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Todd Jackson

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2024-04-11

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2024-04-11

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1. “And he's reading up about CLMs, and he's like, Oh, you know, we do that, and we do, yeah, and so he replies to the email, yes, we are a CLM. And the customer gets him on the phone. And the customer says, oh, you know, I'm in the market for a CLM. I'm looking at like 10 or 12 different vendors, but you guys look pretty cool because there's, you know, some automation, some AI stuff going on. Like, you know, can I check this out? And Jason's like, of course. So he and his co-founder take the train from San Francisco down to San Jose. And on the train, Jason is telling his co-fair Kai, hey, I need you to code this up right now to make it look like what this customer is expecting. And they get to the meeting and they do the demo. And the customer has like no idea that they just made this demo on the train and they're a very small company. And they win the contract against these 10 or 12 other established spaces because Ironclouds, it's more modern, it's automated.”

   2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source

2. “And this is like 2024, people are like, oh, AI legal assistant. Yeah, that's awesome. But in 2014, people were like, what? And he found it really hard to sell. No one was looking for an AI legal assistant. And so he told us this story. You know, there was an email address on the Ironclad homepage. Hello at ironclad.com. This is in 2015. And like he doesn't get very much email. But like Jason's checking the email. And one day he gets this like one-line email and he almost archives it because he doesn't know who it's from. And it's one line. But he sees that it's from like a person at a publicly traded company. And so he's like, oh, maybe there's something here. And the one line email is just, are you a CLM? He was like, what is a CLM? And he's like, he googles for it. A CLM is a contract lifecycle management platform.”

   2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source

3. “Let me do another example Okay, a really different example is a company called Ironclad. Ironclad, you know, it's a legal tech company. They founded in 2015. Jason Baymeg is the founder. AI powered contract management software. So this was interesting because Jason started out calling this an AI legal assistant.”

   2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source

4. “I think I've figured out a model, and the model stayed the same until they ended up selling to Google. And so they did these other things too. They started focusing on demand channels. They got a couple SDRs who were prospecting. I think they did some partner marketing with AWS Redshift. They did these look and tell customer events in San Francisco where they got looker customers together to talk about sort of like what they were doing in Looker and how they built the product. But really it was like the groundwork was set at level one and then they sort of like moved really quickly through level.”

   2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source

5. “And they see the dashboards and they're like, oh my God, like, wow, I didn't realize these insights, right? So Lloyd kind of understood like this is Looker is not a product you could sell with Figma mockups, right? And so what happened was Lloyd would go into these customers, spend 20, 30, 40 hours, right? Like before they were even a customer modeling their data, teaching them how to use it, showing more people within the organization like the power of the data and the dashboards. And later they called this their forward deploy process, right? Like this is how they figured out sales. And so it actually took them kind of a long time in level one to get this right. But then they were able to do this repeatedly. And so they went from five to 25 like fairly quickly. And it's like a lot of amazing, like 75% close rate because they were only selling customers who are already using it. There was like zero churn. And Lloyd explains like once he got to 20 customers, he's like, I know, I know I'm onto something.”

   2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source

6. “Yeah, and the thing that's really, I think, the hallmark of level two is you've got a product that like a handful of people like, right? It's satisfying a critical need for them. Now you've got to open the demand floodgates, right? So that we can get to 25 customers and beyond. And different companies do this in very different ways, right? It's much easier said than done. Looker is an example. So Looker is a first round company founded in 2012 by Lloyd Tab. You know, they do business intelligence. Looker actually. Looker is interesting because they spent actually kind of a long time at level one, but then flew through level two. And the reason is because they Lloyd, the founder, the first five customers of Looker, he was basically going in and doing consulting for them. And the reason is because of the nature of the product. Like Looker, people don't get Looker until they see their own data in it, right? And their data is mob.”

   2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source

7. “Yeah, exactly. There's kind of some wide bars around these metrics. It's just representative of generally the stage of five to 25 customers.”

   2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source

8. “Level, you're just starting to think about retention. Like you've been around for a year, so you've got renewals, right? And you want those renewals renewing. Maybe something like 10%, 20% regretted churn is okay. You don't want to be higher than that. And you want your NRR to be at least 100%. And then things like gross margin and burn multiple, they're still kind of like not the focus. Those are like the classic efficiency metrics. They're not the focus right now. But we would say you want your gross margin to be like not worse than 50% and you'd want your burn multiple to be not worse than 5x. Your burn multiple, by the way, is just how much you burn in a current period versus how much new ARR comes in. So if you burn $5 million and you take in one, then you got to burn multiple of five. And you don't want to be worse than that at this stage.”

   2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source

9. “VCs or from your friends. You're maybe investing in cold outreach and getting that to sort of tuned and humming. You might be investing in content. You might be doing community events. But the whole idea is you're trying to scale sort of the demand source. It's still not easy. Like, you know, like a benchmark we would say is that your sales conversion without a warm intro is still probably like 10%, something like that. Like first call to close one is like around 10%. You get higher than that. That's great. But that's sort of benchmark for this level. You're in kind of the like anywhere from like the 500k to 5 million ARR zone. That's sort of like a hallmark of level two. And you're actually starting to think about like efficiency metrics and sales metrics. Like you might start starting to be thinking about magic number, which is new ARR that you take in in a period divided by the CAC you spend in that period. So something in like the 0.5 to 0.75 range, you want to get higher eventually, but like that's like pretty reasonable for this.”

   2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source

10. “Yeah, so level two is developing product market fit. And your job at level two is now you've got to go from five satisfied customers to 25 satisfied customers. And so now you've got to start thinking about demand in addition to satisfaction. Because it is very hard to just grind your way all the way to 25 customers with sheer willpower. You can do that to like five, maybe 10. And we see some founders who just have phenomenal willpower and grit and grind their way to five or ten customers to get to 25 and to get beyond 25, like the product has to be doing a lot of the heavy lifting for you. And so that is kind of the essence of this level. So if you're at this level, you probably, okay, now you're like Cedar Series A style company. Maybe you've got up to 20 people at the company and you're starting to work on this demand source where you have the early signs of a scalable channel and it's not just warm intros like from your”

    2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source

11. “Away how painful would that be if a competitor came along that charged half as much as us? Would you switch to them? And he's really trying to get to the essence of like, is persona critical for you or am I in the friend zone? And I just think that's like a really great way of thinking about this.”

    2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source

12. “The last thing that I'd add at level one is there's this founder from a company called Persona. His name is Rick Song. He's like super awesome. You know, Persona is a first-round company. They do identity verification. And Rick's analogy, I just love it for level one, is you don't want to get friend zoned by your customers. Like where your customers like you, but they don't love you and they don't need you, right? And he was super paranoid about this in the early days of Persona. And his technique for doing this, which I really like is super simple, was he would just, he was very close with like his first five or ten customers. And he would go to them and sit them down one-on-one and say, I need your help. Like, it is very important to me that this company succeeds and does not fail. So I don't want you to be nice to me. I want you to tell me, is persona like a necessity for your company? If we went.”

    2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source

13. “I tend to gravitate towards the like, I want to sell it before I build it because I really want the signal from customers. And I want that to sort of be the guide and the oxygen that drives what I'm building. I find that very motivating. I also find it kind of like easier, honestly, rather than guessing like, oh, I'm going to write 50,000 lines of code and then see if somebody wants this thing. I think it's better to sort of like talk to a bunch of customers, know that like, hey, if I had this thing, if I could build this thing, I know it would sell. I know these people want this thing. So I tend to approach it from that point of view. And therefore, I focus on the persona and the problem and the promise, right? What is the promise that is really going to click for that buyer, for that persona? And then it's the product's job is to satisfy those first three Ps, really.”

    2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source

14. “I think different founders approach this differently. And I've seen a lot of founders who are build first and then sell. And I've seen a lot of founders who are sell first and then build. And they can both work, right?”

    2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source

15. “The app to like connect to your bank accounts and had solved kind of like all the nitty gritty issues with that. And then they found that their friends wanted to license it from them. So Zach had a friend at Venmo who wanted to license this. And they got, you know, they got Robinhood at some point. They got Coinbase at some point. So that's like an example of like they actually kept a lot of the code that they had written. They kept the product, but they completely changed the other three Psyche who have a problem with budgeting, we are going to solve for developers at fintech companies who have a problem connecting to bank accounts. And it was like a total flip of the four P's. But that's like why I really like this framework because I think it really helps founders think in a structured way about this.”

    2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source

16. “Like people didn't love what he was doing. He kept the persona, but he changed the problem that he was solving and the promise he was delivering through the product. And you see this is like we do a whole section on pivots and like when to pivot and how to pivot. And I think this is actually the best framework for this is the four P's. Lattice changed, kept the first one, but changed the others. Banta changed all four, right? There are other products like plaid that actually sort of kept elements of the product they were doing. So this, I don't know if you know the story of Plaid, but Zach Parrott was building, Plaid started out not as like a API for bank accounts. It started out as a consumer budgeting app. Like it was a consumer app. And it just, you know, it was supposed to help you save money and budget and stuff. And like, it just wasn't that popular. And founders were kind of frustrated, but they had built this part of the product that enabled.”

    2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source

17. “It's the OKR thing just doesn't seem to be a big deal for them. But they've got other problems that I could look at solving. And the interesting thing was that timing, it was kind of like mid-2010s. Performance management had like started to come back in favor. It was like this pendulum. There was a period of time where performance management was really important. And then all these companies were like, we're not doing this anymore. And then the pendulum kind of swung back. And around 2015, 2016 was that time. And so Jack literally showed them figma mockups. Like there was no product. Right. But he's like, what if I could solve performance management for you in a way that is much more modern and much more employee friendly and manager friendly and the whole thing's just going to work better? And the response was like off the charts. And people wanted this thing. And I believe he sold his first five or ten customers like with Figma mockups, right? Like before he had built anything, really. And so that, I think, is an interesting example, right? Of like he was sort of stuck in this zone.”

    2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source

18. “And then the next quarter would come around, and they were like, I didn't go that well last time. I don't know. Plays don't seem to like it. I don't know. And then the quarter after that, they were like, no, I was like, we're not buying this. We're not using this, right? And so Jack pulled off the pivot, right, to people management. And the way that he did it was he actually kept the persona, right? And so this gets into the ideas of the four piece. And I'll talk about this a little bit more. The four P's is our version of the four P's. You've got the persona, the problem, the promise, and the product. And all four of these things kind of have to.”

    2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source

19. “Yeah. And so Jack had just sort of seen this at other companies. He's like, okay, companies are doing okay ours, but they're not very good at it. And it causes a lot of arguments among the executive team. And the employees are like non-compliant. They think the whole thing's kind of dumb. So I can fix that, right? With software. And so the original version of Lattice was for managing OKRs. And he was able to sell it. And so his buyer was the head of HR, right? And they said, okay, yeah, we'll give this a shot. And he had a couple companies using it. And they would use it for like one quarter.”

    2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source

20. “He founded Lattice in 2015. We've talked to him a bunch on the first round past the product market fit and other things. So for those who don't know, Lattice is a people management platform. But it didn't start that way. And most people don't know about this. Lattice actually started as an OKR tool. Back in 2015”

    2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source

21. “Who needs what you are building and the thing you are building works. And so conversely, the signs that we see a lot of founders get stuck. And this is a very common level to get stuck, right? And so if you're sort of hanging out here for six months, nine months, 12 months, and there's yellow flags that are appearing, you're starting to feel stuck. And so the yellow flags are something like, you know, let's say your product disappeared overnight. Your customers wouldn't be super disappointed. Let's say you have a handful of happy customers. Let's say you've got four or five customers, but the most important feature is actually different for each one of them. That starts to look a little bit more like a consulting business than a product business. Or it just feels incredibly hard to find kind of the marginal customer, the next new customer, or you're just, you know, your usage is low. Like the product is in their hands, but the usage is low. It's not growing that much. It lasts for six months. And this, I think, like there's a really good example, Jack Altman, who's the founder of Lattice.”

    2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source

22. “Yeah, so like I said, you're kind of precede less than 10 people. Probably your demand source at this stage is mostly people you know. It's like friends and family. It's your network, maybe it's VCs. You haven't probably done a lot of like, you know, cold outreach at this point. And it's hard to find customers, right? Like you're trying to get to three to five. It probably takes you 20 warm intros to get one, right? Something along those lines. So maybe to get to three to five, it's like at least 50 conversations. That's very normal at this stage because you're just trying to find the right problem and find customers who have it. You're probably in the like zero dollars to 500k ARR, like somewhere in that zone. I would say that you're at level one. And then there are metrics to track efficiency, right? Things like burn multiple, gross margin, NRR, all of these things. All of them are just like not applicable at this stage. It's too early and you shouldn't be worrying about that stuff. And so you want to be feeling this sense of progress, right? That there are”

    2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source

23. “Completely manual. Like she was the one behind the email address, you know, like sort of posing as the AI, but doing it herself. And that's, I think that's revealing of like it's okay to be inefficient at level one as long as you are delivering incredible satisfaction.”

    2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source

24. “And they were like, oh, you can just do that. And she was like, yeah. And she did it. And they landed the deal. And it was like one of the clearest examples to me of a product that satisfies a promise. But this product is going to unlock revenue for you. You are going to be able to land this enterprise deal. And so I think they just did a phenomenal job of that. And that's the kind of thing that you have to, that's what you're looking for when you're at level one, a problem that really matters to like three to five customers.”

    2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source

25. “Was on Dropbox paper, and the experience of getting a Sock 2 was onerous, right? And the reason that she needed to get is because we wanted to start selling Dropbox paper into Enterprise. And so she said to me, there's this paint out there. I think I can solve it. And I think there might be a revenue unlock. And I was like, what do you mean by that? And she was like, well, I've got these first few customers, you know, or like sort of design partner pseudo customers. It's segment and front and figma. And this is 2017, 18. So these companies were like smaller at the time, right? Not like the sort of the big companies they are now. And she was like, yeah, they're trying to sell into like, you know, Fortune 500 companies. One of them is actually trying to land like a Fortune 10 right now. And they said the thing that's holding them back is they don't have compliance certification. They don't have a SOC 2. And I told them, hey, like, what if I do that for?”

    2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source

26. “To be Alexa. And she had this other idea something about dropshipping, but she didn't know anything about dropshipping. And she has just sort of been in this mode of like, you know, we're building stuff and then we're seeing if anybody wants it. And then she realized that wasn't working and she changed what she was doing. And she started talking to potential customers. And she was very interested in the idea of security and why a lot of startups didn't use any security products. And she was talking to security engineers and CISOs and just CTOs at startups. And she would ask them, what is the thing you hate most about your job as it relates to security? And over and over and over, they would say, I hate filling out the security questionnaires. I hate doing the compliance audits. It's like so much grungy manual work. I'm in there filling out spreadsheets and taking screenshots of my AWS account and the whole thing like just kind of doesn't make sense. And she had actually felt this herself, right?”

    2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source

27. “What a good example. So Vanta was founded in 2016 by Christina Cassiopo, and she had come from Dropbox, and we got to work at Dropbox together, which was awesome. She was the PM of Dropbox paper at that time. And so Vanta, you know, it's a company that does compliance automation, continuous monitoring. Most startups think of like Vanta as how you get a sign. They didn't do that at first, right? And I remember in 2018, like Christina and I went on a walk around the South Park neighborhood in San Francisco. And this was the first time I heard the idea of Vanta. And she had actually in 2016, 2017, like tried a few other ideas. She had this like smart speaker that would record meetings and it would send meeting summaries over Slack.”

    2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source

28. “So, okay, level one nascent. So at this point, you're probably like a pre seed or seed stage company. You've got less than 10 people on your team. And at level one, your job is to find three to five customers that have a particular problem that is worth solving and to deliver them a satisfying solution. And you got to pick a problem that is both important and urgent to them. And the solution that you deliver needs to satisfy some kind of promise that they care deeply about. Okay, so of the three dimensions that you just recapped, Lenny, it's satisfaction first, demand second, efficiency last when you're at level one. Like it's actually okay to be inefficient at this stage if it helps you uncover something that delivers an insanely good customer satisfaction. And so I think that one of the best examples I can think of that is this company called Vanta.”

    2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source

29. “Level two is developing. Level three is strong, and level four is extreme. And that's where you want to get. And along the way, you're sort of trading off these three dimensions, satisfaction, demand, and efficiency, because they're intertwined, right? Like you could do a bunch of, you could spend a bunch of money on marketing, and that's going to increase your demand, but you're decreasing your efficiency if you do that. You can invest a bunch in efficiency and automating a whole bunch of stuff, but that actually might harm the customer experience. And you're reducing satisfaction. That's an interesting thing, I think, is you're actually making trade-offs at each level and what you should optimize for at each level is different. And so we talk about all these signs, you know, like whether you're getting stuck at a given level, how do you get unstuck, and sort of how do you progress along this path?”

    2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source

30. “And the next incremental customer you're going to get for your company, for your product. And if you have product market fit and as you are progressing along this journey, the marginal customer should be getting easier and easier and easier to get. Like easier to acquire them, easier to give them good service with a good product. And that means your efficiency is sort of increasing along the way and your product market fit is strengthening. So you've got to have all three of those things, right? Demand satisfaction efficiency. But the interesting thing is that you don't go for all three of them at once from the very beginning. And so product market fit, it happens like in this sequence of levels. It happens over multiple years. And for the best enterprise companies, I would say they tend to reach extreme product market fit in like roughly four to six years, right? There's some variance, but roughly four to six years. And so we label these four levels. We say level one product market fit is nascent product market fit.”

    2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source

31. “Thing is like it's ridiculous, right? Like the whole metaphor is ridiculous because it's just not viable to do something like that. And yet you see a lot of startups kind of do this, right? They're basically with their products giving away $2 for $1. And it gets them pretty far. But that's not real product market fit, right? And so that's one of the reasons that we think efficiency and how you think about the economic model of what you're doing is very important. And then this other aspect that I like, which is we have this concept that we call the marginal customer.”

    2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source

32. “Like, I was a big fan of WeWork as a customer of Weork, right? And I'm a fan of Casper and these other products. Like those products managed to achieve customer satisfaction and demand, but they never got the efficiency right. And so sort of the whole business just never worked, right? At scale. And my partner, Brett Berson at first round, he gives this example of the $100 vending machine. And I really like this example, which is Imagine I built a vending machine and I stuck it like in the middle of San Francisco and you walk up to this vending machine and you put a dollar in and a hundred dollar bill comes out. And that's the product. That would have insane sort of like demand. Like there would be a line at that vending machine. I think people would be extremely satisfied, right? Like they'd be like, this is awesome. The retention would be very good. I'm sure they would come back tomorrow. But like the whole...”

    2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source

33. “Yeah, so the framework starts with a very simple idea that is product market fit is not a one size fits all thing and it doesn't just happen overnight. And for B2B companies specifically, it does tend to follow a repeatable pattern. And so we start with defining the ultimate goal. The ultimate goal is to get to extreme product market fit. And we have a precise definition for this. Let me read it to you. So extreme product market fit is a state of widespread demand for a product that satisfies a critical need. And crucially, can be delivered repeatedly and efficiently to each customer. And so there's sort of like three key ideas in there. Demand, satisfaction, and efficiency. And I think efficiency is worth highlighting because that's what most people would leave out of their definition. You talk about like, oh, it's a product. People like it. You know, that's good. That's product market fit. But if you look, there's products out there.”

    2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source

34. “Yeah, so it's 100% free, and literally it costs you zero dollars. We give you zero dollars. We own 0% of your company. And it's pretty different than I think a lot of other programs out there. And this is just something we do over the years. We've run first round Angel Track, which I know you were in, Lenny. We've run the first round review for 10 years. We make these things free, and our belief is that you have to create value in the ecosystem. You have to put stuff out in the world that is useful. And if you can create that value, create enough value with the audience, then you'll be able to capture that value at some point. And so we think there's a win-win here. We get an inside look at some of tomorrow's great companies and they get an inside look at first round.”

    2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source

35. “The way that we think about it is that the program roughly takes about 10 hours a week for each founder, and it's 10 hours of work that you were going to be doing anyway, right? It is literally, you're talking to customers, you're improving your positioning, you're sort of doing critical thinking about your market and what you should be building. And so the way I think about it and the way I've heard from the 11 founders that went through it is it just added structure to what I was doing anyway. And it actually made me more efficient.”

    2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source

36. “The program in a nutshell. And like I said, any founder working on a new B2B SaaS company, welcome to apply. And then bonus points if you are technical, like I said, you have a clear kind of product idea or a hypothesis, but you're less than six to 12 months into building the company.”

    2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source

37. “Discovery. And we actually refer to it as dollar-driven discovery. We get very specific about not just kind of like the normal way of doing customer conversations and customer discovery, but how do you find that a customer is willing to pay money for this thing and a lot of money? We talk about market validation, product positioning. We do a section on design partners because I think a lot of founders have questions about that. How do I find the right design partners? What's the right way to structure an agreement with them? How do I convert them to paying customers, kind of all that stuff? We talk about product iteration and pivots. And I sort of refer to this stage as like the grind, right? The grind of kind of product iteration. And then we spent a ton of time on founder-led sales. And the reason that we do that is we really like working with very technical founders, builders, people that are either engineering background, product design, data science, like people who are builders. So that's kind of.”

    2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source

38. “Yeah, so we launched a new program and we call it product market fit method. It is designed, like I said, to help early B2B founders increase the odds of finding product market fit. It's totally free. It's a very intensive program. You can see all the details at pmf.firstround.com and the application deadline is May 7th. The program starts on May 29th. And we actually ran a beta version, like a test version of this last year, late last year, with 11 founders. I think probably some you know, Lenny, from Stripe and Plaid and Airbnb and Twitter. And the feedback was really, it was great. It made me feel very good. Like one of the founders was like, you know, I feel like these 14 weeks saved me two years of time in what would have been kind of wandering through the desert. And so there's kind of eight sessions in the full program. And the first one is the one we're going to do today. So the first session is on what we call the levels of product market fit. The second one is on customer.”

    2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source

39. “We can't guarantee success here. I just want to contextualize that finding extreme product market fit is very, very hard. And what we are trying to do is increase your odds, right? Increase the odds, reduce the role of luck, give you sort of a framework and way of thinking about the things that you need to do. And I think that that can increase the odds. Like I said earlier, the majority of startups are sort of getting stuck at these first couple levels. I think if you know what the path looks like and you know what the levers are at your disposal and you know sort of what you need to aim for, I think we can get more of these companies to kind of like level three and level four product market fit, which is where you really want to be and where you have a very valuable company.”

    2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source

40. “This is for early B2B founders, and specifically founders who are doing something that is more sales led than bottom up. I think bottom up is its own kind of world. It's closer to consumer product development in my mind. And I have done consumer products. Consumer product, I think there is a little bit more alchemy involved. It's about having great taste and sort of finding the right thing at the right time. And it just sort of, it's like catching lightning in a bottle. I think the good thing about enterprise and specifically kind of sales-led B2B is that there is more science to it. And so it is for sales-led B2B founders who are in, let's call it, the first six to nine months of starting their company and want to set the foundation for product market fit, like right from the beginning.”

    2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source

41. “Most of them don't get past the first couple levels of it. Like the majority of startups do not get past what we call level one product market fit or level two product market fit. And I'll go through and define all that stuff. They get stuck at one of those first couple levels. And if they can unlock kind of the right product and the right way to explain it to a customer and make a customer deeply satisfied and there's enough customers out there like that, it just pulls the whole thing along.”

    2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source

42. “I think as a founder, there are so many things you have to do. You know, you have to pick a market, you have to find a co-founder, you have to hire a team, you have to raise funding, you have to build a product, you have to sell a product. And so sometimes it kind of gets lost that like actually the only thing that matters in the first couple years is finding product market fit. And actually what we define as extreme product market fit, and I'll go into that. Because if you find extreme product market fit, the momentum just carries you and the market pulls you along and it's easy to know it to build because you're building the thing that your customers want and it's motivating as a team. It's easy to hire people. Everything becomes easier if you find product market fit. It is the thing that propels the company. And so we work, you know, we are a seed stage venture friend. We tend to work with very early founders who are pre-product market fit. And the truth, kind of the hard truth about it is that”

    2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source

43. “But like you said, product market fit is the single most important thing that your startup does in the first three years. And it's just underexplored and it's just underexplained as a topic. So we felt this was a very important thing to do, something worth focusing on. And I've personally talked to hundreds of founders about this topic. We've published dozens of articles on the first round review. We call this our paths to product market fit series where we interview founders about the early days. And I'm just like always interested in what are the patterns. You know, if you talk to enough successful founders, and in this case it can be enterprise founders, and you ask them, what did you do in the first six to nine months of running your company, of starting your company? What patterns emerge from that? And we have found a very consistent set of patterns, and that's what we decided to base our framework around.”

    2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source

44. “That people thought was just an art. And I think it's why your content is really popular too, Lenny. You and I worked on this product validation. And the seven part series that you did on B2B SaaS companies and like the PMF benchmarking data that you had, I think it was how long it took to get to a product and a customer and to product market fit. That was super well read. And there just isn't that much good specific content about this.”

    2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source

45. “Know the thing about product market fit is that I find it's mysterious to a lot of people. And people tend to think about it purely as an art rather than a science. And, you know, all the advice that you find out there on the internet is like very general when it comes to product market failure. You'll know it when you see it. You'll know it when you have it, right? It's not specific. And there's so many other startup topics where there is good content on the internet. hiring your first salesperson running board meetings stuff that is specific and tactical, but there isn't that much content around product market fit that is that specific. And so I think that's actually why, you know, like Rahul from Superhuman is kind of well known for his approach to finding product market fit. That was published on the first round review in 2018 and it was like immediately popular and interesting to people. And I think the reason is because it was specific and because it was tactical and it brought a little bit of the science to something.”

    2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source

46. “Yeah, you got it. So I am a VC. I'm a partner at first round Capital now. And I've been a first round for four years. But I was not a VC before first round. So I started a company in 2013 called Cover. And that was actually funded by first round 11 years ago. That's how I got to know first round. Yeah. And before that, I had worked on Gmail as the product lead kind of in the early days, you know, early 2000s and at Facebook. And then I started cover. And we ended up selling cover to Twitter in 2014. And I worked on a bunch of different products at Twitter. And then I was the VP of product and design at Dropbox. That was 2015 to 2018. So I have always loved product. And that's actually the reason now that I love being a seed stage VC because I love investing kind of at the earliest stage founders who are pre-product market fit and then helping them get there. And I just kind of love doing that over and over again.”

    2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source

47. “You've got the persona, the problem, the promise, and the product. Lattice kept the first one but changed the others. Vanta changed all four.”

    2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source

48. “Published dozens of articles on the first round review, and we have found a very consistent set of patterns, demand, satisfaction, and efficiency. But the interesting thing is that you don't go for all three of them from the very beginning.”

    2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source

49. “Finding product market fit is the single most important thing that your startup does in the first three years. And it's just under explored and it's just underexplained as a topic.”

    2024-04-11 · Lenny's Podcast · A framework for finding product-market fit | Todd Jackson (First Round Capital) · IDENTIFIED FROM THE TRANSCRIPT · source