Getting to Product-Market Fit

1. THE HOLY GRAIL OF
CUSTOMER DEVELOPMENT
PRODUCT
MARKET
FIT
ANAND KULKARNI - CHIEF MENTOR - COFOUNDER @ LEADGENIUS

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6. Who is this guy?
- Forbes 30 under 30
entrepreneur
- Former operations
research PhD
- National Science
Foundation
fellow at UC Berkeley
- Raised $18M from
investors:
YC, A16Z, 500, Sierra, etc.

7. What we built
- Sales technology startup
- Social enterprise
- Google, Box, hundreds of
customers (mid-market &
enterprise)
- ACV $50K, millions in
revenue
- 50 local employees,
500 global, 40 countries

8. What we built
people
businesses
products
services
sales teams
marketing teams
business data people who need
this data
crowd of 500 work-at-home researchers
crawlers

9. How'd we get here?

10. !!!!
• How can we help groups with minimal (technology)
literacy participate in the crowdsourcing economy?
Original Problem

11. Original Idea (2010)
Let’s build a company that takes the
easiest jobs from Amazon Mechanical
Turk and makes them available to the
poorest people in the
world through their cell phones!

12. Original Idea

13. User interviews Personas! Scenarios!
The Process!
Lo-fi prototyping User testing! High-fidelity
prototypes!

14. Every single part of our original
idea was wrong!
• There were not many image tagging
jobs on Mechanical Turk
• The jobs were too hard for workers
living in a slum in India
• The jobs were paid so low that we
couldn’t make any money from them

15. Pivot (2010)!
• Instead of scraping Mechanical Turk,
let’s charge customers directly to do
data entry for them

16. Paper prototyping our new plan!

17. High-fidelity prototype (YC, Spring 2011)!

18. This idea was still wrong!
• Yes, you can get very poor people to do
data entry on a mobile phone
• Why would you, though? BPO
outsourcing is far better and less
complicated.
• We built a system, but only found one
paying customer for $600.

19. Pivot (Summer 2011)!
“Mechanical Turk is really
terrible – people hate to use it.”
Let’s build the world’s best
crowdsourcing platform – a
replacement for Mechanical
Turk!!

20. We built an awesome, sophisticated
replacement for Mechanical Turk,
starting with an API….!

21. …followed by a powerful
interactive web application.!

22. Over a year, we added lots of
great features to the product,
and plenty of people were trying
them out.!

23. Over a year, we added lots of
great features to the product,
and web users seemed to be
trying them out.!
The problem: we had nearly zero
paying customers.!

24. It took us a year to realize:!
- Almost nobody uses Mechanical
Turk (<$5M market)
- Mechanical Turk customers are
cheap and don’t have much money,
not recurring customers
- The people who want to outsource
work aren’t software developers
using APIs – they’re businesspeople

25. The problem!
- We had spent over a year
building beautiful, highly
effective products and ignoring
the most important fact:
customers did not want to use
them!

26. The Advice!
Paul Graham!
!
!
“You’re failing. Why don’t you try
and actually make some money?”!

27. Final Pivot!
Email-based virtual
assistant,
MobileWorks Premier:
premier@mobileworks.com!

28. Final Pivot!
“Just email us whatever
work you need done
(anything). We’ll find
someone to make sure it
gets done.”!

29. Our MVP (2012),
wufoo.com + Gmail!

30. 2013 growth!
Yet another change! !
(Focusing on selling to one specific vertical)!
!

31. ACHIEVING
PRODUCT
MARKET FIT

32. Why do startups fail?

33. Why do startups fail?

34. Why do startups fail?

35. Why do startups really fail?

36. Why do startups really fail?

37. They don’t achieve
Product-Market Fit
Why do startups really fail?

38. This is an important idea.
“The #1 Company-
Killer is Lack of
a Market.”
-Ben Horowitz,

39. This is an important idea.
“The #1 Company-
Killer is Lack of
a Market.”
-Ben Horowitz, There’s just one
mistake that kills
startups – not making
something users
want.
-Paul Graham, YC

40. How do you know you have
product-market fit?

41. It’s simple:
customers are buying what
you’re selling.
How do you know you have
product-market fit?

42. It’s simple:
customers are buying what
you’re selling.
How do you know you have
product-market fit?
You know where to
get more customers!

43. raise a little capital
experiments
customer development
spending money slowly to learn
as quickly as possible
raise a lot of capital
acquire customers fast
clear connection of spending
money to customer growth
spending money as fast as
possible to grow customers as
fast as possible
before
product market fit
after
product market fit

44. Before product-market fit
raised $900K
7 people
inconsistent revenue
lots of experiments

45. After product-market fit
raised $6M
30 people
watched revenue
grow rapidly

46. CUSTOMERS VS
MARKETS

47. customer = someone who
pays you for the product
market = the big universe of
customers that you plan to serve

48. Example: LeadGenius (B2B)
Our customer is a head of sales running
a B2B sales team of 10 or more people.
Our market is Fortune 5000 companies
spending money on outbound sales.

49. Example: Shortcut
(ocean cargo marketplace)
Our customers are ship owners with
spare capacity and individual
manufacturers who want to transport
cargo.
Our market is the international short
sea shipping market – everyone who is
spending money on shipping freight.

50. Example: Carstomize
(machine learning for car
configuration)
Our customer is the head of
marketing at car manufacturers.
Our market is going to be the
ten largest automakers in the
world.

51. MARKET SIZE:
TAM, SAM, SOM

52. What are TAM/SAM/SOM?
These are different
ways to estimate
how much a startup
could someday
make.

53. TAM: TOTAL ADDRESSABLE MARKET

54. TAM: TOTAL ADDRESSABLE MARKET
How much money could you make
if absolutely every possible
customer in the world used this
product?

55. TAM: TOTAL ADDRESSABLE MARKET
How much money is being spent
on this problem globally today?

56. TAM: TOTAL ADDRESSABLE MARKET
How much money is being spent
on this problem globally today?
“global shipping is a $400B market”

57. TAM: TOTAL ADDRESSABLE MARKET
How much money is being spent
on this problem globally today?
“global shipping is a $400B market”
“new car sales is a $570B market”

58. EXAMPLE: DOLLAR SHAVE CLUB
Product:
Cheap mail-order
razors for men

59. EXAMPLE: DOLLAR SHAVE CLUB
Product:
Cheap mail-order
razors for men
TAM:
Shave & razor industry

60. EXAMPLE: DOLLAR SHAVE CLUB
Product:
Cheap mail-order
razors for men
TAM:
Shave & razor industry
$34B global market!

61. EXAMPLE: DOLLAR SHAVE CLUB
Product:
Cheap mail-order
razors for men
TAM:
Shave & razor industry
$34B global market!
includes: Fancy razors, store-bought razors,
mail-order razors

62. SAM: SERVICEABLE
ADDRESSABLE MARKET
How much of that market can we
serve with our specific product?

63. SAM: SERVICEABLE
ADDRESSABLE MARKET
How much of that market can we
serve with our specific product?
“online truck sales are a $50B market”
“short sea shipping is a $70B market”

64. EXAMPLE: DOLLAR SHAVE CLUB
TAM was the full
shaving industry.
SAM is the size of
the cheap/
disposable razor
category – $10B.
SAM is the smaller sector that you’ll go after.

65. SOM: SHARE OF MARKET
How much revenue will we
realistically be able to make in our
first few years?

66. SOM: SHARE OF MARKET
How much revenue will we
realistically be able to make in our
first few years?
Bottom up analysis:
value per customer X
number of customers we reach

67. EXAMPLE: DOLLAR SHAVE CLUB
There are 90M US men over 21 (research)
We’ll get 5M people to see our ads (strategy)
50% are men (average)
75% use disposable razors (research)
10% turn into customers after
seeing ads (experiments)

68. EXAMPLE: DOLLAR SHAVE CLUB
5M x 50% x 75% x 10%= 187,500 customers
187,500 customers x $60/year = $18M revenue
$18M revenue / SAM of $10B
= 0.2% SOM

69. Remember… these are just
estimates! You don’t need to be
perfect.
You’re trying to convince yourself
and prove to investors that you
have a viable business.

70. ESTIMATING
MARKET SIZE +
GETTING
MARKET DATA

71. Estimating Market Sizes
Google –
Gartner, Forrester,
research agencies
B2B & B2C TAM

72. Government
data
Estimating Market Sizes
US Census
Industry
Snapshots
(B2B TAM/SOM)

73. 6 million businesses in the US with >1 employee
100,000 midsize businesses in the US with >
$10M revenue
Fortune 500, Fortune 5000, Global 2000 with
multiple sub-organizations
Estimating Market Sizes

74. Facebook (B2C)
Ample consumer data
Market sizing information
Good for SOM
Also… you can use it
directly when launching!
Estimating Market Sizes

75. LinkedIn (B2B)
Ample business data
Market sizing information
Good for SOM estimates
Estimating Market Sizes

76. PICKING YOUR
MARKET

77. Startups need to serve big markets.

78. impact
Startups need to serve big markets.

79. profitimpact
Startups need to serve big markets.

80. no market
+
good technology =
not a viable startup
(research)

81. small market
+
good product =
small business

82. huge market
+
good product =
maybe a big business
(good for startups)

83. Good businesses have
competitors.
You will only get a small share
of your TAM and SAM…
so they’d better be big!
Remember

84. VCs like businesses that can
scale up to $100M per year
in revenue.
That means you should target a
total addressable market of
$1 billion or more.
How big should your market be?

85. …but you can’t
start big!

86. Startups need to launch in small
target markets.

87. Startups need to launch in small
target markets.

88. Dominate that
initial market.
Grow.
Get customers
in a small initial market.
Startups need to launch in small
target markets.

89. Your market will get
progressively bigger
over the course of
your company.

90. BIG COMPANIES START WITH SMALL
MARKETS.

91. BIG COMPANIES START WITH SMALL
MARKETS.
Harvard All colleges Everyone

92. BIG COMPANIES START WITH SMALL
MARKETS.
Books Merchandise Cloud

93. Good initial markets:
- are underserved, feel the pain
- are narrowly-defined and tractable
by your team
- let you find hardcore customers
who love you!

94. Quotes
“Build something a small number of people
want a large amount.”
“When you have an idea for a startup, ask
yourself: who wants this right now? Who wants
this so much that they'll use it even when it's a
crappy version one made by a two-person
startup they've never heard of?”
- Paul Graham, YC

95. Things to remember:
- Your market will grow over time.
- Think big and impressive when
you’re setting your vision – aim for
the biggest possible overall market.
- Think small and doable when you're
setting your initial market.

96. That’s it!
Questions?
anandk@berkeley.edu
@polybot