The 5 Steps to Product-Market Fit w/ Chris Saad, ex-Head of Product at Uber, Host of The Startup Podcast

We took examples from the last 100 episodes and built a clear, 5 step path to finding product market fit:

1.Before Startup Mode, There’s Research Mode —> Become an expert to find problems worth solving.
 
2.Only the Insanely Focused Survive —> Focus all your resources to do more with less.
 
3.You have to be in the market to win the market —> Use niche markets to discover unique insights.
 
4.Forget Growth. Find Value. —> Optimize for value delivery and growth will follow.
 
5.Pivot Harder, Faster —> As soon as you realize you’re not solving a #1 problem, pivot.

Why you should listen:

• Why creating value by solving problems is the core of startups.
• Startups must avoid perfectionism and embrace learning.
• Research mode involves deeply understanding customer needs.
• Insane focus and hustle are essential for early-stage success.
• Validation comes from engaging with the market directly.
• Why growth should be a byproduct of delivering value.

Keywords
startups, product market fit, entrepreneurship, research mode, focus, hustle, validation, customer experience, growth, business strategy, Wattpad, user-generated content, agility, iteration, product market fit, startup growth, pivots, entrepreneurship, value creation, founder stories

Timestamps:
(00:00:00) Intro
(00:01:47) Who is Chris Saad?
(00:02:30) Pablo's Story
(00:05:53) The Core to Early Stage is PMF
(00:09:07) Step 1: Research Mode
(00:16:44) Step 2: Only the Insanely Focused Survive
(00:23:46) Step 3: Be in the Market to Win the Market
(00:32:57) Step 4: Forget Growth, Find Value
(00:37:59) Step 5: Pivot Harder and Faster
(00:45:45) Recap

Chapters

• 1:47 Who is Chris Saad?
• 2:30 Pablo's Story
• 5:53 The Core to Early Stage is PMF
• 9:07 Step 1: Research Mode
• 16:44 Step 2: Only the Insanely Focused Survive
• 23:46 Step 3: Be in the Market to Win the Market
• 32:57 Step 4: Forget Growth, Find Value
• 37:59 Step 5: Pivot Harder and Faster
• 45:45 Recap

Transcript

Chris Saad (00:00):

The only thing that matters is creating value by solving problems or generating dopamine. That's it. Startups are learning machines. So anyone listening to us here who has spent months and months and months developing, you know, tens and hundreds of pages of a business plan, you lose, you are failing. Stop. If you are a perfectionist…. a perfectionist is just an excuse for a procrastinator. If you want a whole plan laid out for you, then you are too risk averse to be a founder. Quit, go do something else. Forget, forget, forget sunk cost. You are an early stage pre-product market fit startup. If you're listening to this episode, right? you cannot afford the luxury of technical debt, business debt, customer debt, cognitive debt. Throw that aside. You are a learning machine. Need to be iterative, agile and move fast. Put it aside and focus on first principles. Go back and focus on your user and focus on your product.

Pablo Srugo (00:57):

So I opened up listen notes.com today, which is a platform that ranks podcasts worldwide that I've often used to understand kind of where we're at. And as of today, we are now a top 1% podcast globally. That's across all the millions of podcasts that are out there. So I just wanted to let you know this because we're building this community together and I wanted to say thank you, thank you for listening. Thank you for following the show. Thank you for sharing it with other founders. I love the fact that I get to do this. I love that we continue to grow and I love to end the year on such a high note. Let's do it again next year. Here's to 2025. Hey Chris, welcome to the show.

Chris Saad (01:37):

Hey, thanks so much for having me.

Pablo Srugo (01:38):

So maybe, before jumping in kind of to the, the presentation and, and the back and forth discussion we have, maybe just give us a bit of background on yourself, if you don't mind. 

Chris Saad (01:47):

Yeah, sure. Well, I've been building products and brands and startups and ecosystems for the better part of two and a half decades, actually, it's almost 29 years now. I had to, I had to recalculate 10 or so years in Australia building venture scale companies there, and then 10 or 12 years here in Silicon Valley. And then I've been advising for the last five or six years, I run a podcast called the Startup Podcast. We invite you all to come and check that out. And I do advisory on the side as well. Help companies one-on-one, help 'em avoid wasted time, dead ends, and fast forward to the best answers as quickly as possible.

Pablo Srugo (02:18):

Awesome. Well, looking forward to kind of jumping into this with you and just kind of getting your thoughts, your perspective on each one of these steps..

Chris Saad (02:25):

Awesome! Let's do it. Let's break down the five key steps to product market fit.

Pablo Srugo (02:29):

If you don't mind, I'll actually start with just a really quick story maybe from my founder days because it's funny it happened back then … as I was building this presentation, I thought back to this moment, and I really think it's kind of this good jumping off point, right? For why any of this even matters. So right now I'm a VC and I've been here at Mistral for over six years and I've been running the product market fit show for, for the last three years. You know, talking to a lot of founders, which is where this stuff's come from. But before that, I was a founder. My startup was called Gym Track, and I was like 22, 23, first time founder, kind of going for the big home run. And at one point I had a co-founder Lee, who's my age, and we'd hired this CFO who was very experienced.

Pablo Srugo (03:10):

He'd been through many acquisitions, a really, really smart guy, a guy named Ken. And I remember one time we were sitting in a boardroom and Ken wanted us to implement different controls, like different financial controls, you know, just little things to make sure we just didn't go offside. I don't remember exactly what, but you can imagine as a young founder, I frankly couldn't care less <laugh>. I was like, you know, I just want to go fast, you know, go fast and break things like this sort of idea and like if it's not, you know, sales, customers fundraising, like I just couldn't be bothered. I really didn't care. And so we're having like this back and forth, you know, discussion and Ken, Ken is like really good with these punchy lines, right? So at one point he looks at me and he is like, Pablo, why do cars have brakes?

Pablo Srugo (03:58):

I'm like, Ken, like, what are you talking about man? Like, I don't have time for this. Like, what is this? And he's like, why do cars have brakes? And I'm like, I don't know, man, so they can stop? And he's like, no, it's so they can go faster. And for me that just hit, you know, in a different way. And I thought back to that moment because I was like, man, what Ken really understood is, as a first time founder, you're learning everything from the get go. You're making so many avoidable mistakes. So that's why I made this presentation, right? Because at the end of the day, like you're gonna make mistakes no matter what, but there's avoidable mistakes and unavoidable mistakes and you have to avoid the avoidable mistakes because that really dials up your odds of success. So that's really the goal of this presentation is taking what I've learned, talking to over a hundred, a hundred founders through the product market fit show, and just boiling it down to like five steps of the things that they've done right to get to product market fit.

Chris Saad (04:49):

I love this. You know, I often talk about my advisory work. My job is to help you avoid wasted time and dead ends and just fast forward to the right answer as quickly as possible. And I'm often quick to point out this is not because I'm some kind of rocket science genius, it's just I've made every mistake personally, multiple times, and figured out why the thing is counterintuitive and why you need to go a different way. And so trying to boil that down for this show, trying to boil this down for your show, trying to boil it down for advisory. This is the name of the game because I think both of us and, and all of us involved in making this thing are very passionate about helping founders achieve their dreams and not wasting potential and wasting capital, and wasting the chance to change the world. So very cool. So this is, this is really distilling everything you've learned through your show and through your experiences into five key steps. And also it's worth pointing out, you know, why does product market fit matter, right? Product market fit. Before we dive into the five steps of achieving it, let's just talk about just for a second what it is and why it's important.

Pablo Srugo (05:53):

This is the core to the early stage, right? And obviously it's a nebulous concept, it's hard to define, but what I found talking to early stage founders is, you know, if you ask across different industries, different business models, and you're like, what's your number one goal? What's your number one objective? And it typically is some version of trying to find product market fit. You know, as Marc Andreessen had described at this moment, when the thing that you're offering to the people you're offering to the market just kind of clicks together and you start getting true pull from the market, you're not in just a pure like push motion and symptoms of it are very fast growth rates. Maybe your problems are no longer like growing the top line, but it's actually like product or operations or customer success because there's just so much going on.

Pablo Srugo (06:36):

There's so many fires you gotta put out, but it's all because of growth. So those are like the outcomes of finding product market fit. And that's why it's so important. And I think many times, companies will make it far down. Like they'll raise an A or even a B and actually like never really had product market fit, but so much money was put in, so much effort was put in that they were able to grow the top line. But then at some point, you know, it just starts to plateau and, and you're really kind of moving the boulder up a hill. And that's what we're trying to avoid.

Chris Saad (07:03):

I think it's fair to say that product market fit is one of the first and most important milestones, major milestones a company needs to achieve. When I first heard this concept of pull versus push it took me quite a while to understand it, so I wanna unpack that also just for a few more minutes. So push, when you're in push mode, you are like out there hustling hard, you're like trying to talk to anyone who will listen, grinding, grinding, grinding. Like, please try my product, please give it a go, give it a chance. Please stick around, please find the value that I'm trying to deliver for you. Pull is when people start coming out of the woodwork, you start getting signups and you didn't run an ad or you didn't email someone, people start referring it to each other and you just, you didn't ask them to. The market starts to pull it out of your hands and say, I need more, I need more. And so product market fit feels like momentum. It feels like the wind is at your back and it feels like easy growth, easy momentum. People struggle to figure out how to define it and how to, how to measure it and all this sort of stuff. But at the end of the day, it differs from company to company and it's sort of like, you know it when you see it.

Pablo Srugo (08:13):

Yeah, I was gonna say the same thing, the same useless line, but it's true. Yeah, <laugh>, what can you do?

Chris Saad (08:17):

It's like pornography, right? You know it when you see it, right? Yes. So all right, so that's a lot of preamble about where this came from and why product market fit is important. So let's go through these, these five key steps that you've boiled it down to. Now of course, I just wanna let founders know who are listening. This is really, really hard. In many ways, our entire show is about this. I'm sure your entire show is about this Pablo. And so here we're just trying to distill it again in a new framing, in a new remix to try to help bring this message home. But just don't feel bad if you're like, I'm not following or like, I tried these five things and or wait, how the hell do I do that third thing! <laugh> just gotta go listen to the back catalog of our podcast and it'll become clear. There's a lot, a lot to do. So, alright, let's go through this. Okay, step one you've described here in our, in our show notes is research mode.

Pablo Srugo (09:07):

Yes. And let me just set some context for this. I'm sure you and every single person listening to this podcast knows this book. The Lean Startup by Eric Res obviously talks about MVP and all those sorts of things. And it's been great, right? Because it's led this revolution of, how can we just put something outta market with the least effort possible? I think the problem is that the kind of skim read version of this is don't waste time, just put something out and see if it sticks. And what I've actually realized speaking with so many of these successful founders is there's a step before that lean startup mode and it's called research mode. And I'll give you an example to talk about, you know, somebody who, who did this really well. So I, one of the people I spoke with was Mike (Murchison), the CEO of Ada, which is doing over $50 million a RR, it's a unicorn, et cetera, but it didn't obviously start that way.

Pablo Srugo (09:53):

And actually his first startup idea was this thing called Volley. It was this social search engine. And you know, it started growing it, it actually raised, he raised like a pre-seed round, about half a million dollars or so, and you know, started growing, started getting some traction, but it was never like talking about product market fit. He just never had that clear pull. And what he started to realize as he went through it is that as he had more and more users, the customer service experience, which you know- many startups put so much emphasis on customer service in the early days because they can control it and they should. And he was doing that, but that experience started to wither away. And he was like, well how can I keep this super high bar on customer experience, on customer success, on supporting my users as I kind of grow my user base?

Pablo Srugo (10:39):

And as he researched it, he'd realized that there was kind of like no good way to do it. What he ended up doing is he took a step back and decided to completely pivot and go after this totally different use case of trying to scale a customer service experience. The crazy thing is that he was venture backed, like he was venture backed on a specific plan that was, Hey, go grow Volley. And instead what he and his co-founder decided to do was spend full-time hours as customer service agents and automate themselves out of the job in order to create the product. So they got hired by different companies that had customer support agents that, you know, help customers on chat or whatever it is. They did that job full-time. That's research. that's trying to understand, really, wait a second, what is customer service? Like, what does that really look like?

Pablo Srugo (11:29):

What is the day-to-day like? Then they started to build automations to do many of the pieces that they were already doing, many of those workflows. And what comes out of that is Ada. And Ada then becomes, you know, this $50 million plus, it's like in the chatbot era, right? Like there were so many chatbots back in 2013, 14, 15, they were one of these chatbots, their chatbot actually worked and is still very successful and now obviously implementing AI and all that stuff. But the reason it worked so well is because they understood the problem, the real problem in a very specific and subtle way. And the reason that happened was because they did real research mode for a full year as full-time customer service agents before building the product, before building the MVP.

Chris Saad (12:15):

It sounds like you were saying as they were doing this for a year, they were also iterating on the product, am I understanding that correctly?

Pablo Srugo (12:21):

Yeah, I mean that's kind of right. I mean the starting point was literally let's just go be customer service agents and then you know, whether it's a month in or two months in, as they start learning the job, then they start automating themselves outta that job. So then this kind of product. But it's not like they're necessarily selling that product at that stage. They're still really in this kind of weird research mode. You know, it's funny, this research mode because if somebody were to ask them, you know, just socially like, Hey what are you doing? What are you building? They're like, well we're just like being customer service agents trying to replace themselves, but they're not even selling a product yet.

Chris Saad (12:51):

And so we have to be very precise here, right? Because oftentimes founders will go into research mode and what they think research mode is, is to have an idea and pitch that idea to ten, twenty, fifty, a hundred and fifty people and see if those people resonate and go, oh my god, that's great. I would love that if you would build it. If they think of that as a kind of product discovery, product research, market research, market validation. And I just wanna caution here, that's not what you're describing. What you're describing is not talking to customers with an idea and hoping that they say that's great, you're talking about digging deep into living the problem, going and becoming a domain expert on the problem. And they're not, they weren't just doing that academically. They weren't just like asking for problem after problem after problem. It sounds like they were building and iterating a solution as they were doing that.

Chris Saad (13:40):

And this is, this is key, right? So this is why actually the lean startup is relevant because if you just spend a year academically putting just an idea in front of people and go, do you like this? Most people are trying to be kind, trying to appear smart and trying to be useful. And so when you say to them, would you like this idea? In their kindness, they will go, yeah, that's a great idea. Go keep going. And in their effort to appear smart, they'll go, yeah, I think Sally would like that because if you just add this feature and that feature, Sally will definitely want it. Exactly. That's not validation. That's people being kind and trying to be smart. The best validation is actually building stuff and putting it into the world and seeing if it helps people. You know, you can call that a form of research, but really it's a form of lean execution, learning and iteration. And you do that with running code and, and people actually have to physically pick it up and use it, not just give you platitudes of “That's a great idea”. And unless and until they pick it up and use it and continue to love using it, you're nowhere near product market fit, right?

Pablo Srugo (14:47):

Yeah. So I mean, funny enough just to vibe all that, like obviously at some point you gotta put this thing out in the world and we'll get into that. But what I actually noticed was before putting something out into the world, taking the time to really understand your customers, another example comes to mind is this company called Legion that builds payroll software for coffee chains and these sort of places. Like he was a developer but then worked in a coffee chain for like weeks before going out and building. 'cause Part of it was like scheduling and these sort of things. And so finding a way and, and other people like Cement, which is another company that's doing tens of millions in ARR they did more of the traditional things like speak to customers, but it wasn't, hey here's my idea, do you think it's cool? It was very much like, tell me about your problem, tell me about your day to day. I think the high level objective here is : find a real problem because so many companies fail because the problem they're out to solve isn't even that important. So even if you build the perfect product that really solves that problem, you're always pushing uphill because your customer is like, that's great, that's awesome, but like, come back next quarter. I got other things that are more important.

Chris Saad (15:47):

I think the way I would frame this first step then is really about understanding the problem. And understanding the domain really, really well. Again, though, just to have some gotchas, understanding the problem purely academically, meaning just hearing it secondhand is not often good enough. Correct. Understanding the problem too much from a domain expert can be distracting because they tend to not understand how to read the label from the inside. So they have all of these quote unquote best practices and domain dogma. And so you need to translate what you learn and what you understand through first principles product, taste, judgment, instinct, and rethinking the whole thing from a technology point of view. But if you are able to dig really deep, embed with the people you're trying to help, as you're talking about become the barista, become the customer service agent and iterate your way through that, then you'll have a deep understanding of the problem and an increasingly good understanding of the problem over time as you're learning and iterate.

Pablo Srugo (16:44):

So then, you know, step two, I'll talk about this other book really quickly. Only the Paranoid Survive. super famous, by Andy Grove. Great book. Everyone should read it. It talks about a late stage problem, right? Success breeds complacency. Complacency breeds failure; only the paranoid survive. So when you're hyper successful, a hundred million billion dollars in revenue and you start to get complacency and when complacency kind of breeds into the culture, then you tend to fail. So you have to be paranoid as a late stage CEO. This

Chris Saad (17:09):

Is ironic that Andy Grove from Intel would be the one to say this. 'cause 

Pablo Srugo (17:14):

That's right. <Laugh>

Chris Saad (17:16):

Intel is the currently the poster child of-

Pablo Srugo (17:18):

I feel like they didn't, they didn't read his own book. 

Chris Saad (17:20):

That's right. Well he's not the CEO  anymore, right?

Pablo Srugo (17:22):

Oh, I know, but <laugh>, you'd think they'd at least read it <laugh>. But I think the counterpart to this in the early days, getting to product market fit in terms of what I've seen from teams, from people, the people side is only the insanely focused survive. Like, just the level of maniacal focus that I've seen from these founders that have been super successful in those early days to me was pretty mind blowing, right? So here's an example. Mike Katchen, he's the founder of WealthSimple, which is like the Robin Hood of Canada. It's a $5 billion ish company today. He told me that in the early days he was doing consumer- it was a free consumer app. And what he was doing was he was so obsessed with customer satisfaction with his early customers being happy that he would call his customers within 30 seconds of them signing up, not like B2B, they're paying $10,000 a year.

Pablo Srugo (18:08):

Like obviously you're gonna call them, these are like free users will probably not pay you a cent, he's calling 'em within 30 seconds. He's giving them his personal number and he's like, if you ever need anything, call me directly.  I just wanna know how you heard about it, about us. I wanna know any problems you have. These are the sort of things that if you describe to let's say non founder, they'd be like, that's crazy <laugh>. You know, it's insane. And it is, it's insane. It's insanely focused, right? Like this is another example of Mark who's now running a over a hundred million dollars revenue business called GoBolt. He had a 1-800 line for kind of problems, right? 24/ 7. He's the one answering it. He's picking up at two in the morning. Like he's doing insane, crazy things. The sort of things that would be so obvious for you to outsource, but when you're obsessed about customer service, like he was insane, focus tells you if that's the most important thing, then that's the most important thing and I've gotta be the person that's responsible for that. And so whenever his phone rang, he would pick it up because maybe it's a sale, maybe it's a problem, maybe it's something important. And either way he wants to be the one to know about it. So I think that the second thing that I've seen that is very common amongst this group of hyper successful founders is just this insane level of focus that leads to really weird things, but for this stage of the business, I think it makes perfect sense. 

Chris Saad (19:21):

So two things on this in my vocabulary kinda the way I would frame this is actually not so much focus but hustle and obsession and doing things that don't scale. So this is, this is about like being obsessed and pulling out all the stops, right? And just doing whatever it takes through sheer force of will to bring your vision into reality and to connect with your customers, understand what they're going through, and make yourself, make your company grow. But at the same time, I actually think focus, as I would define it, is also insanely important. <Laugh>, right? On this show we've talked about focus over and over and over again. In fact, there's an episode in our back catalog here I'm seeing is September 16th, 2024. We call it “Conviction, the essential ingredient for focus and scale”. And you know, this is just one of the many episodes we've talked about around focus and one of the metaphors we've used Geneva and I is a hunter can't chase two rabbits at the same time.

Chris Saad (20:18):

If the rabbits go off in two different directions, if you try to split the difference and go some third vector in, in a different direction trying to think you're gonna catch both rabbits, it's not going to happen. And so not only do you have to be obsessive and hustle hard as you're describing here, you need to do it on an embarrassingly narrow problem and solution embarrassingly narrow and not hedge and split the difference. And so you talked about, you know, this idea of paranoia from the CEO of Intel, often founders make the mistake of being too paranoid that they're going to fail. So they're paranoid that they're gonna miss out on opportunities or that the thing they've chosen is not the right thing. So they're hedging and hedging, it's the paranoia that leads them to a lack of focus, a diffusion of focus. And so you need to be not paranoid that your thing is not gonna work. You need to be paranoid that you are not focused enough and really, really just go all in

Pablo Srugo (21:15):

Your default debt in the early stages, like 99% of these companies don't make it. So, like paranoia is only gonna help you so much and actually could be detrimental because it'll make you overprotect. Like you've gotta focus on the things that might make you that one or 10% that survive. And that's the hustle. And I say focus, by the way, one thing that I think is important is like if you're answering the 1-800 call every time it rings, you're not doing a lot of other things that you could be doing with that time. And so focus is inherently a trade off. Like if you're focused on one thing on one rabbit, you gotta let the other one go. And so that's where these two things miss for sure. Hustle is part of the equation. It's also though, this insane level of prioritization and deciding that, for example, for GoBolt, customer service is the most important thing. I'm answering the 1-800 line, I'm insanely focused on that. Yeah, I won't have time for this and this and this and that, that maybe normal CEOs should have time for, but this is my focus. And I think that's a core part of getting to success.

Chris Saad (22:09):

There's also another thing that this is touching on, which is there's a saying that every founder is kind of grabbed onto and completely misunderstood, which is the Airbnb “do things that don't scale initially.” And so you know, him answering everybody within 30 seconds doesn't scale. And in Airbnb's case Brian Chesky talked about how they went out and took the photos themselves and made the photos amazing because they realized high quality photos were a key to success. But founders often misunderstand that advice and they think “do things that don't scale” as in non-recurring engineering, bespoke work, custom consulting and you know, doing whatever it takes to win an account through custom software and professional services. So just again, because you showed something here that doesn't scale, it scales in the sense that it is bootstrapping a scalable marketplace or a scalable social network or in Airbnb's case, a scalable marketplace of accommodation, right?

Chris Saad (23:08):

So they weren't custom building software for Marriott. Yes, that doesn't scale, but it's also stupid 'cause that's not on the business model, right? What they were doing was going out and taking the first few photos to set the bar for their scalable marketplace. So they did things that don't scale to bootstrap a scalable marketplace. “That's right”. And that's the part, that's the second part of the sentence that most founders miss out. So yeah, there's a hustle here. There's doing things that don't scale, there's being obsessive and then there is being paranoid about the right things and then there is insane focus. I think all of that is encapsulated here in this, this step two that you're outlining, which is great, Pablo.

Pablo Srugo (23:46):

And so then step three, this is where we get more into the validation piece of it. I like to call this, you have to be in the market to win the market, right? And that's the only way that you're going to discover the sort of unique, subtle insights that are gonna make the difference. My go-to example for this Wattpad is now -it's a marketplace for readers and writers. People write like original books, publish them on WattPad, people read them, they've got like a hundred million or so active users and they ended up selling for about 600 million USD. But it was a weird story if you look at how it all kind of happened. And I think a lot of times we write these stories in hindsight, Alan, who was on the Product Market Fit Show told me like I knew that people wanted to express themselves and people would read original content.

Pablo Srugo (24:28):

And so we created this marketplace and all these sorts of things. It actually started, and this is a really a kind of older company still doing well today, but I mean it started in the early mobile pre- smartphone era. And the first iteration of this was how can people read books on the go? Like how can people read classic books on their little flip phones? And that was the app that Alan and his team built and then he wanted people to kind of publish books later. But the first one was just letting people read books. And then as he started to get word of mouth and people started talking about his platform as the best place to read classic books on the go, and he started to write blog articles about this super hyper niche idea problem that you could never build like a unicorn deck for, right?

Pablo Srugo (25:13):

But it was actually solving somebody's problem. It led to insights which then led him to kind of start this marketplace model where it was like, well what if people could write books specifically for this kind of, this setup, this interface? And then it started that flywheel and it actually took him, I believe like two years or so for him to get the first upload onto this marketplace of an original book. And then there's all these other things that came in that were frankly unpredictable or at least very hard to predict. Like the iPhone being such a huge success, the app store coming in and letting him build- because before that, uploading apps was a nightmare. And so then he finally was able to build like an iOS, an Android app and these sort of things and ride this mobile wave, which ultimately was a huge part of the reason that Wattpad became the big success that it became.

Pablo Srugo (25:58):

And so like, I think he had seen some of it, he saw the UGC, the user generated content wave starting because that was even pre-mobile, but he didn't know that the iPhone would come out and smartphone revolution would be as big as it was, but he benefited from it. And it's a hard one to kind of put together, but you have to be in the market to win the market means to me that at some point if you've done the research and you feel like, okay, there's a real problem here and you've decided the sort of things that really matter and you've prioritized and you're gonna get really focused, you will not have all the answers. You have to ultimately put something out there and start that kind of flywheel of learning to discover the sort of insights to have the sort of things happen that are going to ultimately lead to success. 

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Chris Saad (27:02):

Yeah, I mean to me this is really about agility and iteration, right? So we've talked about this idea that you can't research in a vacuum and in a pure academic way. And this is taking this to the next level, right? As you're in the market and even if you've had a little bit of success, you need to be paying close attention to what the signals are from the market, where the trends are going, what's working, what's not working. And you need to be agile enough to adjust, to capture new opportunities and to evolve as you learn and as the market changes. Now, the real trick here is walking the line between agility and thrash. And so like the, just the last step that we discussed, we talked about you can't chase two rabbits. And so the question is when is it okay to spot the next rabbit or to pivot off that rabbit that you lost and go to the next rabbit?

Chris Saad (27:52):

And this in some cases just takes art, taste, intuition, judgment. In some cases it can take data. So one of the previous episodes we talked about with the CEO of Eucalyptus where they're launching kind of brand after brand market after market, we talked about s-curves. When you know that your first business, your first feature, your first product is, you know, is reach that hockey stick in, its growing, at some point it's gonna start to taper off and you wanna build, start building your next s-curve and, and your next big idea so that you can start to click that ladder that together with your other business, your first business. And so there's a real art here of having a vision, understanding the problem you're working on, staying focused and disciplined, but also listening carefully, noticing trends and opportunities or shifts in market technology, sentiment, culture regulation and knowing when to pounce or when to add to your business. And unfortunately, this is one of those things that just takes experience. It takes good counsel, it takes rightsizing your business and your capital and all this kind of stuff. But yeah, you have to be really tuned in. 

Pablo Srugo (29:02):

That's right. And I think you just at some point have to kind of take that leap in and understand that things will evolve, things will change and you'll learn so much more as you get into it. Like ApplyBoard's. Another good example of this, you know, Martin started that and now it's like hundreds of millions in revenue. But when he started, this was like a platform to help international students study abroad. And he didn't even know that in these other countries there's this whole world of agents, these little micro businesses that help these international students get abroad. And so he started by going directly to these students. And only by doing that did he start to organically have these agents leverage his platform. Now ApplyBoard is predominantly used by agents and it's basically the stack that sits on top of these micro businesses that lets the agents do their job better. But he didn't know that before he launched, right? And so this is the kind of step-by-step piece of building a startup that makes it all so unpredictable. I think often you want to have all the answers, you want to have this thought out plan, these forecasts and all this stuff. And you gotta get out there and kind of take some punches to the face first and then, and then see where it goes.

Chris Saad (30:06):

Yaniv loves to say startups are learning machines. So anyone listening to us here who has spent months and months and months developing, you know, tens and hundreds of pages of a business plan, you lose, you are failing. Stop. If you are a perfectionist, perfectionism is just an excuse for procrastinators. If you want a whole plan laid out for you, then you are too risk averse to be a founder. Quit, go do something else. You must be willing to be agile, to be iterative, to learn to fail. Failure is not just okay, it is an integral part of the process. You have to put an experiment, try something, see its limits or its complete failure and then iterate and try something else. And so unless and until you can get into that mindset, you are in the wrong business. There's just really no way to mince the words about that. This is really, really important. Some people are just really anal retentive and they need to know everything upfront and they just do not like to fail and they get very emotional and entangle this stuff. You just, you're not a great startup founder. We like to be very pointed on this show, Pablo, we, what are we really saying here? What we're really saying is <laugh>, it's launch, learn, listen, don't be thrashy and be prepared for your plan to get thrown out and to adapt to what you learn through the process. 

Pablo Srugo (31:26):

So this is the last book I promise that I'm gonna throw you. And this might be one that I actually, some people don't know of, Man’s Search For Meaning it's actually my favorite book. It's actually more of a psychology book. But anyways, there's this one quote and he says, happiness is and must remain a side effect or byproduct and is destroyed and spoiled to the degree to which it has made a goal in itself, which makes total sense. Like if you wanna be happy, you can't just force yourself to be happy, you have to find meaningful work, have meaningful relationships, invest in your health, and then as a byproduct you tend to become happy. I found through the product market fit show that there is a kind of counterpart to this in startup land, which is that growth is and must remain a side effect or byproduct and is destroyed and sped to a degree to which it is made a goal in itself, at least in the early days.

Pablo Srugo (32:11):

Later on when you're like Uber size, public company, whatever, and you have proven levers on sales, on marketing, product, customer service, whatever it is that you can invest into that you can tweak, that you have proof points that lead to certain amounts of growth, you can make growth a goal in itself. And you can say, next year I wanna grow at 20% and here are the things that we're gonna do. But before you have product market fit, you don't have any of these levers proven out and you can't put the kind of the cart before the horse. You can't all of a sudden say this quarter we're gonna grow. Here's my forecast, we're gonna grow 30%. Because you have no idea why you're growing in the first place. You have to focus on something else. And so step four is kinda this: forget growth, find value idea.

Pablo Srugo (33:00):

Like the first thing you need to obsess about in those early days is to deliver real value. Growth will come as a result. A good example of this that we had on the show is Jack Newton from Cleo, which is a startup outta Vancouver now probably in the 3- $4 billion range when he started, there's this really interesting example he gave me. He kind of had this platform in the legal tech world and he had this beta right that he wanted to take customers through. What he did for that beta is he actually added friction to the funnel. So what he said was, in order to be part of this beta, you have to watch- I think it was a pretty small ask, right? But it was like, you have to watch this like 30 minute video and only if you do that can you be part of this beta.

Pablo Srugo (33:38):

Now the reason he did that is because he wanted a small handful of very highly engaged customers. It wasn't about growth, it wasn't about getting the most number of customers because think about it, the number one thing you learn in growth is remove friction, remove barriers. You wanna grow faster, make things easier for people. But that makes sense if your goal is to grow, his goal wasn't to grow, his goal was just to deliver clear value. And to do that, he didn't need a thousand companies in his beta. He needed a few dozen, but specifically a few dozen that really cared, that were going to invest the time that we're going to give him the feedback because then he felt like he could actually get closer to delivering real value. And I think that's a clear thing that people tend to miss. And the way this usually comes out, the way that I see the mistake is forecasts even a year, two years, forget five years, right?

Pablo Srugo (34:28):

But like even, hey, like next year we're gonna do this much in revenue. That's great when you have got five, 10 million in revenue. But specifically it's great when you know that, hey, last year we spent this much on this marketing channel, we're gonna double it and we should get twice the amount, right? And you've got a few of these different formulas that you've actually proven out and you're like, we're just gonna dial them by this much. And so this much should come out. It's still a guessing game, but it's grounded in real foundation and real reality. But when you don't have that and you're like, yeah, next year we're gonna do 2 million in revenue, it's completely made up. And all of a sudden I find companies start measuring themselves against this like  pseudo-forecast. And it's like we're ahead of forecast, we're behind forecast. And I'm like, I don't care <laugh>, because it's a made up forecast anyways, forget like, let's put growth on the side for a second. We're not there yet. Let's focus on how much value are you really delivering? How much do your customers really love your product? 'cause only when you really crack that will you start to get the pull that then allows you to invest. That then allows you to start focusing on growth itself. 

Chris Saad (35:29):

Yeah, this is such an easy, obvious and common mistake. There are worse examples than this. There are people that are not focused on growth, they're focused on revenue, they're focused on subscriptions, they're focused on, I had a, a founder the other day said to me, we wanted people to pay $180 for this, but they're only willing to pay $80 for this so we fail so we can try something else. And I'm like, what are you talking about? There are so many aberrant behaviors or false north stars that can send you off into all of these crazy directions. The only thing that matters, as you're saying, Pablo, is creating value. But then the next question that founders need to understand is like, what does creating value mean? What creating value means is A. solving problems or B, generating dopamine. That's it. It only means one of those two things. Maybe there's a third that I'm not thinking about right now, right? It's like, have you found a real problem, a real painful and urgent problem for someone? And are you making it better? And if not, keep working until you make it better? Or are you giving them dopamine? Like, you know, think of Tinder or think of you know, Google or think of pornography, right? It has to be one of those two things. And even those you could characterize as solving problems, by the way.

Pablo Srugo (36:43):

Yeah, some of those are solving problems, some of 'em. But I get what you're saying. And especially on the consumer side, sometimes it's not really a problem. It's more of oh yeah, this is awesome. So then you start using it

Chris Saad (36:52):

Entertainment, right? So TV, movies and so on. And so, you know, there's so, so, so many founders. Almost every founder I meet who's running into trouble with growth or revenue or subscriptions or retention, I ask them, you know, like, what's going on with the product? Do people find value? Are they getting the aha moment? Where are they dropping off? What is the number one reason that more people aren't getting more value? And they're like, oh, well we sort of don’t know. We've been focused on growth, we've been focused on revenue, we've focused on, and I'm like, what are you talking about? And yeah, if you have a massive business and you have a statistically meaningful or a massive throughput through that business, you're a Google, then you can be Marissa Mayer, and you can be optimizing shades of blue to increase the conversion rate from 11% to 11.2% so that you can be entirely focused on growth. But if you are in the early days and you are pre-product market fit, which is by definition what this episode is about-is how to find product market fit. The only thing that matters is creating value by solving problems or generating dopamine. That's it. So go back and focus on your user and focus on your product.

Pablo Srugo (37:59):

And step five I think is a perfect segue because the way you, you know, that you're creating value is you solve a number one problem. And if you don't, the key thing I've seen is so many examples of pivots, right? And so my step five is: pivot harder faster. I'll tell you this, I've interviewed well over a hundred, I'm not sure the exact number, let's say over a hundred successful founders. And I've never heard someone tell me that they regret a pivot they made. I've heard a lot of people say to me, I wish I pivoted sooner, but not, I wish I'd never made that pivot. That's just so rare. It's almost worth ignoring. And so I think what happens is, and, and I get it 'cause I've been there as a founder, you build something, you devote all this time and energy to it, the last thing you wanna do is throw it away.

Pablo Srugo (38:40):

There's so much sunk cost in there, but if you're not solving a number one problem, it's oftentimes the best thing you can do is something much closer to a restart than you might think. The example I have for this, it's almost like a textbook pivot. I love this story. Rob, from Noibu, now doing tens of millions in aRR first time founders and they start with this really cool sounding idea of building 3D storefronts for retail stores. Literally, because it sounded cool. So the idea was if you go and you shop online at any given, let's say clothing store, they all look the same to like these catalog 2D views. But if you go to their stores, there's all this experience. There's so much money invested into the layout. What if you could take 3D imaging of it and put that online and you can click through and all this stuff, you know, again, like sounded kind of cool, didn't really make much sense if you get down to the fundamentals of it.

Pablo Srugo (39:31):

But they hustled their way to something. They had 15 customers, 3000 in MRR in two years, right? Clearly like pushing a boulder up a hill, but not zero. And so they always had something that kept them going. At what point what happened was they had this really big retailer that had moved through the pipeline, moved through the sales cycle, and, and I remember, 'cause I was really close to these guys, they would tell me like, man, once these guys signed, like, everything's gonna change. It's such a big deal for us. It's totally gonna change our revenue trajectory. And then they got the callback and they got it, and he remembers the date. Imagine this, he remembers the date on the podcast. He told me it was February 27th, 2019, where they called back and they're like, listen, we reviewed the budget for next year.

Pablo Srugo (40:11):

We had to make some adjustments. We'll reconsider you next year. That's some of the most painful stuff to hear. Like when you're hearing that next year, come back next quarter. Like sometimes it's true. But if you're hearing that consistently, it's just another way of them telling you- they're buying something else this quarter and it's not your thing. So you're almost by definition, not solving a number one problem. and startup plan, if you ain’t first, you're last. Like, that's really the Ricky Bobby kind of way to think about it. So what did they do? They shut down the product. They literally said, okay, we're not selling this anymore. They called all their customers. They said, listen guys, we're not doing this anymore. And they did, like going back to those steps, they went back to step one. They did real research. They asked about real problems, like, what's your day-to-day like?

Pablo Srugo (40:51):

They really started the whole thing through and they uncovered a completely different problem around checkout errors. It turns out that these customers were losing 5-10% of their sales at checkout because people on some device, on some browser version would try to click buy and the thing wouldn't work. It was literally different bugs that they had in different, many different instances. And it cost 'em 5, 10% of revenue. So they went out and started solving that problem. And in two years, it's like in the first version, it took two years to get the 3000 MRR. After going through all these steps and doing this really hard pivot, two years after that they were doing 300,000 in MRR. So a completely different kind of night and day, same team, same vertical, still e-commerce, but completely different result when they were solving a number one problem.

Pablo Srugo (41:39):

 and this is probably the hardest step, honestly, it's just pivoting harder faster because you're taught to be resilient, to be persistent. You actually a hundred percent need that. And yet, if you're barking up the wrong tree, pushing up a boulder up a hill, whatever analogy you wanna think about, it's just, you can't will yourself to success in that way. You have to fundamentally be going after something that really matters to your customer. And that's when all the other ingredients like hustle and persistence and so on, will take you towards success. But if you don't have that, it's near impossible to get there.

Chris Saad (42:13):

One of the biggest mistakes in my career, and by the way, I've made all of these mistakes, so I have all of this advice.

Pablo Srugo (42:17):

So I just what it's worth,

Chris Saad (42:19):

<Laugh>. Yeah, exactly. But one of the ones that sticks with me is when we pivoted, A. we didn't pivot fast enough, and B. we didn't pivot hard enough as you to put it the way you're putting it, I would say, rather than the word hard, I would describe it as complete a complete pivot. So often people will change their target market or maybe they'll change their product a little bit, but often what they need to do is change their product quite dramatically. As soon as you change the target market and the problem the product actually often needs a much more radical rethink than you would've initially imagined. But that's not where you need to stop. Then people sort of forget they need to change their business model potentially. They need to change their pricing, they need to change their positioning, they need to sometimes change the brand, the entire brand and more dramatically, you sometimes need to change the entire team or change your investors, right?

Chris Saad (43:13):

So you need to actually go out and raise again from different investors who believe in a different thing. And so it is often underestimated how impactful, how deep and wide the implications of your pivot are. So you need to go way beyond target market, way beyond positioning, way beyond some slight changes to the product all through the entire stack of your business. And so that's what you mean, I think Pablo, by harder it really means reevaluate every aspect of your business. The other thing you touched on, which I just wanna echo for everybody, is forget, forget, forget sunk cost. You are an early stage pre-product market fit startup if you're listening to this episode, right? You cannot afford the luxury of technical debt, business debt, customer debt, right? Legacy debt, the cognitive debt. Throw that aside. You are a learning machine. Need to be iterative, agile and move fast. Put it aside and focus on first principles. Where does this pivot really take you?

Pablo Srugo (44:15):

Yeah, a hundred percent. There's almost this weird, negative connotation. I find sometimes with founders and pivots, you know, I'll talk to them and then let's say some amount of quarters later or whatever, I'll talk to 'em again. They're doing something different. And I'm like, oh, you pivoted. Well, no, no, it wasn't really a pivot. I mean, if you think about it, we just kind of changed and I'm like, it's okay., like that's fine. Embrace it. You know what I mean? Like the thing you had at the beginning wasn't really working, so you had the courage to say that it wasn't working and do something else and pivot own it. Like there's nothing wrong with it. And frankly, I think anybody that's been in an early stage long enough should kind of expect it. It's they're few and far between the companies that just get it right on like V1 in many, many cases there's some amount of pivoting. Like it's a, this, it's a scale, right? But some amount of pivoting in many cases is serious. in order to find, you know, true success.

Chris Saad (45:06):

Yeah. And again, a shout out for our back catalog. We've talked about pivoting quite a lot in the show, and there's an episode B2C versus B2B two C, early execution overview. Your MVP sucks. I'm just looking back through our catalog here and we know the word pivot is mentioned a lot in the show notes. So please do a search on tsp.show and find all the episodes about pivoting. This is really important. It just goes so far and so deep. What happened to me was we were 2, 3, 4, 5 months into a pivot and I realized we hadn't changed some really important stuff that in hindsight was so obvious, so obvious it was embarrassing and it was really affecting the business and it was a real headwind for us. This is very, very cool, Pablo. Thank you for walking us through all of this. And so just to quickly summarize here, we're talking about : start in research mode or actually dig deep into the problem, really understand what's going on, but don't be too academic.

Chris Saad (45:58):

Don't try to validate by just asking people. If you like this thing, be insanely focused and hustle, hustle, hustle. Pull out all the stops and do whatever it takes to make your vision a reality through sheer force of will to do things that don't scale, but only on the road to a scalable business. And you have to be in the market to win. So that means launch, listen, learn, iterate, adapt, but don't thrash. Be careful about thrash. And then you need to be not obsessed with growth and revenue and subscriptions and trying to drive some business outcome. You need to, in the early stages, be obsessed with finding a real problem and solving it for real, for realsies. Solve real problems or create dopamine. And then, and only then can you actually start to grow and focus on growth. And then finally, as we just touched on, you may need to pivot you. You may in the end just be in the wrong space or in the wrong message and the wrong problem. And you need to pivot. And when you do pivot hard, reevaluate the whole business from first principles and, and rethink the whole thing. Pablo, thank you so much. For boiling down, you know, your hundreds of episodes on the show on your show, the product market fit show into this concise you know, one hour package. It's been very, very helpful. 

Pablo Srugo (47:12):

I'll leave you with this because I know having been through it and, and speaking with, you know, a lot of founders as, as you do, like these are five steps, I think they can definitely help, but they're not a guarantee, you know, to finding product market fit. The reality is it's more art than science. And, I could see founders thinking like, okay, but I've done all these, or I could see myself doing all these and still not get there. And it's a hundred percent true. Like, just because you do all five of these doesn't mean that you're gonna get the product market fit. But let me, let me end with one story. 'cause I, I find stories of the most compelling for those who can see this. This is the face of a founder who's a good friend of mine who approved this message, <laugh> the cockroach.

Pablo Srugo (47:49):

And I call him the founder Cockroach. He started a company called Block Through, but before that, in 2010, just before I met him, he started his first startup, which ultimately failed in 2013, which was when I met him, he started his second startup and that also failed. And there was a whole conflict and all this stuff with his co-founder. So it was not, you know, a pretty kind of situation by 2015. So he's five years into his startup journey, let's say. And he started this company called BlockThrough. And it doesn't go well <laugh>, it doesn't go well at all. Actually for 20 15, 20 16, 20 17, he's got truly nothing like, hasn't really fundraised. He's raised a few angel rounds, but he was telling me he's hustling for a $25,000 check and then he's got like four weeks of runway at any given time. This is after eight years, if you think about it, eight years of work, building startup.

Pablo Srugo (48:38):

He's got effectively zero success, nothing to show for it. And I, I wanna accentuate this point because when you start in 2010, when he started in 2010 and he was in his early twenties, it was really cool. And I'm sure he went into places and people were like, oh wow, you gotta start. That's awesome. Eight years in. Not only is he exhausted and tired, but his friends, they're lawyers, they're doctors, they're successful execs. Like they've moved up in the world all of a sudden <laugh> like you lose all that coolness factor, but you're still fighting the hard fight. And like I said, at one point he has four weeks of runway and he puts out- I was getting these, 'cause I'm a good friend of it, I was getting like the monthly email. So I was kind of seeing this, you know, live aside from just the product market fit show.

Pablo Srugo (49:17):

When he told me the full story, but I was getting these updates and he had four weeks of runway and he puts out the third version of his product and this is what happens. Just absolute explosive growth for the first time in his startup journey. Like, it just really hits everything that he learned, all the different tweaks that he'd make finally end up in the product that customers truly wanted. He gets that product market fit, you know, five, six months from launch he's doing a hundred thousand dollars a month, right? And I was getting these emails, it was like zero, then 10, then 20, then 40, then then 80, then a hundred KA month in revenue. And ultimately Marty went off and he was able to like a few years into it, I guess a couple years ago he sold this company. He sold it for nearly a hundred million dollars.

Pablo Srugo (50:00):

He didn't raise much. So he did very, very well as a result of this. But I think the point of this story is if you do all those other five steps, there is no guarantee that you're gonna get product market fit on your current startup or even on your next one that this product's gonna work. Or even if you pivot that the next product's gonna work. I think the only guarantee, if you can even call that, that I've seen that you can hit product market fit is doing what Marty did and staying in the game every single time. Increasing your odds, taking those learnings, dialing up, making less avoidable mistakes, but fundamentally staying in the game long enough for something to truly work out.

Chris Saad (50:39)

 I love it. 

Pablo Srugo (50:40)

Well that's been great man. Thanks so much for jumping on the show. Really enjoyed having this chat with you. 

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