If you’re just starting out in the blockchain business, chances are you’ll probably fail to achieve your goals because your company can not succeed in the product-market fit yet.
However, after research, I believe that most Web3 startups fail not simply because they are unable to practice the product market fit pyramid. Rather, it is because they try to apply the conventional methods of finding such a fit to the Web3 business. Let’s learn more about it in the article.
What is a product-market fit pyramid?
Firstly, product-market fit refers to how well a product meets a significant unmet need in the market. Before getting product-market fit, getting users and making sales is like playing the business game in hard mode. Yet, once you’ve achieved product-market fit, customers will be eager to buy from you in such an easy way.
Therefore, finding product-market fit is a crucial first step on the road to success for startups.
So, how can you find product market fit? Traditionally, it is through the product-market fit pyramid.
Based on the book named “The Lean Product Playbook” which coined the term, the product-market fit pyramid is a practical paradigm that defines product-market fit in terms of five essential components. They are:
- Your ideal client
- The unmet needs of your ideal client
- Your value proposition
- Your product features match the needs
- And, your user experience (UX).
In this way, the product-market fit pyramid can only be achieved if you are able to:
- Find an issue that a sizable audience wants to be resolved.
- Find a product that addresses the issue at hand.
- Develop a strategy for monetizing your product in the future.
Why is the product-market fit pyramid essential for Web3 startups?
When a successful product team embarks on the development of a product (or a feature within a product), they ask themselves these questions:
- Is the product beneficial to the user?
- Is it possible to build the product?
- Is this product commercially viable?
Brands such as Amazon, Google, Netflix, and Facebook have raked in millions of dollars in revenue, simply by considering these four factors before building any product or feature.
However, product-market fit pyramid is a practice that can be found sorely lacking among Crypto teams.
Nowadays, many of the blockchain and cryptocurrency projects that fail after a short period of established time have drawn out a heated conviction. Projects that started out promising the creation of ‘new ecosystems,’ ‘trustless regimes’, and ‘tamper-proof wonderlands’ have failed at the peak of inflated expectations – leaving a sour taste in the mouths of enthusiasts and investors.
Most DApps, tokens, cryptocurrencies, and even consortium Web3 projects are developed and launched without adequate analysis of their value, usability, feasibility, and business viability.
Many people are so confident in their first business idea that they fail to conduct the basic research required to ensure success. Creating an excellent tech product is all about creating solutions that customers want, not what you think they want.
How product-market fit pyramid different for Web3 startups?
Cryptocurrency is an unrivaled startup opportunity. The goal of Web3 or the blockchain community in general, is to create a decentralized, native digital economy. Blockchains, smart contracts, and oracles, all promise a world in which tasks are executed automatically based on a consensus of all parties and a single, verifiable source of cryptographic truth.
These are 3 main parts of a traditional product-market fit pyramid’s framework:
- The term “target audience” refers to the process of identifying the subset of the population most likely to benefit from a product or service.
- Match between a product or service and its target market. This is the bare minimum needed for any product development plan to work.
- The last one is a strategy’s distribution and sales strategy in order to generate revenues.
For many Web3 firms whose organizational structures and/or business models are similar to those of traditional ones, this framework is still applicable.
For instance, while NFT marketplaces like OpenSea and SaaS companies like Alchemy are Web3 projects these days, their strategies can follow because their models are similar.
However, many other Web3 projects have fundamentally different organizational structures and business models from traditional ones.
For instance, the primary distinction is in the ownership and administration of all blockchain projects. Here, the distinction between the roles of owners, users, and investors blurs out. Developers, team members, and passionate community members all play a part in the growth of developing the products.
Because of the unique nature of the ecosystem, any Web3 startup must take these steps into consideration. For example, one of the most important aspects of driving any successful Web3 strategy is the effort to build an active and educated community. Nonetheless, it is overlooked during the product-market fit pyramid. The product-market fit journey may also differ greatly from one startup to the next, or even from one product to the next within the same company.
The proposed new framework for the product-market fit pyramid
The most valuable optimistic blockchain projects, such as Bitcoin, Ethereum, and a few other ICO-era products, took a different path instead of the original product-market fit pyramid.
Introducing the “Market-protocol fit”
Market-protocol fit is the most promising, up-to-date framework that is designed specifically for the blockchain industry. The market-protocol fit process can be divided into three conceptually distinct stages:
Promise distribution
Promise distribution with the product-market fit pyramid’s strategy To entail selling a compelling idea within a minimally codified open market framework.
At first, the project envisioned (aka selling a vision) “a completely decentralized electronic cash system” that would let anyone send and receive payments online without going through a central bank.
Because the founder realized that he needed a large group of individuals to bring his idea to fruition, he devised a block reward incentive scheme to reward miners who contributed to the project. Early adopters have also distributed bitcoins as they helped spread the word.
Utility discovery
Early members of the community prototype new use cases, some of which provide real utility and drive growth.
After that, the early adopter community is encouraged to explore more about how to implement the “vision”. Contributing code, chatting on the Cypherpunk Mailing List, and buying alpaca socks,… are all part of the early Bit coiners’ initiation rituals to propose a promising protocol. Community members support experimentation by exchanging ideas, co-creating, and cultivating new narratives together, all while driving towards the most promising real utility (aka product).
Ossification
Network effects increase the value of the protocol and force it to converge around a specific functionality and narrative.
When a compelling story is supported by a solid process, the resulting product is sure to inspire. As additional resources become locked in and the stack stabilizes, the related narrative develops to serve as the defining story of a particular protocol ecosystem.
For Bitcoin, when the members actively support the idea that they could use Bitcoin as payment when other payment methods were restricted or too expensive or referring as centralized methods. This is when the community found a product-market fit for Bitcoin. Bitcoin allowed them to make a payment when nothing else would, and that was all they needed to know or care about. As a result, decentralized payments were the original “killer app” for Bitcoin.
How to know if you have achieved product-market fit?
One way to know when you have reached the final stage (which is product-market fit) is through a product-market fit survey.
What is it?
Developed by Sean Ellis, the product-market fit survey asks simply 1 question: how disappointed your users would be if you went out of business, with four options:
- Very dissatisfied
- a little disappointed
- Not disappointed (though it isn’t particularly useful).
- I no longer use [product].
He discovered that if more than 40% of users responded that they would be “Very disappointed” if the product was discontinued, there’s a good chance that the solution had found its Product-Market fit.
However, as many successful companies state since the payoff is substantial, you’d recognize it the moment it happened. Instantaneously, as if by some sort of enchantment, success comes your way, it is simple to gain more customers, and revenues are automatically generated,…
And, don’t forget, product-market fit is a phenomenon that is notoriously difficult to predict. Bitcoin has been around for almost a decade, but it has only in recent years started to establish its product. Therefore, even if your community appears incapable of progressing beyond the point of producing “actual products” expanding and growing the community has already been a success.
Conclusion
Despite the new or original product-market fit pyramid’s frameworks, in order to keep and expand your business, you’ll need to put in consistent effort.
If you found the process difficult, Satom may very well be the answer. We assist Web3 entrepreneurs and business owners in achieving product-market fit and going beyond brand awareness and exposure. Satom believes in founders who are dedicated to the creation of a decentralized world and offers unique financial and enabling services to assist founders in building successful Web3 businesses. If you’re interested, please contact us at hello@satom.vc.
