If you don’t have distribution, having product market fit is like being a kid magician at an adult party.

Sure, you’re talented, but no one’s paying attention. ‘For my next trick, I’ll disappear into… obscurity.’

Why Distribution > Product Market Fit

• Why Read: 

  • Crucial insights on the importance of securing the right distribution channels, beyond just product-market fit, to achieve sustainable and profitable growth.

• Featuring:

  • Sahil S, VC at Stedu Fund

• Link: 

  • “What's Better Than Product Market Fit (PMF)? It's Product Market Distribution Fit (PMDF)”

Key Concepts and Tactics:

1. Recognizing the Importance of Product-Market-Distribution Fit (PMDF):

   • "Having a great product is useless unless you also have the right channels to sell it through."

   • "Startup with better distribution usually beat a better product so investing early in sales and marketing will help you achieve your business goals."

2. The Impact of Distribution Channels on Profitability:

   • "So all of this boils down to the one equation: CAC < LTV (Customer Acquisition Cost < Life Time Value). If you don't have efficient distribution then your Customer Acquisition Cost will be too high. And if you have to pay a toll to get distribution then the Lifetime Value of a customer will be lower."

   • "But Distribution ain't cheap."

3. The Power of Licensing for Distribution:

   • "Licensing can also be a way to get distribution. A famous case study from history is consumer videotape systems. Betamax, owned by Sony, was the superior product. But VHS, the competitive system owned by JVC, ended up winning because JVC got distribution by licensing VHS to all the other companies making video players."

   • "One of the examples is when Google first released the Android operating system, Apple had a big lead with iOS. Google decided to distribute Android by licensing it to other smartphone companies (so that Google would get the search traffic). Today the worldwide market share is 73% Android and 27% iOS. Distribution matters."

4. Balancing Product-Market Fit and Distribution Experimentation:

   • "The point of all this is that while entrepreneurs are working hard to get Product/Market Fit, they should also be experimenting with various distribution channels."

   • "The laws of economics say that your startup will fail if you don't get to CAC < LTV, and ultimately the driver for that is Product/Market/Channel Fit."

When to Pivot

Why Read:

• A comprehensive framework for founders to assess when and how to effectively pivot their startup, drawing valuable insights from real-world examples.

Featuring:

• Lenny Rachitsky(@lennysan), Author at Lenny’s Newsletter and Lenny’s Podcast

Link: 

• “The art of the pivot, part 2: How, why, and when to pivot”

Key Concepts and Tactics:

• Understanding the Reasons to Consider Pivoting:

  • "It's heartbreaking to pivot. You are thinking about killing an idea you've been obsessed with for months or years. [...] No single post, video, or tweet is going to give you a definitive answer for whether you should pivot or not, but the truth is that pulling the plug on one thing often allows something much better to flow through."

  • "As Dalton Caldwell (Managing Director at Y Combinator), in his legendary talk on pivoting points out, pivoting is all about opportunity cost: '[Pivoting] gets more shots on goal to try to find this elusive thing [called product-market fit]. If you made something and you launched it and it's like, "Meh, not really working," a dang good reason to pivot is you get another roll of the dice.'"

• Distinguishing Between Ideation Pivots and Hard Pivots:

  • "Ideation pivots: This is when an early-stage startup changes its idea before having a fully formed product or meaningful traction. [...] For example, Brex went from VR headsets to business banking, Retool went from Venmo for the U.K. to a no-code internal tools app, and Okta went from reliability monitoring to identity management all in under three months."

  • "Hard pivots: This is when a company with a live product and real users/customers changes direction. In these cases, you are truly "pivoting"—keeping one element of the previous idea and doubling down on it. For example, Instagram stripped down its check-in app and went all in on its photo-sharing feature, Slack on its internal chat tool, and Loom on its screen recording feature."

• Timing Your Pivot Decision:

  • "Ideation pivots generally happen within three months of launching your original idea. [...] Hard pivots generally happen within two years after launch, and most around the one-year mark."

  • "My takeaway is that you should have a hard conversation with your co-founder around the three-month mark, and depending on how it's going [...] either re-commit or change the idea. Then schedule a yearly check-in."

• Recognizing the Signs It's Time to Pivot:

  • "Reasons to strongly consider a pivot are very clear across both the data and the advice from folks who've seen a lot of pivots: Persistent lukewarm interest and Realizing it's never going to be as big as you thought."

  • "If you see very low retention, a consistent growth plateau, and largely lukewarm interest in your idea, and you don't have any more good ideas to drive growth, it's probably time to pivot."

  • "For many founders, it wasn't so much seeing hard data as it was just realizing they were mistaken about the potential of the idea. With time and the additional experience of building the thing, it's not at all surprising that you may realize your idea is simply not good enough."

• Examples of Founders Recognizing the Need to Pivot:

  • Instagram: "We knew it wasn't working when we would give it to people and they'd just keep bouncing off."

  • Amplitude: "Sonalight did decently well, reaching hundreds of thousands of downloads and some number of paying customers, but it never really became a mainstream success. Our retention was very poor because the accuracy of the voice recognition wasn't good enough yet."

  • Twitch: "We started trying to reignite growth and we had all these ideas for products we'd build, but they pretty much all failed in a variety of different ways. [...] Reigniting growth is almost impossible once it stops. And if you're not growing on the internet, you're dying."

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