Okay. We've talked a little bit about customers. We've talked about customer segments. We've talked about value propositions. Now let's talk a little about Product-Market Fit it's at the heart of the business model. The aim of a startup, as we've said before, is defined Product-market fit. And as just to recapitulate what we said last time a product or service that provides one or more value propositions to a customer segment. You'd probably call it product-customer segment fit, but that's a mouthful. What, we'll just call it product-market fit. And it's the heart of a business model. Without product-market fit, you don't have a business. What venture investors like myself try to back are companies that have or look like they might have a, a strong product market fit and, and that's the goal of the activity that we're doing for the next eleven weeks. There's two ways to find a product market fit, there's the old fashioned way, which is pretty bad. And there's a new way that we think is better. The bad old way to find a product-market fit is this. You, it's called product development. You build a product. You build the whole product first. And you then try to find some customers for it. But what's wrong with that model? What's wrong with that model is building a product is very expensive. It's time consuming. Requires a lot of resources. You're spending all dollars up front. And most of the risk which is are there customers who are going to want it. Is the product market fit? Is it the back? So more startups fail from lack of customers than from any other cause. So why not find out about the customers at the front rather than finding out about the customers at the back. And why not spend your money at the back, instead of spending your money at the front. The bad way of product market fit, for my generation was probably exemplified by a company called WebVan. Now, WebVan spent had a scheme which was that people would buy their groceries from large warehouses, and have them delivered by trucks to their home. It's something that's found a little bit of popularity nowadays with Peapod and some other services. But the company's plan was that everybody would buy their groceries this way, the same way they bought books from Amazon. WebVan built out the entire infrastructure of huge warehouses, huge delivery fleet, huge fulfillment systems, and huge supply chain all in advance of having any customers. Guess what? They got to the finish line, they started trying to acquire customers and they found out that nobody really wanted it that much. They had spent I think it was in excess of a hundred million dollars building out this plant. Their investors essentially lost all their money and the company never delivered on its promise. This exemplifies the bad way to find product-market fit. Is there a better way? Sure. Why not? Why don't we start with all of the risk up front and all the dollars at the back? And work a company that way. So, first find out what customers want. If you go to your cust, potential customers and you say to them. You know, what's troubling you? What are your needs? What are your problems? What can I help you with? And then, you build a product that satisfies their needs. And by the way, you don't build the biggest product that will satisfy all their needs. You build the smallest product that will satisfy the least of their needs. But at least, some of them. It'll get them started, give them a sweet taste. We call that the minimum viable product. So, you start up front, you ask customers what they want, what their needs and problems are, you then build a minimum viable product that solves those needs and you offer then, to them, and find out how to sell it to them. So, you take the risk at the front. Main risk being that there won't be anyone that wants what you're offering for sale. And you spend the dollars, which is figuring out how to sell it to them, at the back. Much better way to build, to find product market fit. The major risks are eliminated first, you're ahead of the game. What's not to like? Well, it turns out this is a very hard thing for people to do. Because it requires letting your babies languish. If you have built a product or a service, if you're an entrepreneur, you have that beating in your breast. You love what you've made. You want everyone to love it as much as you do. You want to get it out there, you want everyone to love your baby, kiss it and say how great it is, and you just can't stand hearing that it's ugly. And so this demands that you go out and you find out what is ugly about your baby in advance of you actually getting the baby. That, that's, that's a big mouthful to some people to swallow. But compare the advantages, all to saved money and all to saved tears. To the disadvantages a little ego. And I think you'll see that this is a better way. the, the key thing that you're looking for is something that your customers must have. Must have versus nice to have is a fundamental distinction that you're going to have to become quite familiar with if you're going to make a success at customer development. Here's a quote from Quora. Quora asks the question what's the difference between must have and nice to have? And Quora said, next time your site goes down for any reason. If your customers start calling and emailing in a panic. You've got product market fit. So these customers are so desperate to get what your website is offering that if it's down, they'll come and harass you. That's product market fit. That's must have. Another quote from Quora, if you get calls from folks along the line, I was referred to you by X, Y, and Z because your product does mumble. Those folks are showing product market fit and you're seeing product market fit there. They're calling you up, they don't know you from Adam, and the reason they're calling you up is because someone told them that your product does mumble and mumble is something that they must have. Finally the definition we use a lot is imagine your customers will they take out their wallets and offer you money for x. If they'll offer you money for x that's product market fit. So the goal of customer development is to find a minimum viable product that your customers will take out their wallet and offer to pay for on the spot. If you've done that then you've achieved product market fit. How do you find out about customers? Well, the number one rule of business model development is get out of the building. This is a sort of mantra of suh, of of Steve Blank and the whole customer development movement. The truth isn't in there with you guys. The truth isn't in there where you're building your product. The truth isn't in the circle of people who are the founders of your startup who are the brain trust. The truth is out there with the customers, they're the ones that know. They know if they want what you've got or not. They're the ones who are going to take out their wallets or not. They're the ones who you're taking the risk on. It makes sense to go out of you building, find out what they think, and not substitute your own wishes and thoughts. For the conclusions that you reach by talking to customers. So, the main points here, are that product market fit is the main point of a business model. A better way to find it is, don't develop the product upfront. Develop the customers upfront. Don't go out for the customers, once you've built the product. Build the product, that then goes out and finds the customers. You want customers who must have what you've got. That's, that's product-market fit. They take out their wallets to pay for it. And the way to find out about this whole thing, how the whole business works, is to get out of the building. Thank you.
