Spotting PMF In The Wild

written by Geoffrey Greene on 3/9/2023

How do you know when you’ve got Product/Market Fit? I’ve scoured the internet for details on the subject and most of the advice is of the I don’t know how to describe it but I know it when I see it variety. Snark aside, in my nearly 20 years of CTO experience, I’ve learned that getting to PMF is the whole startup game. You don’t need a lot of fancy metrics, processes or high brow mission/vision/values statements (though these can be useful). You need to build a viable business. And I define “viability” in the answer to 4 simple questions: do we grow, do we attract new customers, do we keep customers, are we in a good market?

The best example in my career of PMF is my time at Bullhorn, 2005-2012. One moment stands out to me from my first few months on the job. Many of the early clients were in the Boston area. A few months before I joined, Bullhorn had signed its largest deal to that point, about 400 to 500 licenses. The service was not stable with that number of concurrent users. As a result Art, the then and current CEO of Bullhorn, was in steady contact with the CIO. One day Art and I took a road trip to their office, maybe 30 minutes north of Boston. I recall walking through their large office, gazing over the heads of people in an endless expanse of low-walled cubes, seeing Bullhorn open on every single computer screen. It was a sobering experience. At that moment, I felt butterflies in my stomach which I interpreted as performance anxiety. This business had put its trust in us. We weren’t just some minor app. We were the app. The business literally ran on Bullhorn.

Once in the meeting room with CIO and some other folks from the business, the CIO skipped the typically small talk and just tore into Art, forcefully describing the impact on his users of how unreliable and bug-ridden the service was. It was uncomfortable. This was my first meeting with a customer and the first time I had seen Art in this setting. I was stunned at how much of the staffing business Art seemed to know, as he was discussing the various issues with the CIO. Bullhorn had pivoted to staffing in 2001 and started to get traction in 2002, so he couldn’t have had more than 3 years of direct experience but he was more than holding his side of the conversation with someone who had spent their whole career in the industry. To my ears it felt like we were being scolded by a teacher or a coach. The CIO was alpha-dogging us but Art kept his cool and handled the situation smoothly. I was busy jotting down all the issues that were coming up so we could prioritize the obvious work we had in front of us.

At the time, the interaction with the CIO caused me to feel a massive weight of unmet expectations and fear. There were so many issues, both bugs and poor service quality, that leaving that meeting, I remember thinking, Bullhorn isn’t going to make it. I looked over at Art from the passenger seat, he seemed fine, glancing over at me with a yeah what’s up? expression. I said, “that was something eh?”. He seemed chill. “Yeah, we’ve got some work to do.” I thought, work to do? Are you insane? There’s too much! How can we make progress? I was totally ignorant of the message that Art got from that exchange with the CIO, which was that only a truly differentiated product could generate such a strong reaction from a customer and that if we made quick progress on their issues we could cement the relationship with them. It didn’t occur to me at the time, because the concept was coined in the mid 2000s, that what we just experienced was a strong signal of Product/Market fit.

Art didn’t know about PMF either because nobody did. But he had the experience of launching his startup in 1999, building out the first Bullhorn product, spending 2 years with no traction, somehow surviving the dot bomb bust, then pivoting to staffing in 2001. Even though the concept of PMF didn’t exist, Art knew they were on to something because he was busy, customers were signing up and using the product. The phones were literally ringing off the hook. Bullhorn was seeing renewals and referrals. There was buzz. And he was also supremely confident that we would be able to fix all the issues.

Too many issues…

Once we were back in the office we sat down to discuss what was really going on with the service. Yes there were software defects, code that was just wrong. I wasn’t worried about this because it’s business logic and, well, it’s fixable. I didn’t know enough to be able to fix the logic defects on my own in those early days. Art was the primary architect and coded more than 90% of the product (if not more). He was still very much the primary author of the code and would be in that role for several years. We didn’t solve all the problems overnight. But Art didn’t even need my notes. He got busy fixing what he knew were their most critical problems. Within a few days the biggest issues were eliminated and, as Art predicted, we got a very positive response from the customer. I worked on the scale problems and we made good progress there too. We hired the best talent available to help us architect our systems for the kind of scale the market was demanding from us. At the time, of course, I thought scale problems should be completely solvable, like solving a jigsaw puzzle. In hindsight, I now understand that in a rapidly growing and evolving business, one with genuine PMF, the puzzle has no ultimate “solution”. The puzzle keeps changing and the answers with it.

About PMF…

When I started at Bullhorn, the entire company consisted of 15 people in a 1000 sq foot “office”. Looking back I can say confidently that on my first day of employment at Bullhorn, it had PMF. Luck always plays a large role in our lives and it certainly was present for Bullhorn. The staffing industry was not on their radar in 1999. The early product concept led them there through pure chance. But once there, Art had the curiosity, skill, and desire to learn how the staffing industry worked. He talked to lots of customers and potential customers. And then, of course, luck steps in again because B2B SaaS was just getting started. Bullhorn was early to market with a very robust product offering. It stood out against the competition, which consisted mainly of aging client/server products. A quick google (or chatGPT) should get you up to speed with the basics of PMF. Essentially, though, for me PMF is really about the potential viability of a business. Do we grow? Do we keep customers? Can we be self-sustaining/profitable? Is this a good market that will satisfy our investment hypothesis? Most startups will answer yes, maybe, tbd, maybe to these questions and are not able to say they have PMF. Bullhorn definitely had PMF, but where were we headed?

One of the most fraught considerations for a startup is selecting a good market that aligns with the investment hypothesis. Venture capital is looking for large exits and is willing to strike-out on many investments as long as their portfolio contains even one “homerun”. A single successful exit can return multiples of the entire fund the VC started with. If Bullhorn had these kinds of early investors in the 1999-2003 timeframe I’m not sure they would’ve been interested in an ATS for the staffing industry. We lamented that a number of our competitors were “life-style” businesses. We didn’t have a good sense of how much technology demand there was in the staffing industry and couldn’t come up with a good story for potential investors. My recollection is that the early investors were a diverse and unusual group. I don’t recall a lot of pressure from them but I wasn’t in the loop on the expectations of these early investors. In any event, if there was resistance to the staffing pivot, we ignored it, and got to work building a great company.

Bullhorn during my tenure never had hyper growth. No hockey stick phase. It was a steady climb over my 7 years. The questions about the attractiveness of the market persisted, even as we were able to win deals with some of the largest corporations in the staffing industry. The question of Bullhorn’s investment hypothesis was always on our minds. We were more than a lifestyle business but we didn’t yet understand the staffing industry well enough to recognize the opportunity. Who would be interested in the business we had built? Could we go public? It was an odd place to be, to have a very successful product, with clear indicators of PMF, solid growth, excellent retention, could easily be self-sustaining, a market that we were just beginning to figure out, but no obvious exit scenarios. As it turns out, Bullhorn has proven over the last 10+ years that we had ridiculously underestimated the appetite for technology in the staffing market.

One of the problems with not focusing on whether your startup is in or near the PMF zone is you may try to act like you have PMF when you don’t. You will waste time and money investing in the wrong things, thinking you are a real business. Pre-PMF companies are not real businesses in a simple but important way; they don’t make money. Every single dollar of investor capital should be spent on finding PMF. In fact, moving towards PMF is the only mission of every startup. But, what about the opposite case? A startup that doesn’t know it has PMF? This is where I think we were with Bullhorn. It’s definitely a better problem than not having PMF and acting like you do, but I’ve often thought if we had understood that we had PMF what would we have done differently and would this knowledge have helped us build an even better business faster? This is a good topic for another post. Stay tuned!