◆ The Value Hypothesis Framework
Product-market fit = a proven value hypothesis = customers who are desperate for your product. The value hypothesis has three components:
What
- Build based on a unique insight, ideally from a technology inflection point
- Must be non-consensus — not everyone should like your idea
- MVP = minimum functionality to test your leap-of-faith assumption
- More than one primary benefit is a negative
- Reduce scope, don't add features to find fit
- Never pivot on the What — that's a restart, not a pivot
Who
- Find the most desperate customers — need is irrelevant, only desperation matters
- Define your niche as narrowly as possible
- A market = buyers who reference each other
- Iterate on the Who until you find a surprise
- Ensure adjacent markets exist (bowling pin strategy)
- Start small to get big — to dominate your initial segment
How
- Business model should reinforce the product's value
- Aim for a disruptive business model — create an Innovator's Dilemma
- Disruption = simpler, cheaper, more convenient (not better, faster, cheaper)
- Three internet business models: Advertising, Subscription, Transaction fees
- Revenue is more valuable as a signal than as cash
- If customers won't pay for the MVP, they never will
◇ Course Map — Click any class to expand
Class 1
PMF Foundations
Value vs. Growth hypothesisLean startup = scientific method for businessPivot on Who/How, never the WhatBuilt to learn, not execute
Class 2
Insights & MVPs
Technology inflection pointsSolution in search of a problemGreat ideas find youMVP scope & definitions
Class 3
Adoption Lifecycle
Moore's Technology Adoption LifecycleCrossing the ChasmWhole Product conceptBowling pin strategy
Class 4
Disruption
New Market vs. Low-End disruptionInnovator's DilemmaSalesforce case studyWhack-a-mole pricing strategy
Class 5
Evaluating Hypotheses
What/Who/How evaluation questionsCommon pitfalls in hypothesesDesperation vs. needMarket segmentation rigor
Class 6
Validation Methods
Concept → Implementation → MVPDesign sprints & 5 WhysBehavior > Intent metricsWhen to pivot
Class 7
Savor the Surprise
Double down on the goodDon't fix the badDon't judge decisions by outcomesDo things that don't scale
Class 8
Focus & Distractions
Pre-PMF execution trapsWhy OKRs hurt PMF searchCulture follows CEO behaviorAvoid partnerships pre-PMF
◎ Technology Adoption Lifecycle
Innovators
2.5%
Tech enthusiasts. Don't target — they don't influence others.
Early Adopters
13.5%
Visionaries. Want breakthroughs. Don't need references. Start here!
The Chasm
Early Majority
34%
Pragmatists. Buy on references. Need the whole product.
Late Majority
34%
Conservatives. Buy once it's the standard.
Laggards
16%
Never buy.
▲ Validation Journey
1. Validate Concept — Concierge · Video · Smoke test · Kickstarter
▼
Fail fast & cheap — don't waste time on bad concepts
▼
2. Validate Implementation — Design sprint · 5 Whys · Attempt to sell
▼
Is your target audience desperate?
▼
3. Validate MVP — Word of mouth · Retention · Organic growth
▼
✦ Product-Market Fit Achieved ✦
⚡ Two Types of Disruption
New Market Disruption
Serves non-consumers — people who couldn't access the incumbent's product
More common. Often evolves into low-end disruption through business model advantage.
Example: AirbnbExample: SalesforceLow-End Disruption
Serves the overserved — customers paying for features they don't need
Requires more trust and is harder to pull off. Lower $ margins but higher asset turnover.
Example: DellThe Innovator's Dilemma: Competing with the disruptor hurts your economics, but not competing leaves you open to being disrupted. A disruptive business model requires a much lower cost structure — possible for startups because they start with a clean sheet of paper.
◉ How to Measure PMF
Behavior-based metrics beat intent-based metrics. Surveys and NPS are of little value. Look for these signals:
Consumer
Exponential Organic Growth
Delight leads to virality. Word of mouth is the #1 signal. Once exponential growth starts, it seldom stops for a while.
Enterprise
Sales Yield > 1
Sales yield of 1 is proof of value hypothesis — it's an inflection point. Once you exceed 1, you typically grow to > 2.
✕ Pre-PMF Distractions — What NOT to Do
These execution-oriented activities don't help you find PMF and should be avoided until after you've proven your value hypothesis:
Tracking Competition
Can't win by copying. Violates "what do you uniquely offer that people desperately want."
OKRs
Drive execution, not learning. They disincentivize veering from the course — the enemy of finding PMF.
Brand Building
Brand = the job you hire a product for. It's built through product excellence, not marketing.
Stealth Mode
Doesn't help validate hypotheses. If you need stealth for advantage, how lasting is that advantage?
Corporate Partners
Partners want an "option on a space" — they'll push you to adapt to their needs, not yours.
Culture Building
Culture follows CEO behavior. Be conscious of how you behave — employees copy the CEO.
⟐ Product Development Process
1
Source Ideas
Surprises, client service, engineers, hackathons
→
2
Smoke Tests
Product smoke tests, ad tests, surveys
→
3
Blog Post
State value hypothesis, make compelling case
→
4
Customer Dev
Design sprints, interviews, five whys
→
5
Founder Review
Feedback from experienced advisors
→
6
Build MVP
Usable product to test the hypothesis
→
7
User Testing
Ensure UX is right
→
8
Post-MVP
Listen for surprise, check for exponential organic growth
★ 33 Debated Principles
Everyone shouldn't like your idea
Appealing to everyone appeals to no one
Without change there is seldom opportunity
Authenticity is required to recognize inflection points early
The only thing that matters is finding desperate customers
Bootstrap ideas that solve your own problems
To get big you have to start small
All the value lies in the surprises
Pivot on the Who and How, restart on the What
Double down on the good, don't fix the bad
Fail fast & cheap
Stealth doesn't matter
Revenue is more valuable as a signal than a source of cash
It's not first to market, but first to product/market fit
Don't pursue growth until you confirm your value hypothesis
Brand building is irrelevant for tech startups
Having more than one benefit is a negative
Market research is of little value
Each adjacent market requires its own whole product
Succeed with an application before you pursue a platform
Disruption is a business model concept, not a technology concept
Markets = buyers who reference one another
Don't pay attention to your competition
Corporate partners impede discovering PMF
Disruption is relative
Don't hit the accelerator until you are successful
Don't judge decisions by their outcomes
Built to learn is preferable to built to execute
You only find the answer if you make someone uncomfortable
Formal experiments are only good for growth hypotheses
Great ideas find you, not the other way around
Only sell if your market isn't happening or you get a ridiculous offer
Need is irrelevant — only desperation matters