What is the primary purpose of a new business venture? Remember: ventures can be freestanding startups or initiatives within larger organizations. In either case, the purpose of a venture is to find product-market-fit.
One definition of a venture I like to use is just “a group of people trying to find product market fit before they run out of money.”
It’s that simple.
Here’s a quick definition of product market-fit (we’ll go into this more later). Product-market fit is “finding a good market with a product capable of satisfying that market.”
If a venture achieves product-market fit (and that’s a big if), its nature changes: it’s still about building circles of relationships, but now the purpose is about growing that market foothold, and making delivery of the product sustainable.
In entrepreneurial terms you’ve become a SCALE-UP; in traditional business terms you’re IN GROWTH MODE. In both cases the way you operate changes fundamentally, as do the kinds of people and relationships you’ve got to set up and nurture. Most of business is about this: from marketing to operations to finance to HR. We’ve gotten pretty damn good at that part. But it’s all based on products that have found their market.
When it doesn’t exist yet the big question is HOW DO YOU FIND PRODUCT-MARKET FIT? That’s what ventures do and that’s where the dirty secret of the venture world comes in. You ready? Here we go:
Investors don’t know. Customers don’t know. The most knowledgeable academics don’t know. Venturepreneurs don’t know – they’re guessing. Even venturepreneurs who found product-market fit ONCE BEFORE don’t know how to find it again.
Why? Because, thanks to technology, the potential product definitions and the markets that need them are always changing. What you did to find product-market fit last time will almost certainly not work again because … time has passed.
What everyone is actually doing is placing bets. Investors bet on ventures that have the best chance of finding product-market fit: experienced leaders, convincing teams, convincing storytelling. The more money you have, the more time you have and the more mistakes you can make before you figure it out.
So the purpose of a venture is to find product-market fit.
I hope that’s useful. But it does beg a lot of question: how do you define product-market fit? What are the best ways to try to find it as quickly as possible? Keep reading.