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Lenny's Podcast: Product | Growth | Career
A framework for finding product-market fit | Todd Jackson (First Round Capital)

A framework for finding product-market fit | Todd Jackson (First Round Capital)


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Todd Jackson is a Partner at First Round Capital. Before moving into venture capital, he played a crucial role as VP of Product and Design at Dropbox, guiding the company until its IPO in 2018. Prior to Dropbox, Todd led product management for Twitter’s Content and Discovery teams after selling his startup, Cover, to Twitter in 2014. Before Cover, Todd oversaw product development for Facebook’s Newsfeed, Photos, and Groups. He kickstarted his career at Google as an associate product manager and eventually led product for Gmail, witnessing its growth from beta to 200 million users. In our conversation, we discuss:

  • Why product-market fit (PMF) matters

  • First Round Capital’s four-part PMF framework

    • Level one: Nascent product-market fit

    • Level two: Developing product-market fit

    • Level three: Strong product-market fit

    • Level four: Extreme product-market fit

  • Examples of companies at each level

  • How to know if you’re stuck at a level, and how to get unstuck

  • What to change if you’re stuck: persona, problem, promise, and product

  • The goals and challenges at each stage

Some takeaways:

  1. First Round Capital’s PMF framework consists of four levels: nascent, developing, strong, extreme

    1. Level one: Nascent product-market fit. Likely a pre-seed or seed-stage company. The goal in this stage is to find three to five customers with a problem worth solving, engage with them, deliver a solution, and validate that solution. [examples: Vanta, Lattice, Persona]

    2. Level two: Developing product-market fit. The focus is on scaling demand and finding a repeatable channel. It’s a challenging stage where founders need to open the floodgates of demand and make the product do the heavy lifting. This entails scaling the demand source, investing in channels beyond warm intros, such as cold outreach, content creation, or community events. Moreover, founders should start paying attention to key metrics like sales conversion rates, retention rates, and efficiency metrics like the magic number (new ARR divided by CAC). [examples: Looker, Ironclad]

    3. Level three: Strong product-market fit, where the fish are jumping into the boat. The business is finally gaining momentum, with leads coming in more easily, possibly even from referrals and word of mouth. Founders should have a scalable demand channel, high ACV, and be thinking about efficiency metrics. Challenges may arise at this stage, such as encountering increased competition, facing saturation in existing channels, or struggling with the balance between growth and expenditure. [example: Verkada]

    4. Level four: Extreme product-market fit, where metrics are robust and the company has achieved significant milestones. Your team is more than 100 people, and you’re likely series C, D, or beyond. A focus on expanding the total addressable market (TAM) by entering new markets or introducing new products becomes crucial for sustained growth. [examples: Vanta, Stripe]

  2. Typically it takes four to six years to achieve extreme product-market fit. Founders should dedicate 12 to 18 months to Level 1, and up to 12 months at Level 2. Level 3 lasts at least two years as the company scales and moves toward Level 4.

  3. Common signs that founders can’t get past Level 1 include low usage, high substitutability, or variation in favorite features across the customer set, for a period of at least six months.

  4. The majority of founders get stuck at Level 2, spending over 12 months struggling to generate new demand. Common signs that founders won’t make it to Level 3 include high churn, slow sales cycles, or lack of urgency from potential customers.

  5. If you’re stuck at a level, reassess one or more of the four P’s: persona, problem, promise, product.

Listen now on Apple, Spotify, Overcast, and YouTube.

Where to find Todd Jackson:

• X: https://twitter.com/tjack

• LinkedIn: https://www.linkedin.com/in/toddj0/

Where to find Lenny:

• Newsletter: https://www.lennysnewsletter.com

• X: https://twitter.com/lennysan

• LinkedIn: https://www.linkedin.com/in/lennyrachitsky/

In this episode, we cover:

(00:00) Todd’s background

(06:07) First Round Capital’s PMF framework

(09:07) Why product-market fit is so important

(11:02) Who can benefit from this framework

(12:55) The product-market fit method

(16:54) Broad overview of the framework

(21:35) Level one: nascent product-market fit

(33:16) The four P’s

(39:13) Level two: developing product-market fit

(49:13) Signs you’re stuck at level two, and what to do

(55:12) Level three: strong product-market fit

(01:00:17) Signs you’re stuck at level three, and what to do

(01:02:22) Level four: extreme product-market fit

(01:06:55) Rough timelines for each level

(01:11:18) A quick recap of the framework

(01:12:15) Diving deeper on the four P’s: what to do if you’re stuck

(01:13:56) Dollar-driven discovery

(01:25:11) Apply for the product-market-fit method program


• First Round: https://firstround.com/

• Twitter Acquires Cover: https://www.vox.com/2014/4/7/11625332/twitter-acquires-cover-an-android-mobile-startup

• Dropbox: https://www.dropbox.com/

• Rahul Vohra on LinkedIn: https://www.linkedin.com/in/rahulvohra/

• How Superhuman Built an Engine to Find Product Market Fit: https://review.firstround.com/how-superhuman-built-an-engine-to-find-product-market-fit/

• How to validate your startup idea: https://www.lennysnewsletter.com/p/validating-your-startup-idea

• How the most successful B2B startups came up with their original idea: https://www.lennysnewsletter.com/p/how-the-most-successful-b2b-startups

• How to know if you’ve got product-market fit: https://www.lennysnewsletter.com/p/how-to-know-if-youve-got-productmarket

• A guide for finding product-market fit in B2B: https://www.lennysnewsletter.com/p/finding-product-market-fit

• Product-market fit method: http://pmf.firstround.com/

• Stripe: https://stripe.com/

• Plaid: https://plaid.com/

• Paths to PMF: https://review.firstround.com/series/product-market-fit/

• WeWork: https://www.wework.com/

• Casper: https://casper.com/

• Vanta: https://www.vanta.com/

• Christina Cacioppo on LinkedIn: https://www.linkedin.com/in/ccacioppo/

• Ramp: https://ramp.com/

• Velocity over everything: How Ramp became the fastest-growing SaaS startup of all time | Geoff Charles (VP of Product): https://www.lennyspodcast.com/velocity-over-everything-how-ramp-became-the-fastest-growing-saas-startup-of-all-time-geoff-charl/

• Jack Altman on LinkedIn: https://www.linkedin.com/in/jackealtman/

• Lattice: https://lattice.com/

• Zachary Perret on LinkedIn: https://www.linkedin.com/in/zperret/

• Positioning: https://www.lennysnewsletter.com/p/positioning

• Retool: https://retool.com/

• David Hsu on LinkedIn: https://www.linkedin.com/in/dvdhsu/

• Persona: https://withpersona.com/

• Rick Song on LinkedIn: https://www.linkedin.com/in/rick-song-25198b24/

• Lloyd Tabb on LinkedIn: https://www.linkedin.com/in/lloydtabb/

• Looker: https://en.wikipedia.org/wiki/Looker_(company)

• Jason Boehmig on LinkedIn: https://www.linkedin.com/in/jboehmig/

• Ironclad: https://ironcladapp.com/

• Lessons in leadership | Scaling an org and tactical management advice | Jack Altman (Lattice): https://www.youtube.com/watch?v=cZzXqf61mrQ

• Filip Kaliszan on LinkedIn: https://www.linkedin.com/in/kaliszan/

• Verkada: https://www.verkada.com/

• Ali Ghodsi on LinkedIn: https://www.linkedin.com/in/alighodsi/

• Databricks: https://www.databricks.com/

• Stripe Radar: https://stripe.com/radar

• Stripe Atlas: https://stripe.com/atlas

• Square Stand: https://squareup.com/shop/hardware/us/en/products/ipad-pos-stand-integrated-card-reader

• Cash App: https://cash.app/

• Square Checking: https://squareup.com/us/en/campaign/banking/checking

• Square Loan: https://squareup.com/help/us/en/article/5654-get-started-with-square-capital

• Casey Winters on LinkedIn: https://www.linkedin.com/in/caseywinters/

• How to sell your ideas and rise within your company | Casey Winters, Eventbrite: https://www.lennyspodcast.com/how-to-sell-your-ideas-and-rise-within-your-company-casey-winters-eventbrite/

• Josh Kopelman on LinkedIn: https://www.linkedin.com/in/jkopelman/

• The art and science of pricing | Madhavan Ramanujam (Monetizing Innovation, Simon-Kucher): https://www.lennyspodcast.com/videos/the-art-and-science-of-pricing-madhavan-ramanujam-monetizing-innovation-simon-kucher/

• Simon Kucher: https://www.simon-kucher.com/

Production and marketing by https://penname.co/. For inquiries about sponsoring the podcast, email podcast@lennyrachitsky.com.

Lenny may be an investor in the companies discussed.

Lenny's Newsletter
Lenny's Podcast: Product | Growth | Career
Interviews with world-class product leaders and growth experts to uncover concrete, actionable, and tactical advice to help you build, launch, and grow your own product.