What is product/market fit, and how to find it?

There’s a saying in the startup world - 90% of new startups fail. Regardless of how accurate this is, most people would agree - the hardest in building a new venture is going from 0 to 1 - from an idea to an actual business with paying customers. 

The problem is very often that founders jump straight from idea to solution, without validating the problem behind the solution. They go straight to building a Minimum Viable Product (MVP), without a proper validation process. It isn’t surprising that many end up building something people don't need, i.e. they don't have product/market fit. 


Would you like to hear real life examples and methods to achieve product/market fit? Watch the video ‘How to find product/market fit’ below and learn more about the process from Riku Kokkonen.

What is product/market fit? 

Marc Andreessen, the father of this concept says: "Product/market fit means being in a good market with a product that can satisfy that market." Pretty vague, right?

If we look at product/market fit in a bit more practical sense, it means:

  1. You have a paying customer that comes back for more 
  2. Your paying customers recommend you to others
  3. You can, with reasonable accuracy, predict your growth based on data

For your business, product/market fit could look like this:

  • You might be able to raise your first larger funding round
  • Your revenue is in the hundreds of thousands (maybe even millions) annually

What product/market fit is not?

First of all, you don't have a product/market fit if you don't have a product. This means an idea of a product doesn't cut it. You need something more concrete, which your customers can use.  

Secondly, you need to know where your next paying customers are coming from. Friends and family don't count!

Product/market fit is the point when you have (repeating/recurring) customers AND enough data to predict growth.

How to achieve product/market fit?

So how can we bring that chilling 90% fail rate down? The answer is by gathering as much evidence as possible, right from the get-go. We call this early learning process: Product/Market Fit Discovery.

Product/market fit discovery is an evidence-based approach

Product/market fit discovery is a systematic learning process for testing our assumptions, gathering unbiased data, and discovering early evidence of product/market fit (without a product). Instead of simply trusting our idea is great, we start collecting unbiased data, and build our product based on these learnings.

Product/market fit discovery has three phases:

  1. Customer discovery - What is the customer problem?
  2. Product discovery - What is the viable solution to the customer problem?
  3. Market discovery - Is there a scalable market for the solution?

Finding answers to these questions can substantially increase the possibility of reaching product/market fit in the later phases of product development, and lowering the risks of venturing.

Would you like to hear what our expert panelists had to say about product/market fit?

You can now watch the entire webinar recording on our website and listen to the interesting panel discussion where Riku Kokkonen is joined by Marko Oksanen from Coventures, Aki Soudunsaari co-founder of Naava, and Pauliina Lämsä, a venture capital investor from Evli Growth Partners.

Click here to download the webinar recording!