23 Mar Market Discovery: Finding Your Startup’s Product-Market Fit
Tech startups have traditionally focused most of their energies on product development, but the majority of venture capitalists are pushing a new model that includes pre-seed, seed, and bridge rounds. As such, entrepreneurs need to start thinking about market development earlier in the game if they’re to reach that all-important Series A funding round.
Sean Sheppard, co-founder of GrowthX, a seed-stage microVC and market development accelerator, writes on Sales Hacker that the vast majority of startup founders still spend much of their time and money on product development, even though the seed funding process has evolved. He argues that the vast majority of founders lack the expertise to bring their products to market, and they’re being hindered by emergence of the accelerator model, which is laser-focused on building products and raising money, as opposed to marketing products and making money.
Sheppard argues that changes in the seed stage funding model make it critical for founders to find a product-market fit as soon as possible. Key to this is developing “a data-informed and market-validated awareness of the predictability, profitability and scalability of revenue,” he says.
Using this knowledge, founders will easily be able to determine if they should iterate or scale, Sheppard says. By doing this, startups can rapidly find their product-market fit, and begin generating the predictable, profitable and scalable revenues they need to raise Series A funding.
The first step in preparing for market discovery and ultimately finding your product-market fit is to take a full inventory of all the resources at your disposal, Sheppard says. The end goal of this exercise is to create a “roadmap of the people, processes and technologies necessary to create and support a functional learning organization” and involves three major steps, namely:
- Reviewing the current development team and its skill sets in order to identify the best way to maximize sales.
- Reviewing the current marketing and sales process in order to determine preliminary recommendations.
- Reviewing the tools and systems in place to manage market outreach programs in order to determine if they should be replaced.
With that out of the way, Sheppard says startups can move on to the “Market Discovery” process, which is aimed gaining a better understanding of who your customers are, what it takes to acquire them, how much they’ll pay for your product and how long they’re likely to remain customers.
The Market Discovery process involves a number of steps with the end goal being to create an “Ideal Customer Profile” (ICP) that can be used to define product pricing and customer acquisition strategies.
Check out Sean Sheppard’s full post over at Sales Hack for more insights.