Work Backward to PMF: A framework for startups raising capital
Mar 26, 2024Finding product-market fit might not be the only thing that matters (as Marc Andreessen of A16Z once said), but it is central to your startup’s success.
Adi Shmorack, the founder of Adidacta, is an expert on product market fit and an experienced founder and advisor. He joined us at the Meet.Capital Startup Podcast, where he shared his framework for reaching PMF via backward reasoning. He also gave his insights for early-stage startups raising capital while iterating on product development. Here are a few of the points he made.
1. Work Backwards from the Market
Instead of diving headfirst into product development, take a step back and survey the market landscape. Understand the players, dynamics, and gaps. Once you have a clear view, define your Ideal Customer Profile (ICP). Who are they? What do they need? Only by understanding your ICP intimately can you design a Minimum Viable Product (MVP) that truly gives value to your ICP. Following the MVP, sculpt a business model that aligns with your findings. This approach ensures you're building not just a product but a solution that the market needs and values.
2. Embrace Uncertainty with Curiosity
Resist the urge for certainty and conviction and instead, foster a mindset of learning and curiosity. Be prepared to pivot based on what the market tells you. Your willingness to iterate and adapt will allow you to get to where you truly want to go, even if the way is different than the one you envisioned when you started.
3. Validate Continuously for PMF and your capital raise
Validation is your compass on the road to PMF and beyond. The validation process will also provide you with the proof points investors require. As you validate your product and market fit, use these same learnings to sharpen your investor pitch. Demonstrate not just where you are, but how you've adapted and validated your path at every step. This validation journey will be crucial in securing investors' confidence in your next funding round.
4. Know Your ICP
Spend significant effort in identifying and understanding your ICP. The depth of your knowledge about your ICP — their needs, behaviors, and pain points — will serve you in building the right product. It will also help you prove to investors that you are on the right path. It's not enough to know who your ICP might be; you need to demonstrate a granular understanding of their world.
5. Show Investors You Know Your Way to PMF
Investors understand that finding PMF is a journey, and they don't expect you to have all the answers upfront. However, they expect a solid plan outlining the experiments and processes you'll employ to discover PMF. Be clear and specific about your approach to experimentation, learning, and iteration. This plan is a crucial element of your narrative to investors, showing them that you're methodical, adaptable, and driven by data and insights.
In conclusion, finding product-market fit is a continuous process of learning, adaptation, and validation. Start from the market and work backward, as a good detective would do.
