Lessons - The Truth About Finding Product-Market Fit After 3 Exits | Shirish Nadkarni - Author of From Startup to Exit

In this lesson's episode, explore how early stage founders can navigate the challenges of finding true product market fit and turning risky ideas into successful ventures, discover why timing and customer insight often matter more than innovation. Understand how testing demand before building saves time and capital, and uncover the strategic thinking behind knowing when to pivot, raise, or exit. Some of the, obviously, some of the lessons that you learned in that first, in that first company you founded are things you speak about in the book. One of the things that are obviously like a big issue for startups is the fact that nine out of 10 of them fail, mostly because they don't find proper product market fit. So how did you, how did you find that proper product market fit? What was your, what was your strategy for that? And also just to follow up question, I want you to give some context. Did you, did you raise that money pre-revenue or did you wait until you were actually, you found product market fit, you were selling to the market before you raised that 15? Yeah, that's a great question. No, this was during the crazy days of the .com boom. And based on my reputation having worked for Microsoft, obviously, for the big help. I had, you know, we had only developed beta software when I started running raising money. And I raised, you know, $15 million in funding on a pre-revenue basis. So we didn't have any revenue at that point. And I raised it on a pre-money valuation of 23 million. So it was totally crazy times at that time to be able to raise that kind of money without really having any kind of revenue or customer traction. But to answer your first question about product market fit, what we discovered took us about six months to kind of iterate through various versions of our software. We were able to sign up a lot of users, but we didn't really get good retention. I think that was because people were still uncomfortable, you know, using email in the cloud, and relying on some other company to store very sensitive corporate information, which is your, you know, email information. And so it became clear to us that the original idea was not working. And so we decided to pivot our solution to providing mobile access to your existing email. This was the time when Blackberry was getting started. They had about, you know, a couple of hundred thousand users. And it was a small, you know, form, you know, like a page of form factor, Blackberry instead of the, you know, the smartphone form factor. And at that time, you know, regular phones were becoming internet enabled. And you had something called a WAP browser on your phone, which, you know, on a very small screen, allowed you to access the internet. And so we decided that, you know, that, hey, why do you need a specialized device like Blackberry, which can be expensive? Why not enable access to your email on your phone? And that's what we did. We basically reverse engineered all the proprietary email systems like Microsoft Exchange and Lotus Notes and AOL, Mail and Hotmail and so forth. And we would allow you to access that email from your phone wherever you are. Understood. Okay. And so you're your products. So that's a, that's a pretty crazy start of story. So you, the fact that you raised 15 million for your revenue. So you were, you were playing with investors money while still trying to figure out product market fit and you were iterating. I'm just curious, would you have done it differently if you could redo it? Was that a lot of stress with the 15 free revenue? Sure was a lot of stress. You have a lot of responsibility to your investors. Yeah, I think I would have done it differently. I would have done a lot more, you know, market research initially to validate whether the idea made, you know, sense at that time. You know, today, you know, the idea of Teeman is something that is widespread. So it was a matter of timing. So the idea was great, but the timing was not right, because it took, you know, quite some time for companies to become comfortable with using software on the cloud. And, you know, we were one of the first SaaS software, you know, introduced into the market at that point. And so whenever you need to use a new concept, it takes, you know, takes time for companies to adopt it. So I wish I'd done a lot more market research to really understand, hey, you know, is this something that is ready, you know, in terms of market acceptance or not? And what advice would you have for somebody who after you've learned and you've gone through this to find that product market fit or to validate that idea before you take it to market? Yeah. Yeah, I talk about that in my book from startup to exit. I've been a whole chapter dedicated to, you know, achieving product market fit. And so it's not an easy, it's not a quick, easy, a quick, easy thing. Yeah, what I recommend is obviously conduct a lot of customer interviews. And don't even talk about your solution first or ask the customer, you know, they like your solution first, you know, first, understand what are the top three or four problems that they have in the domain that you're kind of researching. And if your problem that you're addressing is not in the top three or four, then right there, you may want to pivot and understand, okay, tell me more about your top three or two or three problems. And maybe there is a solution I can build that is more of interest to you because if your solution, if your solution is not addressing a top three or four problem, then even though they may be addressing and, you know, a need, it may not be top of mind to customer. And as a result, your sales cycles will be extremely long because the customer is going to say, I'm going to first address my critical problems. And then I'll get to some other problems that, you know, I need to address. And so first, you know, focus on, you know, the top three or four problems, make sure that your solution tackles that. And the other thing that I recommend is actually testing, even before you built your software is actually creating a website. And using Google SCM or Facebook ads, drive users to that website and see if you can get customers to register for your solution. Because that will tell you, you know, when you actually start marketing your solution, what kind of an uptake are you going to get? And are you going to get enough users? And is it going to cost you how much is going to cost you to really acquire those users? And can you build a profitable business where your lifetime value to your customer is, you know, far greater than the cost of customer acquisition? So those are two things I highly recommend that, you know, people fall in terms of the methodology for achieving product market fair. That's very smart. And as as Timon grew, walk me through the growth of the company and eventually your decision to sell it, I guess, is the best way to put it. So keep me, keep walking me down your story. Yeah. So once we decided to pivot to providing mobile email software, then we started marketing to wireless carriers because they had to install a software and make it available to their customers. And we got traction with T-Mobile, which is based out of here in Seattle. They were very interested in the solution that we were providing. And then we also started talking to BlackBerry because BlackBerry at that time was limited in its access to only Microsoft email software, whereas we provided access to a whole range of proprietary email systems. And so as we started discussions on licensing our software to them, they came to the conclusion that this was a very strategic for them and they would be better off acquiring our company. And so in 2002, they made an offer to acquire T-MON and we decided to at that point that given that BlackBerry was becoming quite well known and because they had existing relationships with wireless carriers around the world that we could get much wider distribution for our software through BlackBerry as opposed to trying to do it on our own. And this was also a time when the .com busted happened and so raising money was very, very hard at that point. So the sale to BlackBerry made a lot of sense for the company. And we did extremely well. Our technology became known as BlackBerry Internet email and it grew to about 50 million BlackBerry users over time and so had really widespread usage within the BlackBerry community. What are and when you were going through that process so they were thinking about licensing it and then the conversation started around whether or not we should just acquire this software. What were some of the things that you were thinking because when you build a company there's different ways to exit, right? You can go for another funding round, you could technically IPO it or you could just sell it to a company. So why did you, I think you sort of alluded to it because the .com bust, it was harder to potentially take it in other directions. Is that the reason why you decided to sell to BlackBerry or what other considerations should you think about when you're trying to exit a company? Yeah, that's a great question because a lot of founders have to come to that decision point at some point whether they are actively selling their company or whether somebody approaches them for an acquisition. In our case, as I said, funding was very difficult to raise. We did have actually an offer from our existing investors to continue to fund the money, fund the company but the terms were not very attractive for us because the valuations had come down significantly at that point because of the .com bust. The second consideration was the fact that BlackBerry had relationships with all the major carriers around the world and so we have been much more successful getting distribution for our software through BlackBerry than trying to do it on our own. That ultimately worked out for us because as I said, our technology reached about 50 million BlackBerry users within a few years and was critical for BlackBerry because they were able to not only reach large enterprises but also small businesses who could use BlackBerry because of our software. Thanks for tuning in. 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