#2: Is your startup driven by funding or the market?
How important is product-market fit in early-stage startups? Turns out - very!
After witnessing WeWork's story on Apple TV’s WeCrashed, I couldn’t help but think about this question:
Is your startup funding-driven or market-driven? 🚀
While WeWork found its product-market fit first and then approached funding, it later went ballistic in its funding rounds despite heavy losses and an unsustainable long-term business model.
Thinking of the distinction between the two scenarios of finding product-market fit, further made me question:
What's the best way to find product-market fit for sustainable growth?
I believe that there are two lens through which founders can think about 'product-market' fit:
Lens 1: You BELIEVE there is a market and sell to investors that customers really want your product. You then get funded to validate this. (Also called manufactured product-market fit)
Lens 2: Customers LOVE what you've built so much that they spread the word in their circles for them to use it. You grow organically not solely on funding pillars, but on organic marketing and product merit. (Let's call it organic product-market fit?)
Lens 1 is a very risky path to head towards.
Why?
The issue with getting funded too fast and too much is that you are setting your company up for when you've artificially created the product-market fit and your seemingly uneconomic business model comes to light in the future when it balloons up and you are backed into a corner.
For any startup to have sustainable long-term growth, your customers need to figure out if your business model is viable (not a funding round).
Bringing us to Lens 2.
What happens when you go down Lens 2 (organic growth)?
✅ You actually stop and focus on what your customers truly want - you naturally gravitate towards your ideal market.
✅ The ideal customer gravitates towards your mothership, and gets more in the future - organic growth * 3000.
Early-stage founders thus should focus on organic growth as a long-term business strategy, and let customers drive your scale.
Can you think of startups that went the first route and the funding bubble burst eventually? Let's discuss.