Andy Rachleff on Product Market Fit

How I was wrong about some of the concepts of Product Market Fit and how Andy Rachleff clarified it.

I listened to this Mixergy podcast episode with Andy Rachleff, co-founder of Benchmark Capital and founder of Wealthfront. It is an exceptionally great episode. Normally most of the podcast episodes I listened to are great and I learn a lot — every single time. But this episode is special. It had some key nuggets that I had misconceptions or little different understandings. But the way Andy explained it, it made it crystal clear. So I felt compelled to share these nuggets with you in its entirety. Ideally, you should listen to the 1-hour episode, but if you’re running out of time, read the key nuggets here.


“Product/Market Fit” (PMF) is a common concept in the startup world. It is widely used in every conversation, especially in early stage startups.

As per Marc Andreessen, who wrote about ‘Product/Market Fit’ in his post “The Only Thing That Matters”:

Product/market fit means being in a good market with a product that can satisfy that market.

So the gist is — the best team with the best product will fail if the market is not there (using product and service interchangeably). So achieving PMF is “the only thing that matters” and that companies should strive obsessively to achieve it until they do.

So I was under impression finding a great (large and growing) market is the most important thing in finding a PMF. But as per Andy Rachleff –

In contrast to what most people think entrepreneurship is, which is evaluating a market to try to find the holes or the problems and developing solutions of those problems, that leads to very mundane outcomes.

The truly great technology companies are the exact opposite. They are the result of an inflection point in technology that allows the founder to conceive a new kind of product.

The question then is, “Who wants to buy my product?” So you start with the product and try to find the market as opposed to starting with the market to find the product.


PMF is also divided into two key concepts — i) Value Hypothesis and ii) Growth Hypothesis —

First you need to define and test your value hypothesis and then only once proven do you move on to what’s known as a growth hypothesis. The value hypothesis defines the what, the who and the how. What are you going to build? Who is desperate for it? What’s the business model you’re going to choose to deliver?

Until you prove your value hypothesis, you waste money to spend money trying to acquire customers. Unfortunately, most people try to get the growth before they prove the value hypothesis. You don’t want to get the cart ahead of the horse.


This is another big misconception I had — if you’re struggling to find a PMF, then you continue to iterate the product until you find it. But that’s plain wrong. As per Andy —

Now, within the value hypothesis, people think, “I should iterate on the product until I find something people want.” No. You stick with the product. You figure out if the first group I approach isn’t desperate, then I’ll try to find a different group that’s desperate.

Now, most people don’t do that. Most people just keep on trying more people to see somebody’s got to want it. The first class in my product market fit class I ask, “Should everyone like your initial idea?” The answer is absolutely not, because if they do, then the only reason they do is they’ve been conditioned to like it by someone else. Means people aren’t desperate for it because somebody else is serving it.


This is also a great advice on finding ideas.

Great ideas find you, you don’t find them. If you sit in a room trying to figure out, “What company should I start?” then by definition you’re starting with the market, trying to come up with the solution and that leads to mundane ideas.

Howard (Andy’s investment idol) describes the investment business with a two by two matrix. I think this matrix describes entrepreneurship as well.

On one dimension, you can either be wrong or right. On the other dimension, you can either be consensus or non-consensus. Clearly, if you’re wrong, you don’t make money. What most people don’t realize is if you’re right in consensus, you don’t make money because all the returns get arbitraged away. The only way to make outsized returns is to be right and non-consensus.

So starting with the market to try to find a problem, everybody can do that. That’s a right and consensus approach to entrepreneurship. Starting with an inflection point in technology which allows you to build a product and find a solution, that is non-consensus. If it works, it works big. That’s where the great venture capitalists all focus, back to the point I made earlier.


If I really want to summarize my understanding of PMF in one sentence is — finding a group of people who are desperate to use your product.

What do you uniquely offer that people desperately want because if they’re not desperate, there’s a good enough alternative. Let me tell you, if there’s a good enough alternative, you’re doomed. So, if you want to build a big business, an advantaged business, people need to be desperate.


Also, having a big vision to conquer a big market is great, but your strategy should be to start small in a niche and dominate it —

If you want to build a big business, you don’t go after the big market first, because those people only buy based on references, and you don’t have the references. You need to create a beachhead, a niche you can dominate. Through references, you grow from that niche of early adopters.


☞ I hope you found these nuggets valuable and useful. If you enjoyed reading this article, then please tap or click “♥︎” below to share these thoughts with others.

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