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Before and After Product-Market Fit with Peter and Calvin from Segment

Episode #032

Why is it so difficult to recognize product-market fit before you find it? And how do you find it, anyway? Learn about the struggles the team behind Segment faced, and how everything changed after they built a product that people wanted.

  1. 4

    Great episode. Thanks for sharing your experiences!

  2. 3

    My Main Takeaways:

    • Peter says that a lot more people can found a company than think they can.

    • Peter, Calvin and their friends were very close, they spent a lot of time together coming up with failed ideas for a year and a half, they shared the same apartment and hung out 24/7 brainstorming, thinking and planning.

    • Peter and Calvin got into Y Combinator with an idea of a button that students can press in lectures/classes when the student is confused about what the professor is talking about. They raised $500k on demo day.

    • Don't project your view of the problem into the world. Instead, actually seek to understand the problem. - An early mistake Peter and Calvin made was push their view of the problem into the world, rather than to actually see the problem for what it really was.

    • After pivoting from their previous failed idea, they spent another year building out an advanced analytics segmentation platform, which they struggled to find product-market-fit for. They started running low on cash (low on the $500k funding).

    • They began improving on the idea, and even made it open source, and it began getting some small traction. But they still hadn't found a way to make this open source product a business.

    • They tried to get people to use their software, but people were already using another similar software and didn't want to use theirs

    • Then Peter came up with the idea to make a landing page for the project, and put it on Hacker News, it went straight to the top, and they got lots of signups. They then made a hosted version of the library. and in a few days had 70 companies using their software. So, they found product-market-fit.

    • A few months later they had about 1000 companies sending data through segment, but they still weren't charging for it. They were scared of asking for money. Then they eventually started asking people for "ridiculously small amounts of money". A customer even told them that they were charging far too little.

    • They were running out of money, so raised $2 million more in seed funding, and started building a team. Then they soon went from a 0 to a $1 million in annual revenue, and then to $2.5 million.

    • These guys weren't natural sales people, so when asking for large amounts of money when selling, they felt uncomfortable, so they got Advisors who helped to push them through the discomfort.

    • When selling and pricing your product, get out of the developer mindset, don't charge too little, just charge less than the value you provide for the customer.

    • To find the ideal price, they'd double their pricing after every conversation where the customer felt that their offer was at a reasonable price, until they hit a ceiling, and saw that their price was more than the value the product would create for the customer.

    • Find out WHY the customer finds your product valuable.

    • Once you have product-market-fit, you can then begin thinking of investing in sales and marketing.

    • It's easier to find product-market-fit a second time, after you've done it for the first time (on the same product) - Peter says that when you solve a customers problem, they'd be happy to tell you all their problems, because you may be able to solve their problems for them.

    • One thing that they wish they did earlier was: Writting everything down (like their assumptions, so that they could revisit their past assumptions in the future).

  3. 2

    Very impressive story. I also liked the format with 2 guests. I took a lot of notes, as the product I am currently developing has a similar approach but with only 3 integrations instead of 200+ like segment.com - Bootstrapping 4tw instead of VC ;)