Rahul Vohra on how to measure product/market fit

Let's find a definition of products market fit. Let's find a metric. So I could explain to the wonderful people who are working with me that we didn't have it.

Yeah.

And that would also give us a methodology to optimize it. So I searched high and low. I read everything I could find. I spoke with all the experts and then I found a gentleman by the name of Sean Ellis.

The graph hacking guy.

Exactly. He came up with the, with the term growth hacker.

Yeah.

And before he came up with the term growth hacker, he actually ran early growth at many great companies. Dropbox logging in Eventbrite. You got it. And during this period of his career he found a way to measure products market fit.

Yeah.

Simply ask your users the following question. How would you feel if you could no longer use the product? And then measure the percentage that say very disappointed. And you give them three possibilities. Very disappointed, somewhat disappointed and not disappointed. It turns out that the benchmark, the threshold for products market fits is 40%. Very disappointed.

Yeah.

And this has been benchmarked across hundreds of venture backed startups. If more than 40% of your users would be very disappointed without your products, then you should focus on growing your company. If less than 40% of your users would be very disappointed without your products, then you'll probably struggle to grow.

And I've seen there's like almost academic research on this to show real case studies of this happening. Right. And I think Heaton Shah, who's actually recording with me straight after this, who's a kind of prominent guy in Silicon Valley, I think he kind of did this for Slack. I think it was, I think you've even written about this in your blog post. But just saying, not only has you've got a case study of your own company, but there are other companies like Dropbox, like Slack and others that have kind of gone through this sort of methodology.

That's right, yeah. Heaton did some very good early work in this area to popularize and to teach people about this metric. And he did a survey early in Slack's life cycle about Slack, posed that very question to 731 people. And 51% of those said they would be very disappointed without Slack. Now 51% is greater than 40%. Therefore Slack has products market fit. And you could argue that you don't need a fancy questionnaire or survey to tell you that Slack has products market fit. Clearly it does. But I think the really interesting thing about that example is it shows just how hard it is to beat that benchmark. It's not like Slack has 60 or 70 or 80%. It's just 50%. It's only 10% more than 40.

What are the other options? There's very disappointed, somewhat. Somewhat disappointed and not disappointed. So it's just those three.

That's right.

And it's quite interesting. Even when I've studied like market research at university in the marketing modules, it's very specific the way it's worded. There's like a negative, like you're focusing on a negative, like I would be sorry, not negative. You're focusing on the fact you'd be disappointed versus the opposite, which is I am really happy to use this product. Is there a reason for that?

Yeah. So I think the reason behind that is if you ask people how they feel about a product and you give them positive potential responses, I think it invites more bias. People are more likely to be polite. And it also doesn't get to the nub, the crux, the heart of the matter of how necessary has your product become for people's lives.

Yeah.

And if you're trying to build a company that's going to stand the test of time, let's say a 100 year company, you really do have to build a product that matters, a product that ultimately people come to depend on because it's just so incredible at what it does. Yeah. And that's what this product or this question gets to the heart of. And in that sense, it's actually somewhere between Paul Graham's question of do people want it? And Sam Altman's question of do people talk about it? It's almost like a third leg to that tent of do people need it and would they feel sad without it?

Yeah.

Now if you get all three, then you really have something.

Yeah.