This post summarizes First Round Capital’s first session of its Product Market Fit program for sales-led B2B SaaS founders.
Levels of Product Market Fit
Level 1: Nascent
You have a handful of somewhat engaged and happy initial customers, but things still feel early and messy. The focus should be on increasing satisfaction. This is probably the most critical and foundational level, as founders must select the right persona and problem to focus on. The primary job is to find an urgent and super important problem for 3-5 customers. With that, you then build a product that solves the problem and delivers a high level of satisfaction for those customers.
Level 2: Developing
You have more engaged, paying customers and less churn. The focus should be on driving demand. By Level 2, startups have met key milestones such as serving around 20 customers and reaching $1M in ARR, with increased repeatability in customer needs, product solutions, and effective messaging.
Level 3: Strong
Momentum is picking up, and you’re finally feeling the “pull” of demand. It’s time to focus on increasing efficiency. The difference between Level 2 and Level 3 is a surge in demand and brand recognition. You know who your customer is with much more specificity. You can deploy a solution with little customization that delivers a lot of value to the customer. Real competitors emerge as you’re no longer flying under the radar.
Level 4 – Extreme
You’re repeatably and efficiently solving an urgent problem for many customers who need your product. You can win over customers who are in your very well-defined target persona.
Dimensions of Product Market Fit
Demand
How many people want it, how quickly/how much can you sell it for?
Satisfaction
How happy are customers with the product?
Efficiency
Can the business scale repeatably and scale effectively?
Levers that you should use to get unstuck: 4 Ps
Change your persona, problem, promise, or product to get unstuck on your path to PMF. Generally, it’s best to first focus on the persona, the problem, and the promise. The product’s job is then to satisfy those first three Ps.
Persona
Who would benefit most from your insight?
Problem
Is this an urgent and important problem for your target persona? If not, you may need to explore adjacent problems for your persona or rethink your persona and problem entirely.
Promise
Are those customers interested in what you’ll do to address that need — your unique value proposition, your positioning? It’s easy to confuse this for your actual product, but the promise is how you communicate the benefit your product will deliver. Perhaps the most overlooked lever.
Product
Will the product that you’re building deliver on your promise? Are customers interested in this particular solution to their problem? Would they pay for it?
Priorities by PMF levels
KPIs and Metrics by PMF Levels
Examples of Travel Startups in each of the 4 PMF categories
I would like to feature several travel SaaS startups/scaleups in each of the four PMF categories. If you’re a founder or executive in a travel SaaS company and want your startup included in an updated version of this post, please share your input with me here.
