Product/Market Fit and the Law of the Excluded Middle

This post originally appeared on the Pollenizer blog.

The law of the excluded middle states that: “for any proposition, either that proposition is true, or its negation is”. I’ve been thinking about this philosophical pearl as it applies to the holy grail of startup propositions: “[Startup X] has achieved product/market fit”. A strict interpretation of the rule makes the proposition black and white, i.e., either you’ve achieved product/market fit or else you haven’t. In practice things are murkier, and therein lies the issue.

If there’s one thing that leading startup thinkers agree on, it’s that product/market fit is what we’re all chasing. The most popular version of this truism comes from a post by Marc Andreessen, in which he claims: “the only thing that matters is getting to product/market fit.” Andreessen’s post has a decidedly excluded middle tone, with its religiously evocative notion of “before product/market fit” and “after product/market fit”. Sean Ellis also puts a fine point on the question with his definition of product/market fit as the stage when 40% or more of your customers would be extremely disappointed to lose your product. Steve Blank’s qualitative definition of product/market fit as a “repeatable and scalable sales model” is open to nuance, but his Customer Development framework as a whole seems predicated on the notion that product/market fit is a clear line in the sand.

At the same time, there’s plenty of ambivalence about product/market fit as a well-defined milestone. Ben Horowitz, Andreessen’s partner, makes a great case for this, arguing that product/market fit is more of a process than an event. Fred Wilson argues a similar line when he points out that revenue traction – often a presumed indicator of product/market fit – can be misleading. Dave McClure, in his well known Moneyball for Startups, post makes an implied argument for different versions of product/market fit by referring to “small product market fit” and “large product market fit”. Horowitz uses similar language, referring to “primary product market fit” and “big product market fit”.

However they’re quoted above, I think all of these thinkers would agree that ascertaining product/market fit for any single company is a complex issue, requiring case-by-case assessment, informed interpretation and so on. I think they’d also agree that Blank’s Customer Validation phase can be a long and challenging slog, with many ups and downs, false positives, confusing signals and the like. But those caveats aside, the debate leaves me feeling that it would be easier to talk about product/market fit if we could fill in the excluded middle with a term that speaks to what McClure and Horowitz are getting at with terms like “small product market fit” and “primary product/market fit”. This interim stage would have a few salient features:

  • product is live and is solving a problem
  • customers exist and are activated/retained
  • if B2B, then some paying customers

In cases like this, the startup has clearly hit some kind of milestone. But it has not hit product/market fit because it’s not clear whether the market is really big or whether the product or team is truly awesome enough to own the market, or perhaps both. And because these things are not clear yet, the product does not meet Andreesen’s definition of product/market fit as “being in a good market with a product that can satisfy that market” nor the scalable part of Blanks’s definition.

So what should this stage be called? At Pollenizer we actually call it problem/solution fit, which I now realize is out of step with standard usage. I think there is a good argument for our usage, as it feels strange to claim the solution part of problem/solution fit without actually having a product, unless you’re the rare startup that can pre-sell. But since problem/solution is taken, I’ll propose a new term: product/market traction. I like this phrase because it speaks to the fact that the company has:

  • entered the Customer Validation stage
  • is trying to match a product to a market
  • has seen some good early results in that effort
  • results do not reach product/market fit standard

If we use the lean canvas as a visual metaphor for the progression of a business, with cells in the canvas turning color as they shift from hypothesis to fact, then this is what a three stage progression that includes product/market traction would look like.

Stage 1 – Problem/Solution Fit

 Lean Canvas_blank_new_stage1

  • Problem, UVP and Customer are green as they’ve been validated through interviews, smoke tests or ideally pre-selling 
  • Solution is yellow because you have an idea of what it should be but you haven’t yet executed it
Stage 2 – Product/Market Traction

Lean Canvas_blank_new_stage2

  • Solution is now green because you’ve launched it and people like it
  • Metrics, Channels, Costs and Revenue are yellow b/c you have some idea on them but it hasn’t crystalized
Stage 3 – Product/Market Fit

Lean Canvas_blank_new_stage3

  • All cells are green! You have a fully functioning business that’s ready to focus on customer growth

As you’ll see,  I’ve left Unfair Advantage out for now as I’m not sure how it is tied to these phases and I’m not convinced it’s a necessary condition for product/market fit, which is to say that every startup SHOULD have an unfair advantage, but I’m not sure all must have it to succeed.

One of the reasons I like a three phase formulation that includes product/market traction is that it matches up to how I see startups getting funded. Here’s a chart for the typical funding phases we see in Singapore. (For the record I am not suggesting that everyone in Singapore is validating their cool idea using Customer Discovery methods as depicted in the chart).


Of course there are many funding pathways, but at least in Singapore this is a tried and true progression, and Dave McClure’s Moneyball Post suggests an identical pattern, just with bigger numbers then we see. The case of Singapore’s funding environment is a great example for why we need a term like product/market traction, because if you look at the dozens of seed rounds that NRF/TIS incubators have funded over the past year, all between $600K and $1M, the vast majority of them are at exactly this product/market traction stage. Which is simply to say that the funders already know what they’re looking for, but we don’t have a good word to describe it.

Another reason I like the product/market traction term is that it marks one of the two key pivot points during the Customer Validation phase of startup development. I refer here to the point when you launch the MVP and you cannot get product/market traction, which means your problem/solution hypothesis turned out to be wrong, either because the problem wasn’t real or your solution doesn’t solve it. If you do reach product/market traction, you may still reach a second pivot point if you are unable to scale to full product/market fit, either because the market is too small, the product and team are not awesome enough, or market conditions change (e.g. competitors, new technology etc.).

The final reason I like the product/market traction concept is that it speaks to a key stage of development that I see startups going through. Consider Pygg, one of Pollenizer’s portfolio companies. Pygg embarked on an MVP around the problem/solution pairing of a mobile wallet application to make peer-to-peer cash transactions easier. It did not reach product/market traction because the pain point was not big enough. It then made a customer pivot to facilitate cash transactions between parents and schools. The pivot worked and Pygg now has strong product/market traction, with early adopter school communities using the product enthusiastically. Going forward, Pygg’s task is to seek out product/market fit by showing that it can work with a critical mass of schools. This drive to product/market fit tests things within the company, e.g., ability to acquire customers and ability to scale the product, as well as market forces like technology adoption plans within the Australian school system. So again these are two very discrete stages within Blank’s Customer Validation phase, which we experience all time, but just don’t have a clear name for.

I’m not sure if product/market traction is catchy enough to get popular, or if I’m catchy enough to make it popular, so if anyone has better naming ideas I’m all ears. But one way or another I’d love to see the excluded middle of product/market fit reclaimed so that we have terminology that reflects the stages of company development and funding that we all see happening.

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