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The Arc Product-Market Fit Framework
- foundzen 2y agoRudderStack entered a crowded Customer Data Platform market in 2019. It clearly differentiated from other platforms by choosing to not host the customer data on its platform rather choosing warehouse-native and Open Source approach where you store data on your own central warehouse only. It made the solution best-in-class solving obvious data quality and governance issues. The early success in such market is seen clearly in the fact that customers replace their existing product (Customer Data Platform providers, the leading ones) with your product (RudderStack). Is this correct categorization (I feel lines are quite blurred between the categories but nevertheless useful)?
- altdataseller 2y agoI wish they discussed startups that didn’t require a lot of capital or even bootstrapped startups. But of course they’re a VC firm so of course they can’t
- deleted 2y ago[deleted]
- Terretta 2y agoThis sounds a little nutty but if you want to be a bootstrapped Rippling, it's possible. A trick I've found repeatable is to find an enterprise that doesn't shy away from big budgets (where six and preferably seven figure budgets are fine even for unproven vendors, because what's big/existential for you is negligible/experimental for them), and is willing to buy a product from you that requires "integration" (they love to spend money on integration, plus that means it doesn't work on day one!), where the "integration" cost is enough to bootstrap the product AND integration (and your ramen!) at your internal rates. To avoid the bootstrap money going to overhead, to keep the money for product build (engineering instead of paperwork), you need to avoid getting "risk managed" like a mature vendor. Its best for you to be a pilot, or proof of concept, or pet project for a sponsor to show a concept they want the enterprise to do. Pick your customers and product integrations carefully where the work will pay for the enterprise capabilities most likely to win your next sale. Use these big contracts like lilypads to cross the pond to the other side of Geoffry Moore's "chasm" between early adopters and early majoriy.
- omneity 2y ago> find an enterprise that doesn't shy away from big budgets How do you identify such enterprises?
- lelanthran 2y ago> How do you identify such enterprises? Impossible, unless you already have an in with someone high up in the management chain to approve your $1m/3months proposal. Enterprises that don't shy away from big budgets have a constant stream of multiple suitors all thinking the way you are, many of them more experienced with doing this as well.
- extr 2y agoIn case anyone was wondering how to make such connections: attend a top 5 MBA program or have a long history in management consulting, preferably both.
- Terretta 2y agoContrary to sibling replies, it's possible to find. For example, when these mega enterprises realize they're behind, they undertake "Transformations" or strategic initiatives to "Digitize" this or that. Look at enterprises that could use your product, see if any are making noises in the press about landing a Transformation Officer or Digital Officer or similar roles. Or work the other way, search for hiring announcements around such titles, and see if the firms hiring them are ones that need you to pull off that change. Either way, when they land that new leader, then look for hiring announcements for their directs or in their product or technology areas related to what you could help do. If you see they hired from "outside", particularly if they hired from Silicon Valley, the Magnificent 7*, or other "Fast Company" cultures, you may be able to cold contact those new hires (LinkedIn InMail, standard email address formats, etc., there are hustle guides to this step). Do not form mail at this step. You get one tight clean shot to hook them that you might have a genuine way to help them, it's worth a conversation. Make having that conversation cheap, meaning, offer to make time convenient for them, 30 minutes is fine to just talk to see if your idea fits, etc. They don't want a dog and pony show. Be painless for them to check if you can help. (Note: Be completely unlike Oracle, Salesforce, Snowflake, or any other vendor where if your desired sponsor takes a call or email they'll be hounded by dozens of sales people for months, and that's just to start a 9 month procurement cycle. In contrast, your sponsor guesses a small firm could ship by then, and they wouldn't have to waste time ...) If what you have could legitimately help them deliver on the Transformation or Digital initiatives' goals, they may get back to you**, because the last thing they need is to deal with even more enterprise vendors, they need some small fast vendors to help them actually put wins on the board. * https://www.investopedia.com/magnificent-seven-stocks-8402262 https://www.investopedia.com/magnificent-seven-stocks-840226... ** I have been that guy, and I have gotten back to small firms. (I also occasionally reach out to startups here.) Peers at similar roles have gotten back to people too. It is much more common to get introduced through VC-hosted field days, senior exec or board room referrals, and the like, but this path can work with enough hustle.
- blackeyeblitzar 2y agoYou have to also treat write ups like this as mostly marketing for the firm. There was a discussion recently about A16Z (https://news.ycombinator.com/item?id=39901289 https://news.ycombinator.com/item?id=39901289) that made me think about that angle here as well. All these frameworks may have useful information but they are also simplistic. I think this is marketing for their Arc program, which is a selling point for early stage startups to consider Sequoia. In other words, this is about improving their deal flow. It also probably helps filter the flow, since now anyone seeking early stage funding from Sequoia will do the work to try to fit to this framework before wasting anyone’s time, and their pitch will also be easier for Sequoia to understand and evaluate.
- vinay_ys 2y agoA nice framework that's constructed retrospectively. Will it hold true in the future, maybe, maybe not. The thing that makes the most difference are not these broad ontological things, but short time horizon tradeoff equations around talent/skills available in the market, access to early customers and who/what they want, your personal network, your innate temperament/mindset in making day to day decisions.
- _pdp_ 2y agoThere is also luck.
- max_ 2y agoThe word luck has no meaning. Otherwise everything is luck.
- Solvency 2y agowrong. somethings are lucky. most things are unlucky.
- max_ 2y agoThe word luck has no real scientific meanings. Other wise, life on planet earth is a lucky accident, you being born was an accident, you now getting sever autism is mistake, you reading my comment is a lucky accident, You being able to understand what I am reading is just luck. Life/reality does have some randomness but it's really naive to call all Randomness simply luck. What is more accurate to do is to define things in terms of odds (probabilities). And call something as having higher probability or a lower probability. Otherwise, everything does have an element luck/randomness.
- safeimp 2y agoI think where luck should be considered is possibly around timing but otherwise luck will only get you so far.
- klabb3 2y agoThis rings true, but understates just how important timing can be. A difference of just a couple of years can be enormous.
- tootie 2y agoI'd be pretty shy about sharing wisdom like this after betting so heavily on FTX.
- SCUSKU 2y agoObviously coming from Sequoia there won't be an bootstrapped approach, but I'd love to see one for that. For bootstrappers, the approach I've heard of is simply just nicheing down to find a segment of the market that is big enough to support you, but small enough to not be worth it to bigger players.
- geoffreypoirier 2y agoWell put! Nice framing.
- user_7832 2y ago> For bootstrappers, the approach I've heard of is simply just nicheing down to find a segment of the market that is big enough to support you, but small enough to not be worth it to bigger players. Thank you, as someone hoping to bootstrap myself this is makes sense. Any idea how to make the niche smaller? The broader market I'm thinking of is huge (likely billions of customers), I suppose I could charge more to narrow it down but that has other risks.
- DelaneyM 2y agoPick one single customer and fanatically meet their individual needs. Then add a second. Repeat until you’re no longer needing to tweak your system to delight a new customer. At that point you need sales and you have a business! :)
- jamesblonde 2y agoFor our company we are in 2 phases. In the cloud, it's 'hair on fire'. MLOps is a hot space. For on-premises, MLOps is basically download MLFlow and Kubeflow and you think you're sorted. So it's the 'hard fact' segment.
- richardw 2y agoNot on premises who are regulated and might have enterprise requirements. If you need eg role based access control you can’t use on prem MLFlow etc. So you could niche down to customers who don’t know this yet. Smaller banks, insurers etc. Edit: we went through this. Started putzing around with open source things on prem on Openshift. Ended up on Databricks for a variety of reasons. The impact on the business to be wiring up lots of new widgets, maintaining them, training, ability to switch to new components when required. Lean team, so turn Databricks on and secure it properly, exclude PI where possible, sort out ETL and CICD etc, profit. Delegate MLOps stack innovation to the vendor and focus on our own job.
- deleted 2y ago[deleted]
- jamesblonde 2y agoThat's a typical journey we see for on-premises prospects.
- phillipcarter 2y agoYep, this journey is exactly the kind of thing I run into when I get prospects who want our product (observability) to be on-prem. What they actually want is assurances around data storage, retention, and controls; and a "throat to choke" to cover their asses in case something goes wrong. At least in this domain, very few people who need Observability actually need things to be on-prem as well.
- curo 2y agoI'm curious how education or entertainment companies fit into this framework, or how they think about PMF in general. Was Duolingo targeting customers who accepted the "hard fact" that passive audio was the only way to learn a language? Was MasterClass a "future vision" because people didn't believe celebrities would spend their time teaching? Or is it that we NEED education and entertainment, so these two providers just differentiated from a crowded market.
- lukeahn 2y agoYeah, to me, Duolingo seems to be Hard Fact. But MasterClass might be also Hard Fact. MasterClass is not a totally different education service compared to the existing incumbents. Online university could be MasterClass.
- klabb3 2y agoAlternatively Duolingo sells a casual memory game that differentiate by giving the illusion of productivity. And Masterclass sells attention and status to a class of people who are already attention-oriented by stroking their egos. I’m not saying this hot take is necessarily true, but the market isn’t always categorized by what we intuitively think. And realizing that can sometimes give you a massive benefit, simply by applying existing and effective techniques (in these cases gamification and people-oriented success storytelling, respectively) from a domain your competitors don't understand or care about.
- spxneo 2y agoMy perspective changed from thinking PMF was a lottery when in reality its just sales/marketing grinding until something works. The reason I used to think this is like other technically orientated founders. If I build for a market that doesn't exist then you are playing lotto. It's not even good odds, you are better off playing 0dte spx coin flip. What you fear you build for and if all you have are unknowns then you are going to simply end up building everything lose differentiation and your potential customers even if they find you will walk Despite classics like the SBF article that was taken down, this framework is quite good but the best thing to do as bootstrappers is to focus on generating net positive cashflow as soon as possible not running a PMF search engine which requires lot of minds and capital injection.
- threeseed 2y agoIt is a lottery though. My partner started a business and literally from her first ad she was inundated with customers. Now it's a $10m/year bootstrapped business. I've done exactly the same thing and had 0 customers. If you are falling into the Hard Fact / Future Vision categories it can very hard to get customers because no one is ever looking for your product.
- spxneo 2y agothat just means she had the PMF to begin with if you done the same and have 0 customers that means you did something incorrectly. it is IMPOSSIBLE to do the same thing that works and net 0 customers.
- nivertech 2y agoWrong, even if both agents are identical, and they're operating in the same environment, each run of the simulation will be slightly different, i.e. the process is stochastic (non-deterministic). In reality the agents are not identical (e.g. different skillsets, or attractiveness to clients), and the environments are different (e.g. different professional or social networks). And, as another commenter pointed out, the time when agents are starting is also a factor, but my point is that even if they start at the same time the result might be different. Lastly, there is a butterfly effect - that small changes in the initial conditions may result in vastly different outcomes.
- ekianjo 2y agoI think it is missing one category. VR for example may be on the future vision side but may end up only be a market niche.
- pedalpete 2y agoI feel like there is quite a bit of overlap in hard-fact and future vision, and I'm not quite sure where our company would fit. We're in the neurotech/sleeptech space, and while the majority of the market is selling "fall asleep faster", "sleep more", we're improving the efficiency of deep sleep with the health benefits. This is a hard-fact - people are resolved to poor sleep quality, or no "real" solutions to improving deep sleep quality - yes, sleep hygiene is important, just like brushing your teeth is important, but that isn't the answer to a poor diet. So customers are resolved to the "I'm just tired, that's the way it is" mentality or "I'll track my sleep, and now I know why I'm tired". At the same time, they don't have the context of "there is a way to do this", which is why they were resolved to accept the status quo in the "hard-fact" Does anyone else feel they are falling between the hard-fact and future vision? Is anyone falling between Hair on Fire and Hard Fact? I feel this is possible too.
- brlewis 2y agoDeep sleep is not improved by consistent sleep/wake times, and adjustments to noise/temperature/light conditions? If not, which sleep phases are? (I don't have an answer to the overlap question; I'm squarely in Hard Fact.)
- Aurornis 2y ago> Deep sleep is not improved by consistent sleep/wake times, and adjustments to noise/temperature/light conditions? Deep sleep definitely benefits from consistent sleep/wake times. Your body tries to play catch up if you break from your normal rhythm but it’s not entirely effective. I think the parent comment might be exaggerating the futility of sleep hygiene because they have a product to sell. :) Proper sleep timing, duration, and sleep hygiene are inarguably valuable for proper sleep architecture.
- pedalpete 2y agoI'm not saying sleep hygiene is futile, I specifically say it is important, and sleep hygiene improves the potential for deep sleep, it does not directly improve deep sleep.
- tempusalaria 2y agoI liked this analysis a lot. However, OpenAI is a bad example of the future vision paradigm. In fact it fits 1/6 of the characteristics they identify in this paradigm. A better example would be something like Tesla. I would say OpenAIs backing of the GPT model family in itsself is a better example of the future paradigm than anything to do with OpenAIs founding or non profit status that sequoia discuss. Going all in on GPT gave them a big headstart (although google should have been fighting much earlier if they had listened to internal researchers).
- hatsix 2y agoiPhone and Vision Pro are also not future vision. Both enter a market at the high end, with established competitors. BlackBerry and Nokia had smart phones that were functionally equivalent, but they were marketed towards business users and worked best with corporate integration. Apple delivered a phone that focused on personal use. Vision Pro is entering market where the competitors are focused solely on gaming or augmented work (hololens) with a product that doesn't do either, yet... but everyone is starry-eyed about what it might enable, some day. 1980s Apple, otoh, fully in the nose.
- spxneo 2y agonot sure if Tesla is really the future of EV they are in serious trouble
- disgruntledphd2 2y agoThey definitely are, but they took EVs from a dream to a product that every car maker is looking at. Regardless of how well I think they've executed against the vision, I think that they are a good example.
- usernamed7 2y agoin a way, this framework represents how far off the reservation you're going. You're either building in the known, challenging existing assumptions, or creating new landscape. for apple: building in the known: Mail Challenging existing assumptions: airpods new landscape: iphone
- m3kw9 2y agoPMF to someone who never experienced a true PMF is grossly simplifying a product. There is so much execution and luck in every step to get there even if you have the right idea
- andreygrehov 2y agoIs there a framework for finding a product?
- vaylian 2y agoI'm not an expert in product development, but I imagine it goes like this: 1) Identify a problem 2) Brainstorm and sketch out solutions 3) Look at the currently available technology to see if a solution can be constructed 4a) If the previous step did not yield any promising path to a product, then give up 4b) Else: Prototype, test and demo a lot until you have a working product
- burntalmonds 2y agoFor half a second I thought we were getting an update on Arc.
- west0n 2y agoThis analysis is very insightful.
- slimsag 2y agono malice intended, but I will take my cloud provider's managed database service.. for which we get support, SOC2 compliance, years of proven stability, no major approval needed by my organization, and budget already approved - rather than jump on the latest 'kubernetes is eating the world' fad.
- mehulashah 2y agoThis is a cute categorization. The stories they tell are charming and reinforce the categorization. But, I've never found things to be so cut an dry. For example, a lot of the work we did in AWS often fell into the hair on fire category, and the products that showed future vision e.g. AWS Glue, Aurora, DynamoDB were the ones that rose above the noise. It mostly boils down to this: delight customers and iterate as fast as you can.
- rmbyrro 2y ago> delight customers and iterate as fast as you can One thing is the product. Another thing is your messaging. Yet another thing is what goes in people's minds when they interact with your product and your messaging. Fourth is how you reason about the complex interactions between the three prior factors. This categorization helps entrepreneurs with #4. I found it very helpful.
- aleem 2y ago> It mostly boils down to this: delight customers and iterate as fast as you can. This is maybe the second phase after AWS found a fit and built a consumer base? Once I am in the housing market, I have a need for everything (mortgage, building contractor, construction materials, designer, hardware and accessories, upholstery, decor, etc). My entry to AWS started with EC2 in the very early days because it of its commodity nature (any size and shape, for however long, with per-minute billing) and instant availability. The elastic nature solved scale. A lot of people didn't move to RDS until later but it was inevitable. Everything else followed on from there, cross-sells and up-sells for reliability and convenience were always a click away for captive consumers who were already onboarded.
- deleted 2y ago[deleted]
- barrenko 2y agoThere is currently a generation of founders who think that talking about PMF somehow gets you closer to PMF. Talking about it, having a great following online, being a decent marketer - does not mean zilch. Knowing everything about PMF probably moves you single digit percentage-wise toward it. It's like being a vampire, avoiding garlic (hell, even drinking blood) doesn't make you one.
- graycat 2y agoSequoia's essay has three categories: For each of FedEx, Google, Duck Duck Go, Facebook, Tic Toc, Amazon, AWS (Amazon Web Services), Windows, which category does it fit?
- nomad-nigiri 2y agoWho is this framework useful for?