The 7 Best Books on Product Market Fit for Startups in 2021

What is Product-Market Fit and Why is It Important?

Marc Andreessen of Andreessen Horowitz was one of the first people to suggest the Product-Market Fit (PMF) concept and he defined the term as being in a good market with a product that can satisfy that market. In other words, once you have successfully identified your target customer and served them a product that perfectly aligns with their needs, you have found your PMF.

The important thing is that the product has to fit the market, not the other way around.

“When a great team meets a lousy market, market wins. When a lousy team meets a great market, market wins. When a great team meets a great market, something special happens.”Andy Rachleff, Wealthfront CEO

The reason why PMF is considered to be one of the most important concepts is that it plays a major role in determining the future for any startup.

How do You Know If you Have PMF?

Being in a good market with the perfect product is easier said than done. Since there are so many variables in the equation, there is no one-size-fits-all formula. Fully achieving PMF depends on the specifics of the startup, but it’s usually a mix of revenue, engagement, and growth.

Educating yourself on the topic will definitely give you a leg up in figuring out what PMF means for your startup. It’s why we put together a list of the best books on product-market fit.

The Best Books on Product-Market Fit in 2021:

The Lean Startup by Eric Ries

The Lean Startup

The Lean Startup is the book that introduced the lean methodology to the world of startups. Since then, it has become one of the must-read business books for everyone, from new entrepreneurs to professionals who want to revise the fundamentals of lean startup. In essence, this book is a foundation that explains the importance of MVPs, iteration and PMF. The author uses real life examples from his own experience, as well as revisiting other startups’ case studies.

FOCUS Framework by Justin Wilcox

Best Books on Product Market Fit – FOCUS Framework

In his book FOCUS Framework, entrepreneur Justin Wilcox walks you through the path to finding PMF in detail. One of his main objectives is to help you reach PMF by running experiments with your customers, not on them. Even though, in some ways the book’s promise might seem hard to live up to, it is still full of good ideas.

Testing Business Ideas by Alexander Osterwalder and David J. Bland

Testing Business Ideas

Published as one of the three books of the Strategyzer series, Testing Business Ideas explains the importance of systematic testing in order to iterate, grow and finally reach PMF. Though the book is mostly focused on testing and experimenting, it is quite informative on how to maximize the chances of success and minimize the risks.

The Lean Product Playbook by Dan Olsen

Best Books on Product Market Fit – The Lean Product Playbook

With The Lean Product Playbook, author Dan Olsen aimed to create an easy-to-follow guidebook to iterating your way to PMF, providing clarity with the help of diagrams and formulas. Apart from being insightful, it is quite entertaining, just like a real playbook. However, there are a couple of things to keep in mind: the book is almost entirely devoted to software products and it is mostly for those who are just starting out in the field.

From Idea to Product/Market Fit by Omar Mohout

From idea to product/market fit

A former technology entrepreneur and a professor of Entrepreneurship at Antwerp Management School, Omar Mohout in his book From idea to product/market fit celebrates the idea that knowing all the answers right away is not necessary. Instead he encourages his readers to ask the right questions first and then find the answers. The main goal of the book is simplifying the process of agile action, and so maximizing efficiency. One thing to be aware of is that the book is mostly introductory.

Product-Market Fit Analysis by Matt Brocchini

Product-Market Fit Analysis

Matt Brochini is a technology and education entrepreneur and executive. He has developed the Quantitative Product Market Fit or simply QPMF concept with Chris Sorensen, an award winning start-up executive and strategist. In his book Product-Market Fit Analysis, Brochini explains this innovative methodology of quantifying PMF in depth. The quantitative approach is designed to help companies assess and improve their PMF.

Lean B2B by Étienne Garbugli

Best Books on Product Market Fit – Lean B2B: Build Products Businesses Want

Meticulously covering the specifics of PMF in business to business, Lean B2B contains vital information. Since the case studies in the book come from real life experiences, they are relatable and easily applicable to your own journey. It will help you recognize the differences between B2B and B2C startups. If you are working on a business selling to consumers however, this book might not be the first on your list.

In Conclusion

Understanding and reaching PMF can be challenging. Though, getting the best information will help you. This list of best books on product-market fit provide you with necessary knowledge. For new and updated articles you can check back the blog often.

More on Finding Product-Market Fit:

How to Raise a Seed Round in B2B

Tim Chaves, CEO of ZipBooks on How to Raise a Seed Round in B2B

This is a guest post by Tim Chaves.

Tim is CEO at ZipBooks, online accounting software for small businesses. Tim previously founded and sold two small businesses, and holds an MBA from Harvard Business School.
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Whether you’re a solopreneur or a team of founders, odds are, you’ll need funding if you want to grow quickly.

Fundraising is foreign territory to a lot of B2B companies—and inexperience can lead to regret. On the other hand, having a war chest is almost always a competitive advantage, so given the right terms, it can very often be worth the risk.

While fundraising is rarely neat and tidy, there are some steps that can help you raise a seed round with a bit more confidence.

Know if You’re Ready

If you want to have success raising a seed round, you’ll need to be ready first. So how do you know if you are?

First, you have more than an idea. I often see idea-driven founders trying to line up meetings with investors. Usually, this doesn’t work. Investors want proof (at the very least, hope) that your business is going to succeed. Research product-market fit by selling something, even if it’s not ready for the big stage. Gain some traction. Build an exceptional founding team. Investors need to believe that you are the only people who can capture this market potential.

Second, get some skin in the game. In some cases, you may need to tap into your own savings, but be cautious about being too aggressive with your own funds. Find novel ways to show that you’re all in, without betting the farm, especially if you have others relying on you. In my case, I built the first version of what’s now ZipBooks on the side while in grad school, and that was enough to get investor interest.

Third, practice telling your story. Start at the beginning, think back on the dream that birthed your company. Your origin story gives you purpose and drive—it’s part of your unique selling point. Make sure that you can convey this clearly to investors: what problem are you solving? And why now? Practice your pitch with family, friends, even low level investors. Once you’ve got the kinks ironed out, you’re ready for the big leagues.

As a bonus, you’ll know you’re ready if you’ve devised a way to be profitable—even without funding. This is a great sign to investors (and yourself) because it’s a promise that you’ll succeed no matter what—raising money will only help you do it faster.

Plan Your Attack

Once you’ve built up your idea and your story, plan out your fundraising strategy.

Paul Graham famously advised founders to talk to investors in parallel. While arranging fundraising meetings may not be time-intensive, the process of fundraising is thought-intensive, pulling your attention away from your work. Fundraising all at once helps you to focus and get it done quickly, so you can get back to what matters.

Plus, once you’ve got that first term sheet, others that have been dancing around your deal will suddenly switch into high gear (happens every time).

You should also create multiple growth plans dependent on the amount of funding you receive. Run lots of scenarios within a range of funding, then present the plans that best fit each investor. Planning for multiple scenarios will show that you’re prepared to build your business, no matter how fundraising turns out.

Set your fundraising goals strategically—actually do the math. Usually, startups raise in rounds to get to their next milestone (typically 12-18 months later). Calculate monthly operation costs and multiply by 18—voila! You’ve got a reasonable fundraising goal.

It’s important to note, however, that many economists are predicting a downturn some time in the next few years. I would also consider “overraising” and planning for a day when fundraising isn’t as easy as it is now, as you may be forced to figure out how to be profitable before you’re able to raise another round.

Get Introductions

When looking for seed investors, you’ll typically deal with 1. high-net-worth individuals (angels) and 2. Venture Capital firms (VCs) that invest institutionally.

B2Bs raising a seed round often start with angel investors in order to get the money flowing, then move onto VCs. You’ll probably find that VCs are less willing to invest in the seed round. VC’s do much more due diligence before funding a company, and at the idea stage, there’s usually too little information for them to be confident making an investment. But if they do invest, expect some serious cash (around $500K-$5M).

You’ll deal with angels and VCs very differently, but they’ve got two things in common:

  • They want to invest in things that already have fundraising momentum
  • They want to make a huge splash and get a real return, not fund a lifestyle business

This is why you don’t want to start fundraising before you’re ready. If you’ve got a tiny space or a flimsy team, you’re going to make a bad impression on investors. Introductions can be hard to get (warm introductions are best—from a founder of a company they’ve funded), so don’t waste them.

Quick note on debt raising: it’s rare for B2B, but not impossible. Odds are, you’ll be equity fundraising. But you can also seek out non-dilutive capital like grants and solicitations.

Follow Promising Investors

After you’ve had an introduction, immediately set a meeting and follow your most promising leads.

If you’ve been fundraising in parallel, hopefully you’re juggling a good number of investors. This is great! You should meet with as many investors as you can, but set your sights on the investors that are most likely to close—and who would be the best partners if they did.

B2B solutions can be very sought after, so find partners who stand to gain a lot. Know your audience and research firms with similar investments. Then, listen to the investor when you meet, get him or her to talk more than you. This kind of connection makes it more likely you’ll end up with a “yes.”

There will, of course, be some No’s. Don’t take offense by this, but part on good terms. If investors spent enough time with you, they probably came close to saying yes—you may have more luck in the next round.

And don’t be fooled by the No’s in disguise. Investors may try to wait around or lead you on. If they won’t clarify next steps or give a solid commitment, they’re just not that into you.

Close the Deal

The key to landing investors is to close quickly and keep moving forward. Get money in the bank and then get back to work improving your product and traction.

When you’ve heard a verbal yes, confirm it in writing. Y Combinator calls this the “Handshake Protocol”: You and Investor verbally say yes; then within 48 hours, You and Investor confirm in writing (text or email is fine).

Once this is done, you’ll get a term sheet with specifics and sign it (a term sheet lays out the basic structure of the deal, but is non-binding). Then, after some more diligence, final docs will be created by lawyers (who will charge way too much—you’re paying, by the way). This process usually takes at least a few weeks. Once they’re truly final, you’ll sign the papers and the investors will wire the money.

B2Bs can be risky, and even a day’s delay could cause an investor to change their mind. Once you’ve got the deal, get the money—always taking definite offers over potential offers.

The First Check is the Hardest

To hit the ground running, you just need to convince one investor. After that, it becomes increasingly easy to get more.

Don’t make the process complicated, and don’t let investors complicate things either. Simplify your pitch—stick to the essentials (the problem, the product, your team, your vision). Keep negotiations, documents and valuation straightforward in the seed round. Be confident and direct, but never arrogant—and always hold yourself to the highest ethical standards.

Once you’ve closed the deal, be smart with your resources. Continue to bootstrap where you can and don’t burn through your funds.

Fundraising is not the key to success, it’s only a means to an end. Get it over with and get back to building your company.

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Risk Identification: How Much Risk Are You Really Taking on With Your Startup?

“Startups are risky.”

This sentence may be one of the most dangerous in the business founder’s lexicon…

Each year, similar statements lead smart founders to create startups taking on absurd (or unexpected) levels of risk.

Although as many as 90% of startups fail according to certain studies, that number can be hugely misleading.

Risk levels and failure rates vary by industry, segment, experience level, and several other factors.

According to a study by the Harvard Business School (2008):

  • Serial entrepreneurs have a 30% chance of succeeding in their next venture;
  • First-time entrepreneurs have an 18% chance of succeeding;
  • Entrepreneurs who have failed before have a 20% chance of succeeding.

As you can see, starting points are not equal, just like startup risk levels are not equal.

Top-line stats about startup failures say very little about the risk level of individual startups.

Risk Identification: Fatal vs Recoverable Startup Risks

The myth of the successful founder who comes up with an idea, sticks with it, and wills into existence a successful organization making little to no changes to his/her original vision is pervasive. It’s also more myth than reality.

According to a study by Harvard Professor Clay Christensen, nearly 93% of the products that ultimately became successful started off in the wrong direction. In startups, pivots are the norm, not the exception.

Going through the customer development process is one of the hardest things you can do.

To be able to keep your team (and yourself) motivated, you want to avoid dead ends and keep failing forward, ever closer to your goal.

You’ll encounter fatal risks, when there is no option but to go backward and change one of your business’s foundational assumptions.

Although founders with sufficient startup runway and motivation can always muster a pivot, fatal risks – like vision pivots – can cost you a co-founder, a funding round, or the will to keep going. They’re obviously best avoided:

Risk 
 Identification: The B2B Startup Pivot Pyramid
Risk Identification: The B2B Startup Pivot Pyramid

How to Do Proper Risk Identification for Your Startup

“You don’t want to create your own momentum; you want to ideally ride on momentum that already exists.” – David Cancel, Serial Entrepreneur.

Idealab co-founder Bill Gross founded over 100 companies in the last 30 years. Analyzing hundreds of startups using 5 key dimensions – idea, team, funding, timing, and business model – he found that the biggest factors influencing the success or failure of businesses were the Timing and the Team / Execution:

Risk Identification: Top 5 Factors in Success Across More Than 200 Companies
© The single biggest reason why startups succeed | Bill Gross

Creating a successful business means achieving success in many areas:

  • Timing;
  • Team;
  • Execution;
  • Idea;
  • Business Model;
  • Funding;

But also…

  • Market Size: Are there ways to expand beyond your original customer segment and grow the market?
  • Channels/Go-to-Market: Can you repeatedly reach buyers and prospects? Can you scale that process?
  • Competition: Can you create sustainable differentiation in the market?
  • Pricing Power: Do you have the ability to increase prices and capture additional revenue from existing accounts?
  • Recruiting Power: Can your business recruit top talent in the market?
  • Value Proposition: Is your value proposition sustainable in the long run?
  • Costs: Is your cost/revenue model sustainable long term?
  • Etc.

The more aspects of the business model are uncertain or unproven, the riskier the business. The riskier the business, the longer the path to success will be.

Although innovating on many factors at the same time can lead to great disruptions and innovation (Airbnb, Uber, etc), it’s not a requirement for success (Salesforce, Slack, etc).

There are no awards for taking on more risk than the competition. Proper risk identification and risk mitigation only help make your life easier.

Risk Identification & Risk Acceptance

The easiest way to minimize the risk of failure in innovation is to build off something that already exists, changing only a few key parts of the model while leveraging your unique competitive advantages.

However, for various reasons – be it ego, personal interest, ambition, etc – founders rarely do that.

For the writing of Lean B2B, I interviewed Martin Ouellet, the founder of recruitment software startup Taleo.

At the time of the interview, Taleo had recently been acquired by Oracle for $1.9 billion, and his co-founder, Louis Têtu, was already working on Coveo, an enterprise search solution.

Têtu had recruited several key employees from Taleo’s upper management and Ouellet had been invited to join the team.

Although Ouellet could have joined a business he felt was very similar to Taleo in terms of market, product, and dynamics, he made the decision to build something completely different: a gaming studio. He knowingly took on more risk, accepting that he would be able to re-use very little of his knowledge and expertise in this new venture.

To Ouellet, taking on a greater level of risk was a decision he wanted to make.

Although startups are risky, it’s important to do proper risk identification upfront, understand the risks you’re taking on, and work to test and validate risky assumptions.

Stay lean. Don’t let fatal risks surprise you.

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