
Y Combinator CEO: “The True Test of Product-Market Fit Is 'Drowning in Demand'” - jkuria
http://blog.capitalandgrowth.org/michael-seibel
======
amasad
Reminds me of the Segment CEO line at one of the startup school lectures:
"finding product market fit is like stepping on a landmine -- you can't miss
it".

------
Hydraulix989
"Sometimes we see founders who are not 'all in' but are looking for YC to
validate them."

Isn't that a bit irresponsible?

I, for one, had to taper my startup ambitions for a year after graduating
university because I had student loans to pay and an initial bank account
balance of zero.

Some people are a bit more privileged to have a bit more of a safety net when
they start, so jumping off the deep end is a bit easier and less risky.

Many tech companies don't see profit for several years. I don't see how that's
possible for some aspiring founders without someone like YC giving them that
initial boost.

Despite this "strike," I'm fully self-sufficient now with my own business that
is ramen profitable despite having a bit more of a barrier to overcome to
start with (which meant biding my time at a Big Company and legally
moonlighting by doing remote work with my cofounder while building my
business).

Is it not equally impressive that someone started with an empty bank account
and worked a full time job for a year and then worked 8+ more hours each day
after work to bootstrap their own company?

Please keep this in mind, if at all possible, when deciding whether someone is
"fully committed." I hope this makes sense.

------
icc97
This seemed a more useful quote:

> Foolish stubbornness comes not from working on the same problem, but from an
> unwillingness to iterate on the solution. Many founders fall in love with
> their product rather than the problem they are trying to solve.

------
hoodoof
And yet we must still do "things that don't scale" to build up that demand.

The real challenge is to work out when your product isn't being snapped up by
users not because it CAN'T be awesomely useful and demanded and valuable, but
because your marketing has not effectively sold it to them yet.

~~~
sskates
Yeah- the truth is always more nuanced. Both product market fit and doing
things that don’t scale are required to get something off of the ground. It’s
almost never you see a successful startup that didn’t have both of those
pieces.

------
realusername
I don't think it's a true statement, you have plenty of small to medium-size
companies serving niche interests which will be never be drowning in demand
but are still profitable. But of course those companies are not exactly the
right profile for Y Combinator.

~~~
icebraining
You don't need an ocean to drown. To me, that means "more demand than they can
handle".

------
logicallee
This also explains why so many great companies are built by people solving one
of their own problems: imagine how high your demand is for a particular
solution, if you are willing to spend 100 hours coding it! That means it is
worth at least $1000 for you, for many programmers closer to $10,000.

That is for founders who can personally code their solution. Imagine the
situation for founders who can only make a proof of concept prototype and need
to raise money for them to see a commercial version.

In this case the desire to see their idea in physical form is so great, they
would work unpaid for 1 to 2 years for a 20% chance at seeing it. That means
their personal demand is $100,000 for a 20% chance to have 1. (And this is why
many engineers work for equity / often called a lottery ticket.)

That is another way to see that the world is drowning in demand for your
product/vision :) People will donate hours or market salary to having one.

(I realize that the last three paragraphs are mixed with potential financial
reward - however for people coding the solution for themselves, this
definitely shows that they themselves are drowning in demand for it.)

------
paraschopra
I like the phrase market-product fit more. I wrote about it last month:
[https://invertedpassion.com/to-get-good-startup-ideas-
look-f...](https://invertedpassion.com/to-get-good-startup-ideas-look-for-
anomalies/)

~~~
canvasduck
Awesome post. Bookmarked so I can reread.

------
crocal
I am drowning in demand right now and it is not a pleasant feeling.

~~~
icefox
Whats the demand?

------
throwaway84742
What would you do if you worked at a startup which, after a year and a half of
existing and raising a substantial Series A _hasnt even started_ to define
what the product is? Basically the only reason the startup is alive is a
single large customer walked in one day in search of the narrow expertise that
we excel at, and gave us a contract. But other than that, there’s zero product
effort, and the CEO doesn’t understand he needs to solve customer problems.

How would you estimate the chances of success on something like that. I
estimate them at roughly zero in spite of the technological prowess, but maybe
I’m wrong.

------
lazyjones
So, for example Tesla has a better product-market fit than the competition
because it can't produce the Model 3 fast enough? That seems like a rather
1-dimensional view to me...

~~~
kozak
Look at the differences in product-market fit between Model 3 and its closest
equivalent/competitor, the Chevrolet Bolt. Model 3 is obviously a much better
fit.

~~~
lazyjones
There isn't an isolated EV market. People who drive EV can also drive gasoline
cars. So the M3 has plenty of competition in the large car market.

------
stephenson
It depends on what kind of company you want to build.

Yes if your goal is to build a Dropbox, an Instagram etc then you don't have
"product-market fit" before you have to stay up all night weeks in a row to
keep your service alive.

But sometimes it makes more sense (and joy) enjoy building stuff where the
product-market fit and growth curve is a lot slower, read Basecamp's post
about linear growth companies: [https://m.signalvnoise.com/the-world-needs-
more-modest-linea...](https://m.signalvnoise.com/the-world-needs-more-modest-
linear-growth-companies-please-make-some-609b5a10a9e0)

Background: I have build a VC backed company that ended up on a linear growth
curve and enjoyed it a lot, today the company is profitable and proud. Today I
am VP Growth of a heavily VC backed company that is trying to hit product-
market fit.

------
mathattack
Has anyone here ever been drowned in demand on the Enterprise side? I’ve been
in high growth (50+% annual) and it still felt like we were fighting for every
sale.

You can have product market fit but if there are competitors, life still is
hard.

~~~
mrep
Slack had about 10 times YOY growth when it first started and then slowed down
to about 3-4 times YOY growth which is what it currently looks like it is at.

*these are just my eyeball estimates from looking at graphs in google search for "slack growth"

~~~
mathattack
Was this driven by end user adoption, or larger scale enterprise sales?

------
derrida
> You mention not having a technical co-founder as a big turn-off. But we all
> know that unless you’re doing a ‘hard tech’ startup, customer acquisition
> can often be harder than building a product. Is it not possible to succeed
> by hiring external tech talent? After all, Kevin Rose famously built Digg
> with $20/hour Rent-A-Coder talent.

How is Digg?

~~~
mjlee
Not so hot, but I think most people would be pretty happy to be where Kevin
Rose is, financially.

~~~
acct1771
Everything's about the scoreboard.

Y'know, unless you want to be happy.

------
kyloon
It is also important to tease out if the demand is actually because of pricing
your product too low which can sometimes be perceived as achieving product-
market fit. Nothing wrong with that if cost efficiency is what you are trying
to solve, but in most cases this is a sign of underestimating the true value
of the product.

------
vonnik
I think the key point here is: If you have to ask whether you have product-
market fit, the answer is "no." Product-market fit, when it occurs, is an
overwhelming, white-knuckle ride. Google and FB figured out monetization after
they found product-market fit, but once you have users, advertising will
follow.

------
peter_retief
The advantage of being oversubscribed is you can be more picky and get the
best, great news

------
derrida
Funny... all the hackers reading this trying to figure out how they can "game"
this system.

------
lowglow
1\. Create demand

2\. Acquire users

3\. Own distribution

4\. Iterate to multiply 1

------
gregoriol
If you are "drowning", it's not market fit, it's actually how unfit you are
for the market.

~~~
McPepper
Interesting perspective and I can agree somewhat... But isn't "drowning"
correlates to the validation of your product/business model?

Depending on the business that is, but if there's an unsolved need from the
market, wouldn't it be that no one is fit for the market? If so, then the
person who's "drowning" is the most qualified of all (given at that moment).

~~~
gregoriol
Drowning can have bad reasons: you are not ready, your product is under-
priced, your product is trendy based on an point-in-time event/PR/whatever,
...

And it can have bad consequences: your customers might get unhappy because of
delivery delays, lower quality, you might try to adjust the product/price
loosing early customers or making a mess, your thinking and doing will be in a
hurry, ...

Overall, the trend might not last, and others might get into that market in a
better shape than you.

Market-fit is more about the long run: being able to have regular steady
growth, of customers, of the revenue, being able to learn and adapt to it,
having positive feedback again and again and again, ...

I think this "drowning" idea is a pure bro/VC one: you demonstrate in a short
time that you can attract a lot of customers, you get good press (for that
short time), investors, millions (or billions) of money pours in, and it's not
really about the customers or the long game of making a product.

~~~
McPepper
Drowning is a problem, but a good kind of problem to have in my opinion.

I'd rather have a positive feedback that my business is growing in the right
direction but can't keep up with demand than being the never-ending void of
finding a product-market fit. This is purely my opinion (so I don't expect
everyone should do/think this way), I just feel the trade-off is better.

"Overall, the trend might not last" \- I love this bit. I think this is one of
the biggest problems with finding a product-market fit that is often mixed
with "catching waves" (think AI wave, sharing economy wave, blockchain wave).
How do I know which is which is the driving force of my product when it's
mixed up?

You're 100% right, market-fit is about the long run and there's this tendency
in tech culture that everything should be fast-tracked to become a unicorn,
hyper-growth, press coverage on TechCrunch. It is a purely bro/VC idea.

But iterating your product/business to the best/biggest possible realization
that it could possibly be can lead you to get "drowned". At the end of the
day, when coming on the crossroads at that point, we should ask if we want to
"go big" or "stay as you are". Both are equally accepted answers and comes
down to taste and preference.

We all hate the toxic tech bro/VC culture telling us not going big is akin to
being a failure and we don't talk/promote enough the idea it's absolutely fine
to go slow and steady (my favorite example would be Basecamp). Tech bros are
all in to get a few seconds of fame and VC are in maximizing their returns in
the shortest possible time. It's unsustainable and unstable idea. I think it's
the primary root why there's a diaspora of engineers, VCs, startups in silicon
valley.

------
bkohlmann
I think the more interesting comment is related to hiring an MBA for a
startup.

Having just graduated with one, and meeting Michael at a lunch where he tried
to tell us MBAs why we were bad fits for YC, I actually agree.

It’s certainly not a differentiator and while it got me a great job in a very
traditional firm, startups need risk takers more than credential seekers
(which I’ve come to understand is something I’ve actually become to some
extent).

~~~
jcadam
I am a programmer with an MBA. I honestly forget I have it sometimes.
Occasionally someone will remind me I have a master's degree (Why did you
leave your master's degree off of this form?) and I have to think for a
moment. "What?! Oh, yea..."

So, getting an MBA has had very little impact on my career/life. In fact,
considering the time/effort involved, I'd say it has probably given me
_negative_ value.

~~~
philipodonnell
I am in the same boat, but with a bit more charitable view.

You may not realize it but an education like that will come across in the
language you use and the way you present yourself to executives. It won't help
in a startup, because there are no executives, only doers, but in a larger
company being able to hold a conversation with executives on thier terms and
using thier jargon will make you far more effective than someone who can only
talk in programming paradigms.

------
lkbm
"Y Combinator CEO", to me, means sama, though I guess his title isn't actually
CEO. I feel like a better title would be "Y Combinator company CEO".

Not a big deal, but confused me at first.

~~~
vonnik
Sam Altman, sama, is president of Y Combinator Group, which includes more than
the accelerator. Michael Seibel is CEO of Y Combinator, the accelerator.

[https://www.linkedin.com/in/mwseibel/](https://www.linkedin.com/in/mwseibel/)

------
jnsaff2
So this cryptocurrency/blockchain demand means that it has achieved the
perfect product-market fit?

~~~
blueline
bitcoin transaction volume is down ~50% from 400k/day in december to
150-200k/day recently

the "demand" is from people who like seeing lines that go like this / in their
portfolios

the ratio of people who are actually using the "product" to those who are just
speculating is pretty insanely low

------
Lordarminius
Jeff Bezos once said the same thing in different words: "... The true test of
innovation is customer adoption."

------
gajju3588
Is it always the demand? How will this work for some company which provides a
service which is used once in a while by other companies? So for a long time,
there would be no demands. Think of something like
[https://dataturks.com/](https://dataturks.com/) . They provide UI tools to
manually label data for ML algorithms until some company is doing that
specific ML algorithm/task/project.

~~~
icebraining
Demand doesn't need to come from the same people continuously. Car
manufacturers have plenty of demand, despite their clients only buying a
product every few years.

Similarly, Dataturks can have demand from a stream of different companies,
each doing their isolated projects.

~~~
gajju3588
Cold-start will be a big problem, once you have customers it becomes easier.
How does one read signals in the beginning ?

------
owens99
My only problem with this is that it's not really a test at all, because it is
not quantifiable.

It's almost like saying, "The true test of product/market fit is whether or
not it's obvious you have product/market fit."

Essentially, the statement is redundant.

There are various levels of Product/Market Fit. There's unicorn-level
product/market fit and there's amazing product in a small market-level
product/market fit (ie. $25M-$100M exit). YC and others in the VC-world only
seem to recognize the unicorn-level because that's the only level that's
relevant to them.

~~~
boffinism
> "The true test of product/market fit is whether or not it's obvious you have
> product/market fit."

The thing is, this is the sort of thing people _actually say_ about p/m fit.
E.g. Marc Andreessen: "you can always feel product/market fit when it’s
happening"[0].

It might feel redundant, tautological and unhelpful, but there are a heck of a
lot of startups who are really, really trying to convince themselves they're
ready for the next step because "I think we've got product/market fit - I
mean, we got that pilot with a big corporate, didn't we?".

Statements like this are a reminder to bring over-optimistic entrepreneurs
back down to earth and remind them there's still work to do.

[0] [https://a16z.com/2017/02/18/12-things-about-product-
market-f...](https://a16z.com/2017/02/18/12-things-about-product-market-fit/)

~~~
ekidd
> _The thing is, this is the sort of thing people _actually say_ about p /m
> fit. E.g. Marc Andreessen: "you can always feel product/market fit when it’s
> happening"[0]._

I've consulted for quite a few startups, and the successful ones really do
_feel_ different. Are there lines of people standing outside the booth at
trade shows trying to write 5-figure checks? Are the sales people bringing in
big contracts so quickly that people start mixing them up in conversation? Is
engineering constantly struggling to keep up with ridiculous growth?

Mind you, not all of these companies succeed. Some find themselves trapped in
a market that can't sustain growth. Others are mismanaged, or ultimately
suffer from too much churn. Sometimes Google moves into the market and
everything gets harder.

But once you've seen very aggressive customer demand, it's pretty obvious.

~~~
bald
Can you please confirm that you have really experienced these scenarios
multiple times? In which geography? Can you give names of the companies?

This would TOTALLY redefine my personal definition of product-market fit.
Thanks!

~~~
woah
A poster above wrote that Slack had 10x yearly growth, that sounds like it
might be like that.

------
rmason
I've seen startups that couldn't succeed selling dollar bills for fifty cents.
There are others, Dropbox for example, that post a video and demand explodes.

I've seen people grind on a startup for years, pivot multiple times, and have
nothing to show for it. Then they try another totally different idea and it's
an instant success from day one.

~~~
tritium
Put another way, there doesn’t seem to be any apparent correlation between
effort and success.

~~~
onion2k
Effort is a multiplier. A bad idea with a ton of effort won't go anywhere. A
good idea with a little effort will succeed in a small way. But a good idea
with a lot of effort... that's when things are massively successful.

------
sheetjs
The original context is more nuanced. The quote was responding to "Can you
have product market fit without monetization?"

> It depends your product. My definition of product-market fit is: you are
> drowning in demand—your product is being used by so many customers that you
> cannot handle all the new people knocking at your door!

> Absent that you do not have product market fit. Most people use the term too
> loosely.

It's easy to sell a dollar for 90 cents and be "drowning in demand". The
answer seems to indicate that demand is a pre-requisite, but not necessarily
sufficient.

~~~
edanm
This is an incredibly important point that often gets overlooked.

Not only are many businesses actually selling a dollar for 90 cents and
therefore _think_ they have product-market fit, but even if you _aren 't_ one
of these, your _competitors_ might be behaving this way.

For example, when doing freelance/consulting work, you can try to match the
rates of cheap freelancers, but that's usually not smart- they might be doing
the equivalent of selling a dollar for 90 cents.

Always worth remembering that 90% of new businesses die within a year (or
something like that). That means there's always a significant amount of
competition that is doing things that _don 't make business sense_.

~~~
sp332
This is a very common thing to hear, but Fortune couldn't even find an
original source let alone actual data to back it up.
[http://fortune.com/2017/06/27/startup-advice-data-
failure/](http://fortune.com/2017/06/27/startup-advice-data-failure/)

~~~
edanm
Well, it really depends on what you think I meant. You're interpreting me as
talking about startups (which I explicitly wasn't, since I was talking about
freelance work).

Even assuming we're talking about startups, the article is looking at venture-
backed startups, and defining failure as returning less than 1x. This gets two
things "wrong":

1\. If talking about startups, most people (founders, investors) will consider
a return of 2x to be a failure as well.

2\. You're already limiting the discussion to startups that have been venture
backed.

IIRC in venture-land, the number of startups that are considered to be
returning a meaningful return is around %10-%20 for the best funds.

~~~
sp332
I went with startups because I thought they were even more likely than average
businesses to fail. Do you think that's a bad assumption?

~~~
edanm
No, I think that's a great assumption. Well, startups vs. general businesses -
I think specific things like restaurants might fail at a pretty high rate too.

I think the rest of my comment stands though. And especially, if you're
singling out specifically VC-backed startups, I'm guessing their 1-year
failure rate is practically zero, since they usually raise enough money to
survive at least 18 months. That's why the details of what exactly we're
talking about matter a lot here.

I think, for all VC-backed startups, there are statistics that show a more-or-
less 90% rate of startups "failing" in the sense that VC's care about. But
it's really more-or-less- I'm assuming it's a made up statistic that is in the
area of the truth.

------
suhail
You need demand and user retention. Just the former is a false sense of
success. Many startups flameout without the latter at high frequency. I've
witnessed 100s.

~~~
taneq
Also, uh, money. Coming in. Income. You need this. If you don't have income
(or a clear road map to it before you run out of funding) then you don't have
a company, you have a Ponzi scheme.

~~~
emmett
Sorry, but do you think Google (prior to turning on AdWords) was a ponzi
scheme?

~~~
tim333
>Both Brin and Page had been against using advertising pop-ups in a search
engine, or an "advertising funded search engines" model, and they wrote a
research paper in 1998 on the topic while still students. They changed their
minds early on and allowed simple text ads.

Sounds like a road map.

(Wikipedia)

~~~
kozak
But here we should remember what internet ads were like before the appearance
of textual Google ads. They were image banners of standardized sizes, much
more intrusive and way more pointless.

~~~
jmvoodoo
I think that depends on your definition of intrusive.

