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“Promise-Market Fit”

In the world of startups, there’s a concept known as “product-market fit,” describing the point at which a product or service becomes so self-evidently valuable that its growth skyrockets organically, with no changes to outside advertising, sales motion, or other “inorganic” growth techniques.

There are lots of ways to over-intellectualize “PMF,” but it’s essentially when an exponential curve begins in revenue, users, and usage. Conventional wisdom is, “If you’re asking if you’ve found product-market fit, you haven’t found product-market fit.”

This term is useful because of its narrowness. Product-market fit means a company becomes undeniable. Everything pre-PMF should be done in pursuit of it.

In his famous essay “Do Things That Don’t Scale,” YCombinator founder Paul Graham details all of the tasks he has seen companies do to keep themselves alive pre-PMF. This includes the Stripe founders personally downloading the service on customers’ laptops; the Airbnb founders going door-to-door in New York recruiting hosts and photographing their apartments in a stylish way; and the Wufoo team sending each user a hand-written thank you note. The underlying message is clear: In hindsight, it’s all worth it. But reverse-engineering this process is nearly impossible.

There are hundreds of YouTube videos, business school lectures, and podcasts episodes about product-market fit. In Silicon Valley, debating whether or not leading indicators of product-market fit exist— or, more importantly, can be systematized or measured—is like debating what God looks like. (Thankfully, there’s no debate whether or not product-market fit exists at all. If there were, the intellectual circle jerk would never end.)

I don’t have a strong opinion on whether PMF can be reverse-engineered or not. Frankly, I still need to get the reps in so I know it when I see it with no false positives. But this framework has had me thinking about my career. I’ll explain why below.

The goal of any ambitious young professional should be finding “product-market fit.” This comes in a few steps. First, you need to find a game you want to play and win. Check, I love my job. Second, you need to be so awesome at your job that everyone who knows you can’t deny you’re a winner. Wait, what?

Job product-market fit definitely can’t be reverse-engineered. You can read biographies of successful businesspeople for years and never come close to replicating their success. So, why do people take chances on young professionals, and what can I do to ensure my “luck surface area” is as large as possible? Thanksfully, there’s a tweet for everything.

Enter: promise-market fit.

I’ll first explain why promise-market fit is a useful way to think about businesses. Then, I’ll explain how I’ve used it to contextualize my early career.

In startups, there are several industries for which the “bleeding edge” of technological development is not necessary. Lots of companies don’t need the best AI tools, nor are they willing to pay a premium for single-digit % better performance on niche tasks. Rather, these companies need something that is better than what they have at a similar or lower cost, and some combination of the product’s cost savings and efficiency gains needs to justify the effort of “ripping and replacing” existing, embedded solutions.

As such, there are a whole host of interesting startups that have found “promise-market fit” in a handful of (usually large, usually “legacy industry”) companies. The “secret sauce” that’s gotten these large companies over the goal line is not one-size-fits-all. For some startups, it’s a founder that comes from a particular industry and knows all of its pain points. For others, it’s a killer sales team that understands the buyers’ economic incentives better than anyone else and crafts early deals in a fiscally-creative way. For others still, it’s an outsider’s perspective that gets a forward-thinking executive excited.

Post- promise-market fit, pre- product-market fit companies are exciting because they get paid to stress-test and improve their product with a real customer, at scale. This means there is money to be made by “expanding” with a handful of existing customers they know well, “landing” new clients in the same industry as those existing clients, or “landing” new clients in entirely-new industries by virtue of the company’s mature and well-developed product. This is a different kind of bet—one that might have less upside than a consumer play like Facebook or Instagram—but one that has a much clearer “path” to positive cash flows and, hopefully, extreme growth.

(I also think some consumer apps, which require far more users, can be pre- product-market fit, post- promise-market fit, but they are fewer and farther between. The bar for consumers is incredibly high right now, particularly if the offering isn’t free. In an investment context, finding an undervalued company with an imperfect product that many are willing to pay for is like finding a needle in a haystack. Consumer [as opposed to enterprise] promise-market fit could be an entire research paper in itself.)

So, how does promise-market fit help me think about my career?

I think lots of early career is “Promise-Market Fit.” No one knows exactly what I’ll be “when I grow up.” One of my earliest conversations with the partner who ran the hiring process for our firm involved me asking him what kind of role he wanted me to play at the firm, to which he replied, “Well, we don’t know what you’re good at yet, so first find out what you’re good at. Then, do that as often as you can.” I checked enough “reverse engineering” boxes (work experience, education, disposition) to be interesting, but I’m inherently a roll of the dice. While expectations for effort and work product are high, doing what I’m told well is not enough to make me a good venture capitalist. But becoming a good VC takes a while.

So, in the meantime, my job is to make myself a net-positive. That’s meant getting up to speed on existing companies and deals as quickly as possible, anticipating and knowing the answers to any questions that may pop up in a meeting, and speaking with precision, among other things. Basically, I’ve got to continue to show enough promise to earn confidence in my ability to find career product-market fit eventually.

As our partner alluded to, though, the real “bet” my firm placed when hiring me is that I’ll reach career product-market fit. That is, I’ll find several new multi-billion dollar companies before anyone else, or I’ll help our existing companies build value in a way only I can. Promise-market fit only converts to product-market fit when upside is realized. So, the other part of my job is to increase my “luck surface area” and try to maximize my opportunities for upside in the industry. Which brings me to my next question: How do you convert promise-market fit to product-market fit?

Conversation

Recently, I was speaking to the Global Head of M&A for a publicly-traded company worth over $100 BN. To my credit, I had networked my way into the room solo and struck up a conversation with him that lasted about a half an hour. He gave me some fascinating insights on the industry he is in, offered great career advice, and seemed to be genuinely enjoying the conversation.

I then proceeded to completely botch an explanation of VC economics and their tax implications. He called me out, I corrected myself and apologized, and the conversation ended shortly afterwards. But he still gave me his business card and offered to continue our conversation another time.

Later that week, I recounted the interaction to a friend. I wondered aloud whether or not I should reach out to him & why he even offered his contact information after my huge gaffe. She then replied:

Of course, the statement isn’t entirely true. I’m privileged in a lot of ways. But, directionally, it’s right on the nose. And I think it’s important for anyone younger than 40 or new to an industry to remember.

People who are good at their jobs often love what they do. People who love what they do often want to help others with that same passion, especially if they are relatable and/or are not eminent threats. As a (very) young player in an “apprenticeship” industry, at a firm that invests in verticals facing dearths of young people, I am an un-molded ball of clay. Being a ball of clay that is willing to be molded is the best way to increase my chances of finding career PMF.

I’ve found that earnest interest, honesty about shortcomings, and the effort to forge genuine relationships lead to the best friendships and mutual “Aha! Moments.” Frankly, I have little to offer to those who can mentor me. So, while I try to provide value in any way I can (sharing good companies that I think they’d be interested in, connecting people I think would personally or professionally hit it off, trying to make non-obvious connections), I’ve realized I cannot pretend to be the more valuable party in a relationship at this stage of my career.

As someone who’s very insecure about not providing value in a professional context, this has been a weird mental shift for me. It’s fueled a lot of my efforts to become a net positive as quickly as possible. My content diet has involved a lot of technical papers, books, and YouTube videos recently. I look back on me of two or three months ago and laugh at his ignorance, but I also know and feel that I have so much more to learn.

The somewhat-unexpected plus side to this stage of my career is the joy of finding others on the same journey. It’s the other up-and-coming investors with have half-baked, contrarian ideas about different markets; the other people who create content online and shout into the void; and the other young professionals who are trying to both provide traditional value and make their own unique mark that make this fun.

This combination of factors is why I write this newsletter. I want to connect with people on the same journey, get feedback on my ideas, and help people who are just a step or two behind me. I can (hopefully) provide value while also being forthright about my weaknesses.

Breakthrough
Grinder vs. Killer

Lastly, I’ve been thinking about building credibility in professional circles.

I’m a weird learner: I majored in Computer Science and minored in English. My Substack is a combination of business newsletters and cultural critics. I read fiction and the Wall Street Journal. I compare venture deals to poker hands, companies to sociological theories, and consumer products to movies.

Due to a lifetime embrace of liberal arts education, I thrive on ingesting tons of unconnected information and making out-there connections. I think this is my greatest asset. For example, I recently compared Meta’s LLaMA AI model to Kubernetes to make a point in a firm-wide email, and my coworkers agreed with me. (I’ll write about this soon.)

Because of some combination of these factors, I think by talking out loud and writing. Both are iterative processes. Both involve lots of garbage that needs to be thrown out before reaching a polished, coherent final product. At times, I output more garbage than I should. (In other words, my signal-to-noise ratio gets too low.)

I’ve recently resolved to speak and write more precisely, sacrificing some of the random, unpolished ingest for clarity. I think this will make me a better thinker. Eventually, I’ll find some ideal balance between shooting wild ideas by coworkers and waiting until I’m 100% confident in an idea. But I think I’ve demonstrated to everyone who knows me how thorough and wide-ranging my research is. Now, it’s time to prove that that research bares fruit in the form of actionable, contrarian opinions.

Until next time,

Sam