Product Market Fit or PMF is amongst the most discussed and evergreen startup topics. Popularised by Marc Andreessen in a celebrated post titled ‘The Only Thing That Matters’, PMF has become a keen topic of study and analysis in the startup community. Not a year or a quarter passes by without a celebrated article or twitter thread offering a new take or slant on it. After all PMF is a necessary step to obtaining growth capital, and hopefully unicorn status and eventual success. 

Now despite all of the coverage it gets, and the regular content that is published on the topic, it is still one of the most misunderstood topics in the VC / startup ecosystem. Startup founders perennially ponder – has my startup achieved PMF? VCs themselves wonder if their portfolio has achieved PMF or when it will. 

“The number one problem I’ve seen for startups, is they don’t actually have product-market fit when they think they do.” – Alex Schultz, VP of Growth at Facebook.

A lot of the confusion around measuring PMF comes from the fact that there is no common clearly agreed or accepted definition of PMF. Marc Andreessen’s definition of PMF is “Product/market fit means being in a good market with a product that can satisfy that market”. This is a vague definition – good and satisfy aren’t exact words. And what this has meant is that we really haven’t hit upon a set of metrics that when achieved demonstrate PMF – despite whatever founders and VCs may say. 

PMF has two parts

I personally think a lot of the confusion comes from the fact that founders and VCs see PMF as a unitary concept. It is actually two distinct parts or phases, in my opinion. 

The first is the product / solution to problem fit – ensuring that you are able to create a product that solves some or most of the customer problem that spurred you to start up. This is the Minimum Viable Product or MVP as it is called.

The second part is the GTM to market fit, where you hit upon the ideal combination of customer segments, sales channels and customer acquisition approaches (collective addressed as Go-to-market or GTM) that get you to positive contribution margin (i.e., revenue minus cost of goods sold minus direct marketing costs) for every marginal customer. This is when PMF is achieved.

When you achieve positive contribution margin for every marginal (new) customer, this means the revenue that they bring is greater than the cost of servicing them (cost of goods sold) and acquiring (performance marketing). This means that you have a growth machine that can be cranked up; every incremental rupee or dollar invested at this stage in the growth machine (acquiring, engaging and monetising the customer) will yield more than what was invested. Growth capital can now be deployed.

This is why getting to PMF is vital. Before PMF, there is no guarantee that a rupee invested in the growth machine will necessarily yield incremental returns. At PMF, there is a guarantee of a return on the growth investment.

Value hypothesis and growth hypothesis

While researching this piece I came across writings describing the value hypothesis and growth hypothesis. These were introduced by Andy Rachleff who founded Wealthfront and later Benchmark, the storied VC firm, and who is credited with conceiving of product market fit as well. 

Value hypothesis “tests if a product is valuable to potential customers. It determines if a customer should adopt a product into their lives.” After value is proven, comes growth. “A growth hypothesis is an assumption on how users find your product.” (source of the quotes)

It is interesting to see the value hypothesis as corresponding to the first part – product to problem fit (Is this product of value to me in solving my problem?) while the growth hypothesis corresponds to the second, i.e., GTM to market fit. (Is the growth engine that I have arrived at, the best approach to growth?)

The founder’s role

Let us understand role of the founder at each of these stages – a) product to problem fit b) GTM to market fit

The kind of conversation / interaction needed with customer at each of these 2 stages is slightly different. 

Let us take the first stage of ‘product to problem fit’ or getting to MVP. The founder is naturally involved at the preMVP stage – after all s/he is effectively the Product Head then. In the case of B2C products, such as consumer apps, it is relatively easier to launch the product with a small beta group and gauge reaction from the consumer playing around or using the features. 

It is harder in B2B to get quick feedback – it takes time for the sales cycle to kick in, and for the adoption to happen. In such contexts, feedback can take a long time. If so, try short-circuiting the process by co-creating the product with your consumer, or give a special offer that makes it irresistible for the consumer to trial the product. 

The key here, especially in B2B, is increasing the number of product iterations and feedback to learn faster. Do note that the only way to get effective feedback from the customer, is not by hearing them talk, but seeing how they interact with the product – through the process of buying it and utilising its features. Believe what they do, not what they tell.

For the next stage, what you are testing is the playbook for GTM + monetisation. 

At this stage the founder is checking to see if the approach adopted to take the product to the customer is the most efficient approach, i.e., is the energy expended to transfer a rupee from the consumer’s wallet to yours, the lowest possible?

This is important because you are seeing whether the product you have created hooks as frictionlessly as possible into the customer’s product adoption and purchase processes – if there is friction, you need to change your GTM approach, e.g., in B2B, you are determining the optimal channel (partnerships or performance marketing / above the line or content marketing) to build top of funnel as well as testing the narrative and pitch. It helps in this case for the founder to do a certain number of sales meetings, in order to get a first hand feel for customer issues and reactions. 

In B2C it means you are determining what your most effective path for customer acquisition is – performance market or virality or content. What route gives you the best ROI on your customer acquisition investments? Still, in both cases, B2B and B2C, you are striving to see customer trial, adoption and engagement, and double down on what is working to arrive at the effective playbook. Almost always, the learnings from this stage go back to the product, resulting in further product iterations, and refining of the value hypothesis, which later influences the growth hypothesis, and so on.


To summarise, product-market fit has two phases, a product to problem fit, which results in the MVP or minimum viable product, and then the GTM (go-to-market) to market fit. Each of these phases has different asks of the founder. The first needs the founder to drive faster product iteration cycles to ensure that the product meets much of all customer needs or solves the problems the product was designed for. The second needs the founder to explore various paths to take the market to a wide segment of customers, so as to determine the least-energy or most cost-efficient path to scaling.

(I would love to hear your thoughts, feedback, criticism on the above.)