The most successful tech startups achieve product-market fit with a deep understanding of consumers. In fact, the best startups know what customers want and are well-equipped to deliver the right product at the right time. For most tech startup founders, understanding consumers' pain points can take years of research.
"For a startup, this [product-market fit] could make or break your business. If you have a great product but are targeting it towards the wrong people, your business will fail. Every product must fulfill a need and even the smallest of niches can meet the criteria," says Nathan Resnick, contributor at Business.com.
Unfortunately, the path to product-market fit is different for every startup. Many industry-leading tech entrepreneurs model their approach after the founders that came before them. Learn how some of the world's tech leaders achieved product-market fit to scale fast.
How 3 Startups Achieved Product-market Fit
In nine years, Uber has gone from a black car service to a peer-to-peer ride sharing service. Today, Uber is available in more than 58 countries worldwide. Additionally, Uber is valued at more than $50 billion.
In 2008, cofounders Garrett Camp, Oscar Salazar, and Conrad Whelan achieved product-market fit by offering free rides to and from regional tech events. The team knew that San Francisco's taxi system was outdated, underutilized, and expensive. Once the apps started to gain some momentum, Uber issued 50 percent discounts to new riders for their first Uber ride.
"This initial discount incentivized users to become long term riders and the rest was history," says Dmytro Brovkin, mobile expert and co-founder of octodev.net. "As more and more people took to social media to tell the world about this innovative new app — the sheer brilliance of their marketing strategy paid off."
However, more than cost-savings, consumers value the company's ease-of-use. Users can call and pay for a cab all within a simple smartphone application. Furthermore, the company continues to expand with add-on services including UberEATS.
Are you struggling to achieve product-market fit? Learn from the tech industry's best in the Silicon Valley Startup Guide.
Snapchat is a messaging and multimedia application created by former Stanford University students Evan Spiegel, Bobby Murphy, and Reggie Brown. Unlike other messaging apps, Snapchat photos disappear after ten seconds. Snapchat recently went public, raising more than $3.4 billion. Today, Snapchat boasts more than 60 million daily active users. During early development, Snapchat marketed to families, bloggers, and more. However, Snapchat gained the most significant traction from students in Los Angeles.
"As a messaging app, Snapchat is inherently viral — you want to send snaps to your friends, so you urge them to download it. Snapchat also grew very quickly in tight-knit communities at high schools and colleges, where students interact at a very high frequency and can (and did) tell each other to download Snapchat in between classes," says Billy Gallagher, author of How to Turn Down a Billion Dollars.
During this early growth phase, Snapchat was able to harness user feedback, identify all-new product enhancements, iterate, and ship quickly — key factors in achieving product-market fit.
"The earliest version of Snapchat was a simple disappearing photo sharing app only for iPhones; they got it into users' hands, learned from how users actually interacted with Snap in the wild, and quickly added an Android app, video recording, and sharing, then more," says Gall
Today, Snapchat is poised to overtake Facebook as the world's most popular social media sharing platform.
Since 2008, Airbnb has provided convenient and affordable rental opportunities to customers worldwide. Today, the startup is valued at $30 billion. Currently, the company maintains listings in 65,000 cities in 191 countries around the world. Airbnb is one of the world's fast-growing and innovative tech companies.
During early growth, designers Brian Chesky and Joe Gebbia rented out their living room as an extra way to make money. The team launched a website, bought three air mattresses, and even promised to deliver breakfast to guests. However, the founders wanted more.
"Going back to the drawing board and hoping to capitalize on popular technology and design conferences, the founders repositioned the service as a networking alternative for attendees when hotels were booked up," says Ryan Holiday, author of Trust Me, I'm Lying; The Obstacle is the Way; and Ego is the Enemy.
Unfortunately, the company still had difficulty turning a profit. In fact, Airbnb only averaged $200 per week. In 2008, the company bootstrapped $30,000 in early-stage funding by selling politically-inspired cereal boxes during the U.S. election cycle. Despite their best efforts, the team struggled to land VC investment.
"Airbnb was a marketplace for air mattresses on the floors of people's apartments," says Fred Wilson, partner at Union Square Ventures. "They had ideas for taking on other listings but they had not yet made much progress on them. We couldn't wrap our heads around air mattresses on the living room floors as the next hotel room and did not chase the deal."
Later, Airbnb rolled out a unique Craigslist integration. In addition to listing their properties on Airbnb, the company allowed users to simultaneously list on Craigslist. By taking advantage of Craigslist's massive user base, Airbnb was able to uncover its true market potential.
Ready to Scale?
Achieving product-market fit is the first step toward tech startup growth. Uber, Snapchat, and Airbnb tested product-market fit through prototyping, customer feedback, and routine iteration. With the insights needed to capitalize on consumer wants and needs, these tech titans were poised to unlock accelerated growth and success. Are you ready to scale like Uber, Snapchat, and Airbnb?
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