The Arc Product-Market Fit Framework

It 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.

I spoke with the ceo of a top ten AI company on Friday. They are definitely playing the PMF lottery and there is no alternative to this. They have lots of very smart people and tons of conversations with customers. But nobody has any idea what will end up working.

Did you study business?

It's no wonder so many fail when most people don't bother to study business strategy, entrepreneurship and marketing first.

Its not a lottery, most people just arent intelligent enough to anticipate new market needs. They have no business trying to innovate at that level, but are unaware of their inadequacies. Some people do have the raw intellectual and societal horsepower to bring new paradigms to life.

How do you generate positive cashflow if your product doesn't fit a need that the market has?

It’s a lottery, but you control the number of tickets you play.

Far too many companies stick with one, failing ticket

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.

This has little to do with whether you are VC backed or bootstrapped.

The amount of effort to sustain yourself is going to be almost the same regardless of which category you are in. Either you have a category that is popular but will attract dozens of competitors no matter how small your niche is or you have a product that requires effort to market.

These days with so many no/low-code tools getting a product into market has never been easier. And that's both a positive and negative for bootstrappers.

While I'm not convinced it is VC vs. bootstrapped that should differentiates frameworks, you should read this book, it is simply the closest thing to a step by step user guide to finding PMF as I've seen, and it worked for me: https://www.amazon.com/Four-Steps-Epiphany-Steve-Blank/dp/09...

it doesn’t matter imo.

you just need to solve a problem. you need to go talk to people and help them.

if someone isn’t using your product that you’re building to solve their problem and they are complaining about said problem, it’s because nobody else has tried selling to them.

obviously over simplified but I think it’s true.

Well put! Nice framing.

Deep 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.)

Yeah I’m not sure where mine fits either. I have a video editor that removes pauses, saving lots of editing time for (certain kinds of) videos/podcasts. I would say I hear from 3 kinds of customers:

- They know about tools like mine and have compared a few

- They have had this problem for a while, decided to Google it one day, and found my Recut app

- They stumbled on it randomly via social media and say things like “where has this been all my life”

I would guess that some people from all 3 groups would describe it as Hair on Fire, but they have different levels of awareness of solutions. Maybe they just live with it as a Hard Fact, maybe they live with it because they know of solutions but don’t like them (of the flavor “I want to automate this but I don’t want to lose all creative control to AI”).

It’s tough to find good ways to get in front of the people who aren’t looking! It feels like that way lies a lot of broad/expensive advertising.

I feel like there is quite a bit of overlap in hard-fact and future vision

Not to mention revisionism.

Customers must believe that your product represents a whole new paradigm—often with its own ecosystem. (The iPhone wasn’t just a device; its App Store was a new way of interfacing with the internet.

"Its App Store" didn't come until a few years later. It was not a part of the iPhone vision, certainly not at launch.

This is a hard-fact - people are resolved to poor sleep quality, or no "real" solutions to improving deep sleep quality

I glanced at your website, and there’s already a product on the market that does the same thing (headband using EEG techniques to provide auditory stimulation based on the same research your site points out): The Philips Smart Sleep https://www.usa.philips.com/c-e/smartsleep/deep-sleep-headba...

So in your case, I’m not sure it’s accurate to say there aren’t any “real” solutions when a major market player has already released a product in the exact space. I think it’s more likely that wearing a headband every night isn’t an attractive proposition for many. That’s an entirely different problem to solve.

I'm curious to see how that actually compares in effectiveness to wearing headband-type speakers and listening to sleep brainwave stimulation music (which I tried).

Looked at your product. If your marketing copy reflects reality, your product is Sci-Fi.

"The next phase of research is measuring the effect of stimulation on removal of beta-amyloids, related to Alzheimer’s prevention, concussion & TBI, and more. We’re actively speaking to researchers interested in examining the impact on insulin response for improved outcomes in people with type 2 diabetes, as well as athletic recovery and this is just the beginning."

But if you believed that this would actually have a significant effect, I feel like that'd be way up top, not an aside in a blog post. Which means you're a "Hard Fact" ("sleep is sleep") that isn't marketable, and you're reaching beyond your grasp to try to become "Future Vision."

This 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.

You 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) 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.

The word luck has no meaning. Otherwise everything is luck.

I think where luck should be considered is possibly around timing but otherwise luck will only get you so far.

I'd be pretty shy about sharing wisdom like this after betting so heavily on FTX.

no 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.

not sure if Tesla is really the future of EV they are in serious trouble

iPhone 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.

Not 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.

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.

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.

Yeah, 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.

Alternatively 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.

I'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