How Do Investors in SEA Define Product Market Fit?

How Do Investors in SEA Define Product Market Fit?

Yi Jun Phung
February 27, 2023

Product market fit has no concrete definition, so how are investors in Southeast Asia defining it?

We asked Iterative's Managing Partner Hsu Ken Ooi and Brian Ma, as well as three other investors from different venture firms - thank you Susli Lie (Monk's Hill Ventures), Piruze Sabuncu (Square Peg), and Shiyan Koh (Hustle Fund) for helping us out! 

The question we asked was:

How do you define product market fit?

Here are their answers.

Hsu Ken Ooi, Managing Partner of Iterative

Maybe the most overused, misunderstood startup term. Everyone says they have, but almost no one does.

Probably because there’s no concrete, generally agreed upon definition. No specific number of users, revenue, growth rate, etc. that once met means you have product market fit.

If you define it as growing very quickly, we’d have to define how fast very quickly is. Assuming we did that, if you stop growing that fast, does that mean you don’t have product market fit? Google doesn’t grow that fast now, do they not have product market fit? If you define it as a feeling, like chasing a boulder down a hill instead of pushing one up a hill, then it’s up to interpretation.

You think you’re chasing the boulder down the hill, I think you are pushing it up the hill.

It’s like porn, it’s hard to define but you know it when you see it. I avoid using it altogether.

Shiyan Koh, Managing Partner of the Hustle Fund

Credit: Prestige
Product market fit is when you can’t keep up with demand.

You have finally understood your problem and solution in a high enough resolution that you know who is a good customer, how to show them your product cost effectively, and they buy without needing you to do unnatural contortions.

Susli Lie, Managing Partner of Monk's Hill Ventures

When it comes to product market fit, you often hear this response: "If you're wondering whether you've reached product market fit, you probably haven't."

There's a lot of truth in this statement.

Product market fit is hardly formulaic but when you achieve it, you won't miss the visceral effect of having hit an inflection point, and the data will show it. The typical traction graph will suddenly show accelerated growth and you'll start seeing increased demand for or engagement with your product.

Brian Ma, Managing Partner of Iterative

For any founder that's seen product market fit, it's obvious. Your key metrics are growing ~2-3x a month with very little input from you. The best analogy I've found for this is pre-product market fit, you're rolling a boulder up the hill, then all of sudden, the boulder is rolling down hill and you're chasing it. I remember this point for my company - I was looking around to our senior team seeing our metrics jump month after month. When I asked "what happened", the answer even after digging into data for weeks was "we don't know."

The real answer is 20+ things happened. Your sales team figured out how to close customers in 1 conversation rather than 3, your account managers (or equivalent) figured out how to onboard or underwrite in 3 days instead of 6, your product is breaking and confusing only 30% of the time instead of 60%, and now... your customers are talking about you to their friends faster than you can pay money to acquire them. They're also closing and convincing their friends for you.

That said, the reason product market fit is so elusive is because you're never really sure if (1) you're solving a very big pain point and just haven't fully optimized your delivery or (2) you're actually solving a medium/small pain and should do something else.

That's where perseverance, founder gut instincts, a founder advisory networks, and a lot of luck come into play. I wish there was an easier answer (like Superhuman and Sean Ellis's magical 40% number), but in reality, have found it to be much messier than that. There's no silver bullet. The best advice I have is to try a lot of things (Iterate!) and surround yourself with other smart founders you respect. Good luck!

Piruze Sabuncu, Managing Partner of Square Peg

I don’t think there is a one size fits all definition of Product Market Fit. Instead, I think of clear metrics that give you signs of it.

If we take a B2B SaaS product, for example, it would be asking questions like is your product’s usage increasing? Have your users started recommending this product to their peers in other companies or their colleagues? How is your sales cycle evolving? Have you started closing more? Is it taking less effort? Are you able to move beyond founder-led sales?

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