Building a Startup: The Two Engines of Product-Market Fit

By Maddie Wang

As an early-stage founder, achieving product-market fit is the most critical milestone to pursue. According to Mar Hershenson, managing partner at Pear VC, there are two engines required to find product-market fit:

Engine 1: Build a product people really like

The first engine is building a product that customers genuinely like and value.

Some metrics to optimize for Engine 1 include:

➕ 90% of new users are still engaged after 30-90 days.

For my business, if 90% of people who joined this month are still engaged and 80% of people who joined 3 months ago are still engaged, that shows strong product-market fit.

➕ New cohorts are increasingly engaged.

Each new group of users you bring in should be stickier and more engaged than the last. This shows you're improving the product and experience.

➕ Usage and revenue are growing steadily.

Whether it's transactions, time spent, or dollars, metrics should be moving up and to the right.

Engine 2: Build a growth engine

A good growth engine has a few key attributes:

➕ It's repeatable and scalable.

The growth tactics work for new customer cohorts and at higher volumes. They aren't reliant on the founder's "superpowers."

➕ The CAC:LTV ratio is efficient.

The cost to acquire a new customer (CAC) compared to the lifetime value of that customer (LTV) is greater than 1. For many companies, 3x or higher is a good target. This shows customers are profitable and the business model works.

➕ Growth is accelerating.

It's getting easier and faster to acquire new customers over time. This indicates strong product-market fit and a scalable growth engine.

➕ Someone other than the founder can drive growth.

If growth relies entirely on the founder, it likely isn't scalable or repeatable. A good growth engine can be operated by another team member.

In summary, finding product-market fit requires building both a product people genuinely love and value as well as a scalable growth engine to reach new customers. Focus on these two engines, achieve strong metrics in both, and you'll be well on your way to product-market fit and startup success.

Best of luck from founderscafe.io