The idea of product/ market fit is elegantly simple — so why is it so hard in practice?
Shipamax found PMF with an automation tool for shipping documents, but only after pivoting because its original target market just wasn’t big enough to build a hugely valuable VC business.
So how did they do it?
“It comes back to being really brutal about whether you are solving a tremendous ROI that’s really easy to articulate for these businesses. Because you need to be able to sell what you’re doing at scale and convince all these different stakeholders that this is the priority project they want to do. Being really very brutal about whether that is true or not will save startups a lot of time”
This got me thinking: it’s an exercise of killing your darlings. A bit like writing. When you cut away everything extraneous to your reader or market, you can judge whether what’s left is genuinely valuable and original. It’s about seeing clearly.
In the words of co-founder Jenna Brown:
“We separated out what was unique to us and that’s where we had this underlying tech which we had just built to solve something broader.”
There’s a lot of good stuff in here about this journey to PMF and the need to be brutal — read on for the full chat.
Finding your way
We’ve definitely had a couple of pivots since we started. My cofounder and I used to work in a commodity trading company and when you trade physical commodities, you have to literally move them. We believed that there was space in the market to build a marketplace for that, so ventured in – however we saw some of the assumptions we had made were not correct.
Along the way, we had built a bunch of technology – so we then started selling that technology. And that was growing okay but if you looked at just selling software to that segment of the marker, it was just not big enough for a VC business. So we needed to work out the core of what we already were selling and see if that could be expanded out. And that was when we focused in on data extraction, which handed itself nicely to a much bigger segment of the market.
I think we could have actually pivoted earlier, if we were more honest with ourselves about the size of the initial market.
Identifying powerful demand
Sometimes you may look at an industry and think “this is kind of insane how they do it” but unless the people inside those companies are incentivised to change, you’re probably not going to get the growth you want. So there was not only a market size issue, but also a proposition/ value issue which impacted sales velocity.
When we sell our technology into the new market, the ROI is crystal clear and that segment is used to buying tech — so our sales cycles are faster, they’re much more repeatable and the deal sizes are much bigger.
I think the strongest signal is just the capacity at which they actually purchase from you.
It’s a little bit of trial and error, but there may be some quick indicators. For example, when I started speaking to people in the container industry to discuss their problems, many had already identified and even quantified it and or were pulling together that business case and trying to solve it with something else.
It was an active pain they admitted they wanted to solve.
I think you do have to be quite brutal on whether that’s the case or not, because we certainly still have a lot of people in that first segment who are interested in changing, but they move at a much slower pace. As one our investors always says: “go to the fastest running water.”
The biggest challenge is finding people who are a great talent but also fit the culture. Generally speaking, because we work in such a complex industry, the kind of talent we’re trying to recruit is naturally excited by all the messiness and noise and the realness of our industry. To me personally, when I think of working at Facebook, Google, Snapchat, etc, I personally just think those products are really boring – it’s not ‘real world’.
If you think about the problems that data scientists will be working with here, it’s real. It’s not some random AI that might have a business use case in 15 years — you can see the impact on customers right now, today. And the data that we have access to is novel.
Making enterprise sales work
Having people who understand the ins and outs of an enterprise sale is harder than selling to an SMB. We recently recruited a top sales advisor and are doing a lot of training, for example on MEDDPICC — a qualification criteria to list out all the things that you need to really understand in a deal to across the line.
I’m definitely a big believer that process is everything. There’s a certain amount of things you have to get done. So we’re looking for sales reps who are not only fantastic at driving that urgency and building rapport but they know how to really own their process. When you go and sell to a global CIO, you need to follow a tried and tested process, not rely on your rapport.
Difficult decisions that make life easier
After we got Product/Market fit, honestly life got so much better. Because I think before that you’re in this constant flux and it does get quite tiring. Again, it comes back to being really brutal about whether you are solving a tremendous ROI that’s really easy to articulate for these businesses. Because you need to be able to sell what you’re doing at scale and convince all these different stakeholders that this is the priority project that they want to do. Being really very brutal about whether that is true or not will save startups a lot of time in the pre-PMF phase.
I think for us, it was that realisation that the numbers were not going to add up. We had seen the numbers we were on, we knew the metrics we needed for a Series A and we looked at the growth rate and asked: is what I need to achieve in the time frame I have actually possible? And then how do you get it to scale up past a hundred million beyond? I had an open talk with our VCs about it and we kind of said actually, maybe it’s not possible with this proposition and market, so we need to look out how we make this bigger.
I think it was actually a conversation with Crane(VC) that made me think about that. And actually I do remember at the time I had a similar conversation with Simon who ended up leading our Series A, because I’d been thinking whether we should sell to a few different industries, and he very clearly articulated that we should be able to achieve $100m ARRfrom one use case to be really interesting.
And then within those parameters, we just kind of thought about, looking at our core technology, which proposition and market could that be true and and then just had to make a bet and go for it.
We went and looked at all the sales that we had done as a business to identify the ones that were and the fastest. We asked ourselves how these customers would describe what we were doing, the value proposition. And then a couple of things became clear. Whenever we had sold the tech as an API, we never lost a deal because it was just better than anything else on the market.
We separated out what was unique to us and that’s where we had a bit of luck that we had developed this underlying tech which we were almost not valuing as much because we had just built it to solve something broader we were trying to solve. And actually that part in itself was quite unique.
Maybe the piece we didn’t see at the start is how we had built this underlying tech to really solve a problem that we had getting data into a system that we were trying to build. And I guess if you look at many good technologies they were built to solve a problem people have themselves. We just hadn’t really thought of it in that way. In the same way, if you look at how slack was just an internal tool they built to solve their internal comms problems, and it turns out that was pretty valuable.
How the tech world is changing
When I started in tech, it felt like the engineers and the product people were Kings and treated sales like, “Oh, it’s just easy, right? And they just sell our incredible product.” And I really, really can’t overstate the value of having a fantastic sales team.
Whilst you do need a fantastic engineering/product team, it’s really both sales & product working together. And what frustrates me is when a lot of tech founders are told, “oh, you can just learn sales” – but you wouldn’t expect a non-technical founder to “just learn” engineering – to the level you’d want to build a top tier product. So why is sales any different?
I don’t feel like we give sales enough respect as a profession, when it’s insanely hard to get these really great deals done over and over. I hope the mentality continues to evolve to think more highly of sales and sales teams – I do think this has already changed quite a bit.