We often hear the term PMF (product market fit) or traction around an MVP (minimum viable product) when talking to startup founders.
We hear much less about how these terms came to be and the market forcing functions around how they came to be understood as viable gauges for a successful startup.
You can hear them at any pitch night event or in any discussion around how things are going when a founder talks about their traction, but to really understand how to approach marketing and product development we first need to understand where these frameworks came from and the market forcing functions that helped to create them as metrics.
Without this we can’t deeply understand if we are going about things in a way that will help our startup grow and thrive.
The rise of the ‘MVP’
I arrived in Silicon Valley on Valentine’s Day in 2004. I have had the privilege of participating and living through some of the greatest transformations in the history of technology and startups.
Transformations that have changed the way we live forever. Deeply understanding how these market functions took hold to create the lore of today is critical as you walk through the dance of product and marketing and growth.
The rise of the MVP came from the inability for VC’s to compete with large injections of capital into Seed stage companies at unvalued pricing. The creation of the MVP was largely due the market need to have a justification for allocating funding into the Seed stage with uncapped SAFE notes and somewhat to the advancement in dev tools making it easier and faster to prototype as well as.
The next move that occurred in the market was the Fenwick Series Seed Documents; created in mid-end of 2010. This established a new legal framework for what would come as the biggest shake up in Valley funding. The idea you could raise significant capital without placing valuation on a company was unthinkable not long ago.
Previously you had a capable product which would then be given a valuation in order to secure funding. Companies would look for angel funding but it was really much more based on background and the potential the angel saw.
During the rise of “Web 2.0” a new kind of venture investor emerged, spearheaded by people such as Ron Conway and Jeff Clavier. The next move that solidified the MVP as part of the funding process was, in 2011, Yuri Milner and SV Angel launched the Start Fund, offering $150,000 via an uncapped convertible note to every Y Combinator startup.
This historic blanket-investment deal gave founders a quick runway without setting a valuation cap – though it later evolved into smaller structured programs. This was the ultimate shake up that created the MPV and the VC’s asking for an MVP.
This didn’t make the MVP necessary, given lots of products in the ads and social media world didn’t move in that direction, but it did create a rush into the “office 2.0” market which we now call SaaS.
Product and marketing – never the twain shall meet
You are probably wondering why this is important to understand – the biggest is to help debunk the myth that the only way startup creation happens is using the Lean Startup method or that you have to have an MVP, neither is the case – Lean Startup was a framework largely sold outside of the Valley which gave some helpful tool sets but I have yet to point to the success of any unicorn that followed it.
The idea from this time came to be that with a MVP you could test traction and user acquisition and growth.
This worked well in the app economy of 2012-2014 where development tools (like Jira) increased and dev cycles could speed up to meet the demands of MVP testing market.
I think for SaaS the MVP was more harmful than helpful. It created many false positives and encouraged this bolting together of product and marketing that we had never seen previously – not to be confused with product marketing, a different role entirely and one that is critical and one that we saw most successful unicorns adopt.
The reality is with product and marketing “never the twain shall meet”, meaning they have to reside in different worlds where timing is not based upon the other ever. In more California woo-woo terms think of product and marketing as a river: the river (product) requires a riverbed (marketing) but the river itself may flow faster, may rise, may flow slower, may freeze and stop running, may become blocked or dammed or it may dry up based on environmental functions beyond its control.
It is imperative that the riverbed is solid, steady, stable and that it supports where the river needs to go at all times.
Should the river rise and increase in size the riverbed must adapt and become solid, should the river freeze the riverbed must hold the river without eroding.
This helps to really frame out where each one lives and how they do not meet but rather are symbiotic and supportive of one another. What actually happened was that with apps living on an easily accessible platform user growth wasn’t really linked to faster iterations but to the easy flow of marketing and the growth of the iPhone app ecosystem. However, somehow the growth was interpreted as the MVP being the anchor so focus and product dev cycles flowed back to a high speed/quick iterative cycling. Put simply, the platform did the heavy lifting, but the method got the credit.
Remember you can only do what the market allows; you can not control market functions that are greater than you, for example with the river analogy above you can not control climate change and the impact it will have on the river.
This is why flexibility and wider market participation are always important to make a priority, supporting the greater ecosystem your product resides in is never a bad move. Just remember you can only control what the market allows you to, be flexible and forward looking rather than looking at the other riverbeds around you.
The reality is now with AI we are moving to an unproven land where our previous metrics will hold no weight of measurement, and where costs to create have dropped to basically 300 bucks a month. We also do not yet fully understand adoption cycles – we have not found the platform play or the deployment method of what we will see in terms of product ubiquity.
So, what do we follow and what metrics are tried and true that withstood history and time?
So what‘s the relationship that withstands market-forcing functions?
What has been proven over time? 2,500 users within the first 90 days of launch has withstood the test of time from 2004 to now and one that has never steered off course.
You are probably thinking what does she mean for consumer apps, SaaS, AI agent adoption? I’ll be bold and say at the end of the day they all operate the same, we just measure them differently. And never confuse measurement of the customer-life-cycle (e.g. lifetime value) with product adoption (e.g. virality), another read for another day, but suffice to say they live in separate houses.
What we know is that great products tend to have an inherent virality (measured as K-factor) built into their product, like WhatsApp, Dropbox, Canva and Atlassian. They simply have a product that for every one user they gained > 2.
Thanks to the Covid epidemic we are all more familiar with viral growth and what that really means. With no marketing dollars your product is able to for every one user gain 2 more.. Most of the time the product has an inherent virality coefficient that is built in – with the above examples you want in – to view the media, to read the date or to share and generate more access. We know that the 2500 mark is the bare minimum for the first 90 days for products that will have the inherently viral growth curve.
A clearer breakdown is here in more detail.
Veins of gold
What to do if you don’t have this? This is what I call gold mining or prospecting for your Veins Of Gold. Starting with 5-7 avenues by which you are acquiring users/customers that are not paid. You then work to gain approximately 500 per vein. You always want to follow the tripod theory – having a base of three at a minimum (safer to have a base of five).
Ensuring you never have a user base coming from only one vein, and you really want to avoid paid acquisition in the first 90 days to help see the reality of whether they would be there if you weren’t paying for them. The strongest way to gain the traction you need is to find who you can partner with early on that has the same customer base that isn’t in conflict with your offering, this helps to support building out that web like safety net which supports those veins of gold.
After you reach that 2500 threshold you will be able to answer clearly: do I have a product with that K growth factor? Do I have those places where users are attracted and come in to purchase without having to pay for them. You now have a base that you can grow from without the noise and if-this-than-that mega phone. Product and marketing are the heart and soul of an early company. Be a purist, it is ok.
As you can see I live for product and marketing, and have lived a long life of watching the different formations and movements over time. I really focus on what has remained consistent and true and try my best to debunk the myths with as much education as possible that cause founders a lot of painful moments. I love doing the work I do with our seed stage companies. It’s the best place to hang around in the lifecycle of a company.
Happy mining 😉
O(n) × O(1)
The name borrows from algorithmic complexity. O(n) — linear time — is the exhaustive work: every market, founder, and technology, read in full. O(1) — constant time — is the decision that costs the same whatever its scale. The wager of these letters is to do the O(n) reading up front, so that conviction, when it matters, arrives in O(1).
- Julie French is a partner at Galileo Ventures.
