by mikekarnj on November 5, 2012
In preparation for my next online Skillshare class, I’ve been doing research into how startups reach product-market fit (disclaimer: I’m not an expert on this topic). The beauty behind a new concept is that there are a lot of different methodologies including those from Sean Ellis, Ash Maurya, Steve Blank, and Eric Ries. Below, I’ll link to great articles I found throughout my research and share a simple methodology we’ve been using at Skillshare to reach product-market fit.
A startup hits product-market fit (PMF) when they’ve developed a product for a group of passionate users in a big enough market. As Marc Andressen puts it in this article: “product/market fit is the only thing that matters.”
Product/market fit means being in a good market with a product that can satisfy that market.
You can always feel when product/market fit isn’t happening. The customers aren’t quite getting value out of the product, word of mouth isn’t spreading, usage isn’t growing that fast, press reviews are kind of “blah”, the sales cycle takes too long, and lots of deals never close.
And you can always feel product/market fit when it’s happening. The customers are buying the product just as fast as you can make it — or usage is growing just as fast as you can add more servers. Money from customers is piling up in your company checking account.
The key is to reach PMF before you run out of money. So, when searching for PMF, it’s critical to conserve cash. It’s important to know when you’ve hit PMF because 1) most startups fail because of pre-mature scaling - they attempt to grow the business when it’s not ready to scale and 2) companies also fail when they don’t step on the gas pedal when they’ve reached PMF, which allows competitors to come in and take over the market opportunity.
Throughout my research, I’ve documented the process and methodology I’ve been using at Skillshare to reach product-market fit. As part of my class, we’ll be using this four-step process below.
Optimize for Learning
Before you even start, keep in mind that getting out of the building and talking to your customers is the most important thing you can do when trying to reach PMF.
During this stage, you want to be learning what the market wants versus proving that you have the most awesome idea in the world. Don’t fall into the “Steve Jobs trap” – thinking that you are such a visionary that no one understands your vision because you’re so innovative.
While talking to real users, remember that “customers validate and that entrepreneurs innovate.”
1. Pick a Market
According to Marc Andressen, “the #1 company-killer is lack of market… In a great market — a market with lots of real potential customers — the market pulls product out of the startup. Conversely, in a terrible market, you can have the best product in the world and an absolutely killer team, and it doesn’t matter — you’re going to fail.”
This is re-iterated by Sean Ellis, ”my recommendation has always been to decide not to grow the business if it doesn’t have a lot of people that are real passionate about the solutions.”
That’s why I believe that determining your market is extremely important before you even start thinking about doing anything else. Here’s a great article by Noah Kagan on determining your market size.
As you’re thinking about your market, it’s important to know that you can’t build a product for everyone. I came across this quote from Chris Anderson (TED) which I thought was really relevant:
Build for a Niche While Maintaining Broad Appeal: Winning ideas have to connect across a broad array of areas. They have to engage technology in an intelligent way, but they also have to tap into market psychology, human psychology, and customer psychology.
As you build for a specific niche, it’s important to understand how to cross the chasm into the early majority. Geoffrey Moore (author) suggests that “focusing on a single industry vertical, leveraging all your resources to win early-majority reference customers in that segment (by convincing them you are a safe, legitimate choice), and then dominating that segment before moving on to the next industry vertical.”
During this stage, it’s important to define your market, find your passionate users, and figure out how to reach them and help them spread your product for you.
2. Competitive Advantage / Unique Value Proposition
One area that is often overlooked is your company positioning / UVP and overall competitive advantage. Your UVP is a single, clear, compelling message that states why you are different and worth buying over your competitors. By clearly positioning your product within the right market, it can be all that’s needed to drive PMF.
A trap early stage startups often fall into is thinking that their competitive advantage/UVP is complex and simply a list of different features. When an adequate market with a substantial enough problem has been picked,
“And for me,
ultimately it’s that strong signal that this is something that users really love about the product. So understanding who loves that product — who really has that need — that starts to give you guidance on who you’re going to target going forward.
And you may find that they absolutely love the product. Then hone in on why they love the product. And then get the messaging right and the experience right, so that you’re delivering that better.
So, with no real change in the product, but a change in the messaging and a little bit of first-user experience change, you got a huge uptick in the must-haves.” - Sean Ellis
Bill Gurley wrote a great article on competitive advantages, which he defines as “how easy is it for someone else to provide the same product or service that you provide?” But, I think even more important is building your economic moat, “coined and popularized by Warren Buffett, refers to a business’ ability to maintain competitive advantages over its competitors in order to protect its long-term profits and market share from competing firms.”
This is a strategy I continuously develop and evolve over time. I found that it’s much easier to create a strategic blueprint for your startup by putting together a lean canvas (which was created and popularized by Ash Maurya). It’s a great framework for validating your startup idea.
3. Creating a “Must-Have Product”
Before your reach PMF, it’s really important to focus on activation (do users have a great first-time experience) and retention (do users come back?). If you have a business model already, you can start tracking revenue as well.
While working on your product, you’ll want to define your Minimum Feature Set (MFS) that will drive users to use your product, come back, and eventually give you money. At Skillshare, we focus a lot of our time on improving existing features (vs adding new ones), usability/flows, and writing clear communications for our product. We find these changes really correct a lot of the confusion around our product.
4. Measure Product/Market Fit (User Growth, Revenue Growth, Surveys)
As you’re reaching PMF, it’s critical to find your power users and developing a “must-have” product for them. It’s also important to stay away from vanity metrics, which Josh Elman goes over in this article:
One of the things that I felt working on each of these is that we never looked at numbers or metrics in the abstract — total page views, logged in accounts, etc, but we always talked about users. More specifically, what they were doing and why they were doing it.
When measuring PMF, focus on improving the overall experience for your power users. We found that it’s usually too early to set arbitrary BHAG’s when you searching for PMF. Since everything is so unpredictable, you won’t even know what goals to hit.
If you’re looking for a quantitiave approach to measure PMF, I would recommend reading Sean Ellis’ 40% rule.
If none of the steps 1-3 seem to be working, go back, repeat, and keep repeating until you develop a must-have product for a certain market.
How do you know when you’ve hit P/M fit?
Marc Andressen debunks a couple of myths in this article: reaching product/market fit isn’t a big-bang event, it’s not obvious when you hit it, and you can lose it once you hit it to your competitors.
There won’t be an exact moment where everything clicks that lets you know you hit PMF. There’s no set formula that works for every company but I think there are things you can look at to make a decision whether you’ve hit PMF or not.
- What evidence do we have that we’ve hit PMF?
- Are we growing organically?
- Are the survey responses improving?
- Are users coming back to the site and using the product?
Before you hit product-market fit, the only thing that matters is getting to product-market fit. After you reach PMF, the only thing that matters is reaching sustainable growth.
When searching for PMF, there will come a time when you have to double-down on things that have been working and transition to growth/scaling. Remember that most startups fail because they 1) start scaling prematurely and 2) they don’t start scaling when they hit PMF.
From my experience at Skillshare, here are some last quick tips while you’re searching for PMF: question everything, be objective, and make constant 1% improvements. We believe that one silver bullet won’t help you reach PMF but instead a lot of small 1% improvements. It won’t be easy but I hope this simple methodology helps you reach product-market fit!
Michael Karnjanaprakorn is the CEO/co-founder of Skillshare, which is a global marketplace for classes. If you’re interested in learning more about reaching product/market fit; feel free to take his free online class on Skillshare.
by mikekarnj on July 9, 2012
“The difference between an A team and an A+ team is the difference between a million in revenue and a billion in revenue.” – Paul English, Kayak
According to Steve Jobs, “hiring the best is your most important task”. Talent is the lifeblood of any amazing company, but even more important than hiring the best people is building the best team. Putting together an A+ great team is worth 100x more than any “rockstar” individual.
Building a great team starts with keeping the caliber high for talent so that the team can achieve the impossible, together. Putting the team first means that you’ll have to pass on “rockstars” who 1) aren’t a cultural fit, 2) don’t play a critical role/position on your team; and/or 3) aren’t remarkable in their own unique way.
Culture & Team Fit
Most companies define culture fit as “someone you can grab a beer with at a bar.” The problem with that definition is that it’s completely subjective and leads to homogenous teams that look, think, and even dress alike (example: Square’s summer interns were all males).
Companies like Zappos start with core values that help define their unique culture. Core value is defined as a “principle that guides an organization’s internal conduct as well as its relationship with the external world”. Here’s an example of some of the core values from Zappos:
1. Deliver WOW Through Service
2. Embrace and Drive Change
3. Create Fun and A Little Weirdness
4. Be Adventurous, Creative, and Open-Minded
5. Pursue Growth and Learning
To determine if someone is a “cultural fit” at Skillshare, we created a set of core values as a team (during one of our retreats), and created interview questions for each one of our values. For example, ”Be Curious. Stay Passionate” was one of our core values, so we ask all candidates during the interview process, “what are you passionate about?” to get a better understanding of their passions for our mission and outside of work. This allows us to determine whether they are a culture fit based on our values and not on whether we can grab a beer with them.
Lastly, we have an overall criteria of traits we look for when build out our team, which revolves around ambition/drive, curiosity/passion, and humbleness. We also look for “black swans” that have done something remarkable in their lives that make them stand out. For example, one of our recent hires was an Eagle Scout and another was ranked as one of top 100 piano players in the country.
Everyone Recruits for the Team
Recruiting is the not the sole responsibility of one individual at your company but the responsibility of the entire team. For example, the Facebook Design Team keeps a “dream list” of designers they admire. Each designer spends a certain amount of time each week searching for “sparks of genius”. Members of the Facebook Design Team will reach out to these designers themselves, meet up with them over drinks, and sell them on why they should join Facebook. This is very powerful because each person on the team is recruiting for the team.
Most all-stars are not actively seeking to join a new company because they already have a job. It’s your team’s job to find and convince them that they’ll play a critical role on your team. At Skillshare, we host a monthly happy hour where every single person is required to invite someone that they’re actively recruiting – whether we’re hiring for that role or not. This allows those folks to meet other folks on the team, get a vibe of our culture, and understand our vision first-hand.
Interviewing for the Team
The interview process at Skillshare is lean, rigorous, and optimized to save time for everyone involved. The entire interview process never takes more than 30 days and we strive to respond to all candidates within 72 hours during each phase to always keep the ball moving forward.
Everyone on our team is selling during the interview process. Too many companies focus on “what can they do for me” versus “what the company can do for the individual”. Hint: it ties back to joining the team and fulfilling the mission of the company, together. In a nutshell, here’s our interview process (which I’ll detail more thoroughly in a future post).
1. Role Definition
3. Phone Screen
4. Homework Assignment
5. Phone Interview (skills)
6. Team Interviews
7. Reference Checks
8. Job Offer
Another entrepreneur once told me that you can determine the success of any new hire based on how you onboard them within the first 72 hours. The onboarding/training process at Skillshare is optimized around 1) removing all awkward moments and 2) being extremely clear on the person’s role and how they can be successful.
At Twitter, Dick Costolo (CEO) makes sure that all new hires can answer three simple questions:
1. What’s my job?
2. How do I know I’m successful at my job?
3. Why does it matter if our company succeeds (vision)?
On the first day, we spend a lot of time on communicating the vision of Skillshare, company history, and our current goals and milestones. From there, each person is responsible for putting together their role definition and attaching goals over the first 30 and 90 days, which we review with them. This allows them to know their role and how to be successful at their role. And why it matters in the bigger world if our company if successful (democratizing education).
There’s nothing more awkward than showing up on the first day to an office where everyone is working and trying to figure out where to eat lunch on your first day. So, we start all new hires on Monday where we cook them breakfast. This gives them an opportunity to meet the entire team in a casual setting and get properly introduced to the team (and vice versa). The same happens during lunch when their team takes them out to lunch.
Removal of 6′s from your Team
Sometimes, you’ll have to remove individuals if it’s in the best interest of the team (for whatever reason). I believe strongly in the removal of 6′s from teams. If you had to rank individuals on your team from 1-10, it’s really easy to identify the low performers (ranked 1-5) and the high performers (9-10).
But, “6′s” fly under the radar and do just enough work to get by day-to-day. Even worse, they really irritate the high performers (9-10). Since they don’t want to get exposed, they attract other “6′s” to the company. And before you know it, your team slips from being great to being mediocre. It’s extremely important to remove these people from your team as they can be successful somewhere else.
Keeping your Team Happy
Great teams love to achieve impossible tasks together because they know that it’s impossible for any individual to do alone. There are perks (free lunches, yoga, etc) but keeping your team happy revolves around: 1) setting ambitious goals and reaching them; 2) motivating the team by giving them clear success metrics; 3) ownership and empowerment to make decisions; and 4) training to become better.
Most companies will ignore the “all-stars” on the team to focus on the “6′s” but even superstars like Lebron James need feedback, ownership, and coaching/mentorship (article). ”All players want to be coached. They want to have discipline. They want structure.”
In short, always make decisions for the team (and not the individual) and you’ll be on your way to building an all-star team!
by mikekarnj on February 6, 2012
“When you innovate, you’ve got to be prepared for people telling you that you are nuts.” – Larry Ellison, Oracle
Every startup makes hundreds, even thousands, of small decisions every day. But, there comes a time when every startup has to make some really big decisions that will dictate their overall success. I believe there are three big decisions that every startup will make throughout their lifecycle. Without rolling the dice to make these big bets, most companies will hit the “mediocre pool.” This is where startups go when they plateau. They don’t die or grow exponentially. They just flatline and become mediocre.
1. What to Build? Most startups (99%) fail in this stage because they build the wrong product for the wrong market. Are you building something of value that people will use and care about? Are you building the right product for the right market? A lot is written about what to build and how to reach “product/market fit” as fast as possible. This is covered within the lean startup methodology, customer development, etc so I won’t dive into too much detail and reiterate.
2. Who to Hire? After you build something of value, the next major decision to make is on who to hire and what they’ll be doing. The number one cause of death for a startup in this stage is not scaling properly (prematurely) and hiring the wrong people to work on the wrong things. It’s an extremely tricky thing to balance as you’ll be hiring people before your company becomes sustainable (if you have VC funding).
Most startups fall apart here because they don’t have a solid foundation where communication, collaboration, and teamwork are stable and integrated into the company culture. This is where vision, recruiting, process, and holding your team accountable to each other are extremely important. At this stage, you start building the machine that builds the company.
3. Where to Innovate? This is the biggest and hardest decision you’ll ever have to make as a startup. If you look throughout history, most companies become irrelevant because they aren’t innovating properly. Apple and Facebook have done a great job but companies like Yahoo, AOL, Myspace (I would even argue Google) have not innovated successfully to stay relevant in society.
In this stage, most startups fall into the trap of one-upping their competitors. If one of their competitors releases a key feature, they will copy that feature and make it 1% slightly better. This is a sure-fire guaranteed way to hit the “mediocre pool”. However, if you’re “thinking about the idea that you want to see in the world” (Jack Dorsey quote) then you’ll be leading your company to innovate (even when people are telling you that you are nuts). As a startup, you should understand the major decision points that will dictate whether you will be truly successful or not.
At Skillshare, we have a very clear vision of how education should exist in the world. It’s a vision of education that has never been done before and there’ll come one day where we’ll risk everything to realize that vision. It’ll be a huge decision and if the bases are loaded, we’ll definitely swing for the fences.
Michael Karnjanaprakorn is the CEO/Co-Founder of Skillshare.
by mikekarnj on January 17, 2012
Last year, I wrote an article on “Five Entrepreneurial Lessons from 2010” which was a very monumental year for me as an entrepreneur.
There’s a natural progression that entrepreneurs make over time. For me, if 2009 was a year for exploration, 2010 was the year to make a commitment, and 2011 was the year to make shit happen.
At the beginning of 2011, we closed our seed round for Skillshare from Founder Collective. Me and Malcolm shared a desk and worked non-stop designing and developing the first version of Skillshare. In April, we launched Skillshare, which was picked up by Daily Candy (our first major article)! By August, we closed another round of financing from Spark Capital and Union Square Ventures. And by the end of the year, our small team of two (2) grew to twelve (12) and our community grew to the size of a major university. It was a roller-coaster year beyond our expectations and I learned more in those 12 months than the past 12 years about becoming a leader. Here are some lessons that I hope you can apply to your own journey as an entrepreneur.
1. Building a product is hard. Building the machine that builds the product is harder. Disrupting an industry is the hardest. I came across a TechCrunch article quoting Dennis Crowley at Foursquare where he says that “the hard part is building the machine that builds the product.” I agree 200%.
This is the biggest lesson I’ve learned in 2011. In the early days, I was so focused on building the product. Over time, I realized that we couldn’t reach any of our goals without building a great team so I shifted my role from building the product to building the “machine.” My role shifted to recruiting, culture, process, strategy, management, communicating our vision, and becoming a leader.
Looking towards the future, I’m convinced that disrupting an industry will be the hardest endeavor at all. It would not be possible without a great product, community, and team working together to transform an industry. I believe these are the three major stages/bets that a company will make in it’s lifetime: 1) what to build; 2) who to hire; 3) how to innovate. This will be my next blog post so saving all the juicy bits for a latter post.
2. A great team is 100x than a good team. After reading “Tribal Leadership“, I realized that a great team is not just better than an average/good team; it’s exponentially greater. This is when I shifted my focus from recruiting individuals to building out a cohesive team (much like the 1995-1996 Chicago Bulls).
Since time is finite, success can only happen from teams that can create magic and distort reality, which is notable in the first Macintosh team. From picking our investors (Founder Collective, USV, Spark) to our advisors and employees; every decision was made to build a 100x team to help Skillshare achieve it’s vision.
3. People -> Culture -> Process ->Accountability. While I was reading Eric Ries’ latest book on Lean Startups, I came across a diagram he called “The Startup Way” which I found fascinating:
When I started to build out our team, I realized that talented people thrive in a culture with just enough process/structure to hold them accountable to each other. Without it, a lot of time is wasted, things aren’t clearly communicated, and everyone ends up rowing in opposite directions.
“The success of a company depends on its tribes, the strength of its tribes is determined by the tribal culture, and a thriving corporate culture can be established by an effective tribal leader.” – Tribal Leadership
We started by writing the values of our culture (to attract the right talent to our team), implemented MORPH’s as our process so that everyone would be held accountable to each other. Today, everything is aligned from the top to the bottom and back up to the top. It’s aligned on the company, team, and individual level as well as across all projects. Accountability to the team is the foundation of any great company.
4. Meetings are O.K. We used to have an anti-meeting rule at Skillshare. We adopted the PayPal Mafia policy of cracking down on all meetings. One day, I walked into the office, and it was eerily quiet because everyone was working on their computers with headphones. At that moment, I realized that what worked for other companies and cultures wouldn’t necessarily work for Skillshare.
We believed that innovation comes from creativity and collaboration from our team. So, we designed a meeting space that fosters collaboration. We educated everyone on the power of efficient meetings (coupled with the power of being action-oriented/shipping/executing). A lot of the recent and future innovations from Skillshare were seeded in these “meetings” which I believe will be the key ingredient to our success in the future and transforming the education industry. Our competitive advantage will always be our team, community, creativity, speed and innovation.
5. Work/Life Balance. This year, I really embraced the balance between working and enjoying life to prevent myself from getting burned out. I took one day off a week (Saturday), ran a couple of half-marathons, practiced yoga weekly, and made sure to spend time with family and friends. In 2011, I spent the last week in upstate Maine as part of my “think week” which cleared my mind to make higher-level decisions for Skillshare. I made a conscious effort to not let work overpower my life which is something I see happening a lot with first-time entrepreneurs (me included).
Today, it’s easier than ever to start a company, but building a company will always be as hard as it’s ever been. Wherever you are in your journey, understand that you will always make mistakes. But as long as you learn from them, improve, and stay focused to your mission; great things will almost always happen.
by mikekarnj on October 3, 2011
If you take the best team executing an idea in a huge market and put them in the wrong startup culture, they’re destined to fail. Jack Dorsey talks about creating Square as “one startup with many startups inside” which is something I spend a lot of time thinking about for Skillshare. How can we create a culture that allows entrepreneurial talent to thrive and succeed?
We love entrepreneurs. We love working with them. We love recruiting them. But, entrepreneurial folks thrive in a different culture from the norm. They love taking ownership, influencing major decisions, and having the freedom to swing for the fences. In a way, they’re running a startup within our startup. The challenge is balancing the big picture of what’s most important and giving individuals complete autonomy to excel. Below, I’ll share some of my thoughts around creating an entrepreneurial startup culture from my experience at Skillshare.
1. Hire Entrepreneurs, Not Employees. Entrepreneurial drive is the #1 trait we look for in recruiting and hiring. While most companies want to be known for having great engineers, product; or marketing folks; we want to be known for the entrepreneurs that emerge out of Skillshare (similar to the PayPal Mafia). We even created a role called “Founder Apprentice” to groom future entrepreneurs. And joke internally that the only time someone leaves Skillshare will be to start their own company.
Last year I read an article from Steve Newcomb about renting entrepreneurs, ”let me rent you for 6 months. You’ll learn an insane amount about building a startup from me that will help you prepare to start up your first company.” At Skillshare, we believe that an entrepreneur working with us for 24 months will provide us more value than an employee working with us for 24 years.
2. Startups within Startups. At Skillshare, we have a flat organization and foster ownership in everything we do. Everyone on our team is tasked with exactly one priority, and everyone on our team has the same responsibility — creative problem solving.
The usual norms around productivity and organization (top-down deadlines, standing meetings, traditional product/project management) don’t mesh well with entrepreneurs. This weekend, I read a great article about the Github culture, “we do things differently at GitHub: we work out of chat rooms, we don’t enforce hours, and we have zero managers. People work on what they want to work on. Product development is driven by whoever wants to drive product.”
We’ve shifted our focus to results and Big Hairy Audacious Goals (BHAG), which has shifted our focus away from creating a rigid process. For example, we had a team retreat in October to talk about the company goals for the next 6 and 12 months, which everyone created together. From there, ad-hoc teams started forming around new ideas to hit our milestones. Now, we’re in the process of creating new teams around these new ideas and everyone on our team will be the CEO of Something, which allows us to get rid of “managers”.
3. Anti-Meetings. I’ve read a lot about the PayPal Mafia culture on cracking down on meetings. We follow a similar cultural principle to reinforce that action and making ideas happen are the most important tenets of our culture. Meetings are expensive (time-wise) and also interrupt creative flow, which is what leads to true innovation.
4. Feedback & Personal Development. However, there’s one meeting that is mandatory at Skillshare. Every Friday, Malcolm and I spend 20-30 mins in a one-on-one meeting with individuals on our team as a form of professional development. This allows them to tell us what they like/dislike about Skillshare and allows us to give them feedback on their performance.
We also spend the other half of the meeting coaching/mentoring them on anything from building a personal brand to fundraising for startups to calculated risks & decision making principles. This is extremely valuable because entrepreneurs are constantly looking to learn new skills.
5. Fun. We also have the usual cool perks: friday team lunches, stipends to attend Skillshare classes, TaskRabbit credits to run personal errands, new MacBook Air laptops, YogaWorks monthly discounts, bi-yearly team retreats, and game and/or bar nights. We also setup field trips with other startups like Kickstarter to check out new exhibits at MoMA, conduct cross-design feedback with Svpply, and invite our investors to stop by the office to have lunch with our team.
As we start thinking about creating an entrepreneurial startup culture, I always look to create small things that can make a huge impact and reinforce our culture. Up next, we’ll experiment with a company chatroom (yes, we don’t have one yet!) to reduce emails and meetings, writing a company manifesto to attract more like-minded entrepreneurial people, and setting up company metrics to objectively measure our results.
Is there anything you do at your startup to create an entrepreneurial startup culture? If so, I’d love to hear them in the comments section below!
Michael Karnjanaprakorn is one of the co-founders of Skillshare. We’re also looking for entrepreneurial folks to join our team.