How Can Hardware Startups Find and Evaluate Their Product-Market-Fit (PMF)?
The demand for most hardware startups isn’t there
Many startups think they already in the home straight when they have successfully completed a crowdfunding campaign a pool of keen early adopters eager to get their hands on their new toy. The numbers say otherwise, in fact there is more than likely that the aforementioned startup will fail. But why is this? In a recent study from CB Insights, researchers analyzed the reason for failure of 382 hardware startups, and found that the number one reason they fail is a lack of demand for their products. 42% of the founders of the polled startups, stated that this lack of demand as what stopped them from succeeding.
Take the case of Novelsys, the Singaporean startup behind Ampere, a wireless charging sleeve for mobile phones. The Novelsys team had a very successful Kickstarter campaign and managed to raise their funding goal of $60,000 within 24 hours, finishing the campaign with 545 people pledging US$87,125. However, they failed to build a scalable business with which to retail competitively as a hardware company and the project became a failure. Encouraged by the backing of the support of early adopters on Kickstarter, they thought that they had a product that people wanted, but they found it pretty quickly that they didn’t. In an article for Tech in Asia, the teams founder, Kenneth Lou, gave a succinct account for their lack of success, “we didn’t find product-market-fit”.
Novelsys, had made a common mistake. The confused crowdfunding success with having actual consumer demand. They had developed a product that while they believed there was a market for, didn’t actually solve real and existing consumer problems. They had spent too much time on development and not enough time on market research and analysis.
The key take away is that new startups really need to take the time to assess product-market-fit (PMF) before embarking on the long and arduous journey of bringing a product to market.
What is PMF?
Tomes have been written on PMF, but few put it more clearly than AlphaLab Executive Director, Jim Jen: “Early product-market fit occurs when you have a group of customers who are actively using your product and are getting great value from using it. Simply speaking, you have a product that your customers love”.
Or maybe it’s easier to define what is the experience when a startup doesn’t have PMF, as Marc Andreesen of Andreesen Horrowitz, does in this post: “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.”
From these two quotes from respected business leaders, it’s clear when looking at their emotive language that PMF isn’t an exact science. It’s about creating love, value and getting people to speak about you. It’s a feeling rather than a number and a culmination of your product, marketing, branding, user experience ruminating with consumers in a way that gives a perception of true value. Consumers like your product so much, that they are willing to sell for you. Although there is no single precise method, there are guidelines and best practices that you can use to find your PMF.
In the rest of this article, we take a look of what industry experts recommend as the key methods for finding and evaluating PMF.
Defining your PMF
According to Germ.io’s Vikram Bhaskaran, the first thing when looking for PMF is to define what it means for your specific company, case and consumers. Product-market-fit is not a one-size-fits-all definition and should be defined according to your project. Bhaskaran advises start-ups to keep their PMF objectives “quantitative and specific”. Whatever metric you use for your PMF, you should have a degree of periodicity to it (eg. something which happens on daily, weekly or monthly basis) while at the same time accounting for healthy growth. He gives the example of a PMF objectives as “Get 1000 users across 2 industry verticals who use our app 3+ times every day; and grow this by 25% month on month”.
Author of the Lean Canvas, Ash Maurya believes that the first stage of the finding the product market fit, is to first find the problem-solution fit. In this stage you discover a valid solution for a problem worth solving for a sizable population. Meaning, whatever you propose, must be a real problem for. You need to check if your hypothesized problem is real and will customers actually pay for your solution. Maurya writes in depth and detail on this and the Lean Canvas method and you can get an excellent synopsis in this presentation.
Understanding your Customers Needs and Creating a Value Hypothesis
One way of failure-proofing your PMF is speaking to your customers and doing proper customer development. Eric Jorgensen of Zaarly, provides and excellent guide to customer development in this blog post. You need to be doing interviews and going out to meet and spend time with your key demographics. Attend trade-shows and events and try to get an understanding of what your industry needs.
After enough research and customer development, you should be able to create a value hypothesis for your project. Andy Rachcleff, CEO of Wealthfront gave a strong definition of this in an article for Fast Company:
“A value hypothesis is an attempt to articulate the key assumption that underlies why a customer is likely to use your product. Identifying a compelling value hypothesis is what I call finding product/market fit. A value hypothesis addresses both the features and business model required to entice a customer to buy your product”
Through this process you are trying to narrow your feature set to one feature that will really connect and create value with your consumers. This should relate to major pain points discovered in your customer development. Again, you are looking for a unique value proposition that sets you apart from the pack.
Measuring Your PMF
One simple way of measuring PMF is through using simple surveys. A good example of a survey for evaluating PMF can be found here. The basic rule of surveying, is that you need at least 100 responses if you want to get anything close to significance.
For Hardware startups, the MVP (Minimum Viable Product) can be used as an experiment to prove or disprove your value hypothesis. Once you have your MVP, you can start to get feedback and do proper focus-group led research. You may find you need to make a pivot in your direction at this stage.
If you feel that you have really nailed down your PMF, it’s time to start building your prototype and moving towards mass production. This is where TechDesign steps in. We have a large network of carefully screened manufacturers and design houses, and are able to match you with the right one for your project. TechDesign offers NDA and Escrow payment protection, meaning you don’t have to worry about having your money or ideas stolen.