Todd Jackson is a Partner at First Round Capital, a venture capital firm. Before this, he was VP of Product and Design at Dropbox, where he helped the company go public in 2018. He also worked at Twitter, leading product management for Content and Discovery after Twitter acquired his startup, Cover, in 2014. Prior to that, Todd managed product development for Facebook’s Newsfeed, Photos, and Groups, and he began his career at Google, eventually overseeing product development for Gmail.
Our conversation covers why finding product-market fit (PMF) is crucial, along with First Round Capital’s four-part PMF framework, which includes:
1. Nascent product-market fit: This stage usually involves pre-seed or seed-stage companies. The goal is to find three to five customers who have significant problems worth solving, engage with them, provide a solution, and validate it. Examples include Vanta, Lattice, and Persona.
2. Developing product-market fit: Here the focus is on scaling demand and finding repeatable sales channels. Founders need to generate demand and make the product carry much of the workload. This requires investment in various channels beyond warm introductions, such as cold outreach, content creation, or community events. Tracking key metrics like sales conversion rates and retention rates is also essential. Examples are Looker and Ironclad.
3. Strong product-market fit: At this level, businesses experience organic growth, with leads coming through referrals and word-of-mouth. Companies should have scalable demand channels and should be focusing on efficiency metrics. Challenges include increased competition and potential channel saturation. Examples include Verkada.
4. Extreme product-market fit: Companies here have robust metrics and significant milestones, often with teams larger than 100 people and likely at Series C or beyond. The focus shifts to expanding the total addressable market (TAM) by exploring new markets or launching new products. Examples include Vanta and Stripe.
Typically, achieving extreme product-market fit can take four to six years. Founders should spend about 12 to 18 months in Level 1, up to another year in Level 2, and at least two years in Level 3 as the business scales towards Level 4.
Signs of getting stuck at Level 1 include low usage, high substitutability, or varying favorite features among customers over at least six months. Most founders struggle at Level 2, often spending over a year trying to create new demand. Indicators include high churn, slow sales cycles, or a lack of urgency from potential customers.
If stuck, founders should revisit one or more of the four P’s: persona, problem, promise, and product.
This episode dives into Todd’s background and the detailed stages of the PMF framework, including practical examples and the challenges companies face at each level.