, targeting customer segments, or tailoring marketing strategies and communication to different stages of adoption.
Value Proposition Canvas	The Value Proposition Canvas is a tool that helps visualize and design compelling value propositions by mapping customer profiles (jobs, pains, gains) with corresponding product features and benefits. It fosters empathy and alignment with customer needs.	When developing value propositions, refining product messaging, or aligning product features with customer desires to enhance product-market fit.
Competitive Analysis Framework	Competitive Analysis involves evaluating competitors’ strengths, weaknesses, strategies, and market positioning to identify opportunities, threats, and areas for differentiation. It helps inform product strategy and market positioning.	When assessing market dynamics, identifying competitive advantages, or benchmarking product features and pricing against competitors in the industry.
User Persona Development	User Personas are fictional representations of target customers based on demographic, psychographic, and behavioral data. They help humanize user needs, preferences, and pain points, guiding product design and marketing efforts.	When understanding customer segments, empathizing with user needs, or tailoring product experiences and marketing messages to resonate with specific user personas.