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YOU’RE TOO FOCUSED ON PRODUCT/MARKET FIT SaaSFest 2016 Presentation Brian Balfour - http://reforge.com - http://coelevate.com
SLIDES AVAILABLE AT… HTTP://COELEVATE.COM/SAASFEST16 Brian Balfour - http://reforge.com - http://coelevate.com
“Product/market fit means being in a good market with a product that can satisfy that market.” - Marc Andreessen
“PRODUCT MARKET FIT IS THE ONLY THING THAT MATTERS” The mantra has led to tunnel vision among many entrepreneurs.
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
THIS TUNNEL VISION LEADS TO FOUR INCORRECT THOUGHTS…
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
BAD THOUGHT #1 PRODUCT FIRST, MARKET SECOND
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
“We built this amazing virtual goods platform, and now going to sell it to games, social networks, dating sites,
and more.”
What’s Needed To Build $100M+ Company
MARKETPRODUCT
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
Solution then Problem
LANGUAGE MATTERS
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
PRODUCTMARKET
What’s Needed To Build $100M+ Company
IF WE START WITH THE MARKET, WE START WITH THE PROBLEM FIRST THEN THE SOLUTION
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
1Market <> Product Fit We need to think about the market first, not the product.
What’s Needed To Build $100M+
BAD THOUGHT #2 PRODUCT AND DISTRIBUTION SILOS
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
“We are focused on product/market fit right now, once we have that we’ll test a bunch of different acquisition
channels.”
Most Think About Them In Silos
PRODUCT ACQUISITION
IF YOU TREAT THE TWO IN ISOLATION YOU’LL END UP WITH SQUARE PEG -> ROUND HOLE
PRODUCTS ARE BUILT TO TAKE ADVANTAGE OF SPECIFIC CHANNEL
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
Products Built For Channels
Virality1. Quick Time To Value - Virality needs short cycles to work which requires QTV. 2. Broad Value Prop - Value prop needs to be applicable to large % of users network (branching factor) 3. Network Makes Product Better - Product value gets better with more of your network on it.
Paid Marketing
UGC SEO
1. Quick Time To Value - Users have less patience to find value when clicking on an ad. 2. Med to Broad Value Prop - Value prop needs to be broad enough due to targeting constraints. 3. Transactional Value - Product is built to extract transactional value.
1. UGC - Users create millions of pieces of unique content by using the product. 2. Motivation To Contribute - Product needs to have motivation to contribute.
As new channels emerge, past companies are destroyed and new companies are created because of product <> channel fit.
New Channels Create New Companies
VR
???
Social MobileCasual
“The kitchen sink approach doesn’t work. Most companies get zero distribution channels to
work. If you get just one channel to work you have a great business. If you try for
several but don’t nail one, you’re finished. Distribution
follows the power law.”
- Peter Thiel
% O
F TO
TAL
DIS
TRIB
UTI
ON
CHANNELS
The Power Law Of Distribution
Power Law of Distribution Most high growth companies get 70% or more of their acquisition from one channel during their early life.
Channel One Channel Two Channel Three Channel Four
Power Law Examples
TripAdvisor, Yelp, Glassdoor B2C Content/SEO
Facebook, WhatsApp, Evernote, Dropbox, Slack Virality
Supercell, DraftKings, Squarespace Paid Marketing
Think About Them Together
PRODUCT ACQUISITION
PRODUCTMARKET
What’s Needed To Build $100M+ Company
CHANNEL
2Product <> Channel Fit Products are built to tap into specific channels. You can’t treat the two in silos.
1Market <> Product Fit We need to think about the market first, not the product.
What’s Needed To Build $100M+
BAD THOUGHT #3 CHANNEL AND MODEL SILOS
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
“We are going to create a $25/user tier to increase LTV and acquire customers via content marketing.”
MODELS ARE BUILT TO FIT WITH A CHANNEL
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
The ARPU <-> CAC Spectrum
LOW ARPU CAC
HIGH ARPU CAC
Viral B2C SEO Paid Enterprise
Sales B2B Content Inside Sales
The ARPU <-> CAC Spectrum
LOW ARPU CAC
HIGH ARPU CAC
Viral B2C SEO Paid Enterprise
Sales B2B Content Inside Sales
Dangerous
The ARPU <-> CAC Spectrum
LOW ARPU CAC
HIGH ARPU CAC
Viral B2C SEO Paid Enterprise
Sales B2B Content Inside Sales
Dangerous
Too Much Friction The monetization tends to be too much friction to take the advantage of the low CAC channels.
The ARPU <-> CAC Spectrum
LOW ARPU CAC
HIGH ARPU CAC
Viral B2C SEO Paid Enterprise
Sales B2B Content Inside Sales
Dangerous
ARPU Doesn’t Support CAC Your ARPU doesn’t support the higher CAC
channels.
The ARPU <-> CAC Spectrum
LOW ARPU CAC
HIGH ARPU CAC
Viral B2C SEO Paid Enterprise
Sales B2B Content Inside Sales
Dangerous
$25/userFree $10/user
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
LOW ARPU CAC
HIGH ARPU CAC
The ARPU <-> CAC Spectrum
Viral B2C SEO Paid Enterprise
Sales B2B Content Inside Sales
Free $10/user $50/user
PRODUCTMARKET
What’s Needed To Build $100M+ Company
CHANNELMODEL
Channel <> Model Fit Specific channels fit with specific models. 3
2Product <> Channel Fit Products are built to tap into specific channels. You can’t treat the two in silos.
1Market <> Product Fit We need to think about the market first, not the product.
What’s Needed To Build $100M+
BAD THOUGHT #4 MODEL AND MARKET SILOS
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
“On it!”
“Build a new $100M line of business, with a freemium model.”
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
LOW ARPU CAC
HIGH ARPU CAC
One Year In - $3M+ ARR
Viral B2C SEO Paid Enterprise
Sales B2B Content Inside Sales
Free $10/user $50/user
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
“Wait, these customers don’t look like core HubSpot customers.”
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
Credit: Point Nine Capital
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
Credit: Point Nine Capital
PRODUCTMARKET
CHANNELMODEL
What’s Needed To Build $100M+
X
PRODUCTMARKET
CHANNELMODEL
Market or Model?
1. Choose to keep the model.
2. Change the market.
PRODUCTMARKET
CHANNELMODEL
Market or Model?
2. Change everything
else.
1. Choose the market
PRODUCTMARKET
CHANNELMODEL
We Chose The Market…
Cut The $10 Tier
Doubled Down on Content +
Inside Sales
Shifted $10 Features to
$50 tier. Expanded features in
$50 Tier
THE END RESULT WAS GROWING FROM $0 - $10M ARR IN 2 YEARS.
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
Channel <> Model Fit Specific channels fit with specific models. 3
2Product <> Channel Fit Products are built to tap into specific channels. You can’t treat the two in silos.
1Market <> Product Fit We need to think about the market first, not the product.
What’s Needed To Build $100M+
Model <> Market Fit Your model must fit with the markets pain and perceived value of your solution. 4
PRODUCTMARKET
CHANNELMODEL
What’s Needed To Build $100M+
Example In The Email Marketing Space
Product Market Model Channel
Marketo Email Marketing(Heavily Customizable) Enterprise High ACV Outbound Sales
HubSpot Email Marketing(All In One) Mid Market Med ACV Content/Inside Sales
Partnerships
Mailchimp Email Marketing(Touchless, Simple) SMB Freemium
(Low ACV) Virality
All of these are $2B+ Companies
THE FITS ARE ALWAYS CHANGING
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
The “Fits” Are Constantly Evolving and Moving
PRODUCTMARKET
CHANNELMODEL
WHEN ONE COMPONENT CHANGES, THE OTHERS NEED TO CHANGE WITH IT
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
Happens more often in B2C, but will happen in B2BProduct/Channel Fit Breaking
Initial Adapts
‣ Pinterest grows via viral sharing to Facebook product is more multiplayer
• Facebook grows on web via email virality
Breaks
‣ Facebook shuts down platform API’s.
‣ Pinterest adapts to UGC SEO for acquisition channel product becomes more single player
• Mobile emerges and time spent shifts
• Facebook buys Instagram/Whatsapp, and builds Messenger
THEY BREAK MORE OFTEN IN B2C BUT FOR B2B…
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
Outbound Email Becoming saturated, facilitated by the widespread use of sales automation tools.
Content Marketing Hitting max consumption point, saturation of email popups, etc.
Facebook Ads Competition increasing with out inventory increasing increasing costs
HAVE HYPOTHESES FOR THE OTHER COMPONENTS. DON’T THINK ABOUT THEM IN SILOS.
Copyright: Brian Balfour and Reforge Inc. http://reforge.com, http://coelevate.com.
HTTP://COELEVATE.COM/SAASFEST16 Brian Balfour - http://reforge.com - http://coelevate.com
THANKS! Brian Balfour - http://reforge.com - http://coelevate.com
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