What's your product / market fit blind spot?

Summary

In this insightful discussion, Mark interviews Leah Tharen, a solopreneur specializing in product growth and customer fit. Leah emphasizes the importance of understanding product-market fit for investors and shares her expertise on how to achieve it, particularly in the context of her work with JUA, an AI-powered weather prediction company for energy traders. She discusses the nuances of reaching different customers, establishing trust, and the challenges of scaling a business while maintaining a sustainable and efficient sales pipeline. Leah's advice for entrepreneurs focuses on understanding one's customers deeply, being cautious with marketing strategies, and the value of a strong, leak-proof sales funnel over a flashy but unsustainable approach.

Takeaways

• 🌟 Leah Tharen is a specialist in product growth and ensuring companies survive product hyper-growth mode.
• 🔍 Leah's work focuses on achieving product-market fit, which is essential for attracting investors.
• 💡 Leah's previous project involved a company, J, that uses AI to predict weather for energy traders with high accuracy.
• 📈 The energy market has various players like Traders and meteorologists, each with unique needs and roles.
• 🌐 Renewable energy's dependency on weather necessitates accurate predictions to manage supply and demand.
• 💼 Leah emphasizes understanding customer challenges deeply to create products that truly address their needs.
• 🔗 Building trust is crucial in enterprise sales, as it influences the decision to sign contracts and invest.
• 📉 Leah advises against prematurely scaling up; instead, focus on perfecting the current sales channel before expansion.
• ⏱️ Time to value is crucial; Leah suggests getting customers to validate the product's worth quickly to ensure a strong pipeline.
• 💰 Leah stresses the importance of a sustainable business model, preferring a smaller, reliable revenue stream over a leaky, large one.

Q & A

What is Leah Tharen's area of specialization?

Leah Tharen specializes in product growth and product customer fit, focusing on helping companies avoid pitfalls during product hypergrowth mode.

What does Leah mean by keeping companies from dying during product hypergrowth mode?

Leah refers to the challenges companies face when scaling their products rapidly, which can lead to issues if not managed properly. Her role is to help navigate these challenges to ensure the company's survival and success.

What is the significance of product-market fit for investors?

Product-market fit is crucial for investors because it demonstrates that a product is desired and usable by its target market, making it a more attractive investment opportunity.

Can you explain the business model of 'J' as mentioned in the transcript?

'J' is an AI-powered company that predicts the weather with high accuracy for energy traders. It uses machine learning to provide end-to-end weather predictions, which is different from traditional methods that simplify the Earth's model.

Why is weather prediction important for the energy market?

Weather prediction is vital for the energy market because renewable energy sources like wind and solar are heavily dependent on weather conditions. Accurate predictions help in planning and managing energy production and distribution effectively.

What are the different customer roles Leah mentions in the energy market?

Leah mentions various roles in the energy market including traders, meteorologists, and asset management companies, each with their own sub-roles and needs.

How does Leah approach understanding the customers' needs in the energy market?

Leah emphasizes the importance of understanding the specific roles and challenges of different customers in the energy market to tailor the product to their needs effectively.

What does Leah mean by 'product-assisted sales motion'?

A 'product-assisted sales motion' refers to a sales approach where the salesperson uses the product's features and benefits to demonstrate value to the customer before discussing pricing, ensuring the customer understands the product's utility.

Why is trust important in enterprise sales, according to Leah?

Trust is crucial in enterprise sales because it influences the decision to sign contracts and make significant financial commitments. Leah suggests that establishing trust is key to closing deals in the enterprise sector.

How does Leah suggest shortening the time to value from first contact to decision-making?

Leah suggests providing potential customers with all the information they need to validate the product's value, ensuring a transparent and honest conversation to shorten the time it takes for them to decide.

What advice does Leah give to entrepreneurs seeking product-market or product-customer fit?

Leah advises entrepreneurs to first understand their customers deeply, focus on a primary channel for customer acquisition, and avoid diversifying too quickly without proving the primary channel's effectiveness.

Outlines

00:00

🌟 Introduction to Product Growth and Customer Fit

In this introductory paragraph, Mark welcomes Leah Tharen, a specialist in product growth and customer fit. Leah's role is described as crucial in preventing companies from failing during rapid product growth. The conversation emphasizes the importance of product-market fit, which is essential for attracting investors. Leah's previous work with 'Jua', an AI-powered weather prediction company for energy traders, is highlighted as an example of her expertise. The discussion sets the stage for a deeper exploration of customer fit and market strategy.

05:00

🔍 Understanding the Energy Market and Customer Needs

This paragraph delves into the specifics of the energy market, emphasizing the diverse roles and needs of its players, such as traders, meteorologists, and asset management companies. Leah explains how renewable energy's dependence on weather necessitates accurate predictions for effective energy trading. She discusses the importance of understanding the unique challenges each customer faces and tailoring the sales approach accordingly. The conversation underscores the significance of establishing trust and providing value before discussing pricing, which is a fundamental aspect of enterprise sales.

10:01

💡 Achieving Customer Market Fit Through Efficient Sales

Leah stresses the importance of creating a sales pipeline that is not only effective but also sustainable. She argues against the common practice of chasing quick wins through paid advertising, which can lead to a 'leaky bucket' of inconsistent revenue. Instead, she advocates for a focus on customer retention and satisfaction, which can lead to a 'flywheel' effect where customers remain engaged and contribute to the company's growth. The discussion highlights the need for a deep understanding of the customer's job and challenges to create a product that truly meets their needs and can be scaled effectively.

15:01

🚀 Scaling with Product-Customer Fit and Avoiding Vanity Projects

In the final paragraph, Leah advises entrepreneurs to focus on their core strengths and channels before diversifying. She warns against the pitfalls of vanity projects that can distract from the main business and lead to financial strain. Leah emphasizes the importance of understanding the cost of acquiring customers and ensuring that the product delivers value that justifies the investment. The conversation concludes with a call for entrepreneurs to be strategic, patient, and focused on building a sustainable business model based on a deep understanding of their customers.

Keywords

💡Product Growth

Product growth refers to the process of increasing the value and usage of a product over time. In the context of the video, Leah Tharen, a specialist in this field, discusses strategies for ensuring companies thrive rather than falter during periods of rapid product growth. The conversation emphasizes the importance of understanding customer needs and market dynamics to drive sustainable growth.

💡Product-Customer Fit

Product-customer fit is a concept that describes the alignment between a product's features and the needs or desires of its target customers. The video underscores the significance of achieving this fit, as it is a fundamental aspect that investors look for in a business. Leah explains that different customers have unique needs, and understanding these is crucial for a product's success.

💡AI-Powered Predictions

AI-powered predictions utilize artificial intelligence and machine learning to forecast outcomes with high accuracy. The video mentions a company, J, that uses AI to predict weather patterns with unprecedented precision, which is particularly valuable for energy traders. This showcases how AI can revolutionize traditional industries by providing more accurate and data-driven insights.

💡Energy Traders

Energy traders are individuals or entities that buy and sell various forms of energy, such as electricity, natural gas, or renewable energy certificates, in the wholesale market. In the video, Leah discusses how AI predictions of weather conditions can be invaluable to energy traders, as it helps them make informed decisions about energy supply and demand.

💡Renewable Energy

Renewable energy comes from natural sources or processes that are constantly replenished, such as sunlight, wind, and rain. The video script highlights the dependency of renewable energy on weather conditions, which can be unpredictable. This unpredictability makes accurate weather forecasting critical for managing the supply of renewable energy.

💡Market Fit

Market fit is the extent to which a product or service is well-suited to and valued by its target market. Leah emphasizes the importance of understanding market fit for different customers in the energy market, such as traders and asset management companies. The video illustrates that achieving market fit is about more than just having a good product; it's about meeting the specific needs of the market segment you are targeting.

💡Sales Motion

Sales motion refers to the strategy and process a company uses to sell its products or services. In the context of the video, Leah discusses the importance of a product-assisted sales motion, where the sales process is supported by the product's ability to demonstrate its value upfront, rather than focusing solely on pricing or features.

💡Customer Acquisition Cost (CAC)

Customer Acquisition Cost (CAC) is the total cost of acquiring a new customer, including marketing, sales, and other related expenses. The video script mentions the importance of having a reasonable CAC payback period, which is the time it takes for a new customer to generate revenue that covers the cost of acquiring them. Leah advises against scaling a business with a high CAC payback period as it can lead to unsustainable growth.

💡Flywheel

A flywheel is a business model concept where a series of actions or processes drive continuous and self-reinforcing growth. In the video, the idea of a flywheel is contrasted with a funnel approach, where the focus is on continuously acquiring new customers rather than deepening relationships with existing ones. Leah suggests that nurturing a flywheel effect can be more efficient and sustainable for businesses.

💡Product-Market Fit

Product-market fit is a situation where a product is well-received in a particular market, satisfying a significant customer need or want. The video emphasizes that product-market fit is not just about having a good product but also about how well it retains customers and generates repeat business, which is indicative of a sustainable and scalable business model.

Highlights

Leah Tharen specializes in helping companies avoid failure during product hyper growth mode.

Product-market fit is crucial for attracting investors.

Jua, an AI-powered company, predicts weather with unprecedented accuracy for energy traders.

Jua uses machine learning to predict weather, contrasting traditional methods.

Different customers in the energy market have unique needs.

Renewable energy's dependency on weather creates a need for accurate predictions.

Understanding customers' roles and challenges is key to product-market fit.

Establishing trust is vital in enterprise business.

Product-assisted sales motion focuses on delivering value before discussing pricing.

Tailoring the sales approach to different customer challenges is essential.

The importance of shortening the time to validate customer fit.

Product-market fit is about retaining customers and minimizing churn.

Creating a flywheel effect with satisfied customers is more efficient than constant advertising.

Focus on scaling what works before introducing new strategies.

Understanding the cost of generating trust in enterprise sales.

The importance of efficient sales pipelines in young companies.

The challenge of achieving product-market fit in a competitive market.

Leah advises entrepreneurs to stick with what works and not to diversify too quickly.

Transcripts

[Music]

[Applause]

[Music]

[Applause]

hey welcome back I'm Mark and I am very

pleased to have a specialist on today

Leah tharen is a solopreneur who

specializes in product growth and

product customer fit self-described she

says that her main job is keeping

companies from dying as they go into

product hyper growth mode and I found

this fascinating not just because it's a

very cool topic and it's a neat new way

of looking at human nature but also

because product customer fit is one of

the core propositions one of the

fundamentals of building a brand that

investors love if you don't have

demonstrable product Market fit that you

can talk to an investor about you got

nothing so Leah

welcome thank you very much for having

me um I want to talk to you about your

latest gig now you're just winding this

down now but but I want to talk about

jua jua let me see if I can get this

right is a company that is AI powered to

predict the weather with an

unprecedented

accuracy for energy Traders did I get

that right because yeah that is that is

a very good that is a very good summary

yes so um what J doeses is it uses

machine learning to predict the weather

from end to end which is a stark

contrast to what we used to do like

simplify the Earth's model and then run

everything consecutively you know like

having a lot of smart people in the room

and try to predict the weather uh right

now we're doing everything with machine

learning and uh yeah that's that was a

pretty good summary yeah I'm off to a

good start um so I if I walked into the

room with jua and they said I want to

build a brand Investor's love and I said

okay the first thing is product Market

fit then as soon as you say that you

have to start digging deeper because

there are different customers that we're

talking about here and they have very

very different needs can you dig into

just a little bit on in the case of JEA

who those customers are and and how do

you reach out to them yeah so

specifically J is a very interesting

business so in the the thing that you

need to understand about the energy

Market itself is is that you have a lot

of different players in there just as

you said right so like you have Traders

you have meteorologists you have asset

management companies you have many

different roles in the market themselves

and then in these specific roles they

also have different sub kind of roles so

for instance Traders are dealing

sometimes with some of these Traders are

dealing um in a day Market some of them

are dealing two weeks ahead some

meteorologists are closer working with

other energy Traders together and the

reason for this why this is happening in

the first place is that we are building

now in the world a lot of new renewable

energy renewable energy is dependent on

the weather weather is very very finicky

it's not easy to plan we cannot store

all this energy because our technology

is just not at that point so what

happens is is that you have huge demand

that needs to be satisfied by something

that is very finicky at the same time

and we cannot store all of it so you

need to trade against this you need to

make predictions does it help you know

like if you know that the weather is not

very strong and not creating a lot of

power yes it does help because then we

can spool up other nuclear power plants

or um you know gas trading or whatever

like to kind of compensate and the

depending on where you are in this kind

of value chain like whether you want to

know about how is the wind blowing or

whether you want to know how much of

this wind is being converted into energy

which is a different question versus how

are the markets moving you start to

address different kind of people in this

value chain now it is clear because it

is a chain it's not a loop that if you

have the best data then you can also

serch the best power insights then you

can also predict the market the best so

you need to get the start right that is

the ultimate bet of the company itself

so if you want to achieve customer

Market fit then you need to know what is

important for each individual in this

particular

chain and who is paying the bills in the

end for the kind of Leverage that they

can create and this is fundamentally

very important because you need to

understand someone's job extremely well

you cannot create a machine for farming

without understanding Farmers it just

that's just not how it works you cannot

think of something that makes them more

efficient without doing it yourself at

least to some degree and really really

getting close to the customers and um

talking about it oh man that just

reminds First Step that reminds me of a

funny anecdote where I I'm not sure of

the sector exactly but a bunch of tech

guys you know big swaggering Tech guys

they go into new sector and they say

we're going to take over this sector and

they say do you know anything about the

sector I said don't need to we know how

to make it

better and then they went away they died

uh but it it's super funny because uh

where I always start I just try to

understand the people that I'm selling

to or I think I'm selling to because I

believe in the case of J you're selling

to three different people in a different

hierarchy um but you have to understand

the person that you're trying to sell to

and know them better than they do

themselves but let's let's go to this

this this part what fascinates me we've

got a few different stakeholders how do

you figure out who is going to be the

most valuable person to sell to in a

case like I think what's important to

note here is is that this is an

Enterprise business right so like we're

selling to very very highly valuable

acvs of hundreds of thousands of dollars

at the very

least but there is something that goes

through all the markets right now and

that is you need to establish trust in

some way if somebody does not trust you

then they're not going to sign a

contract if they're not trusting you

they're not going to sign up for a $5

subscription it's just as easy as it is

the differen is is that in Enterprise

there's more due diligence happening

there's more time invested there is less

arguments about urgency there is less

arguments about specific price you know

like a you know like you're going to get

30% off if you're closing the deal in

the next five minutes that kind of

stuff but the fundamental question Still

Remains is like how do you generate

trust and how much does it cost me to

generate enough

trust for you to sign

so there's a kind of a unit right so

like how much how much does it cost me

to generate this particular trust so you

say yes this is worth my money and then

we go for it and there's a couple of

ways that you can do this and um because

Jui is in this Enterprise segment and

I'm someone usually talks about product

L growth which is more stronger in the

lower segments you're talking about

something that is not sales assisted but

product assisted so you have

fundamentally a sales motion that is

product assisted what does that mean

that means that if you go as a

salesperson into a call hopefully with a

lot of knowledge what the other person

actually needs and what they want and

what they really care about that I'm

going to show as honest as fast and as

transparent as I can the value that we

deliver first before we even talk about

pricing this is a very classical sales

Playbook yeah it is it is totally

classic like how much does it cost well

I'll tell you that in a second but first

let me tell you if you're this type of

person here's what it does and here what

it does yeah and and and even before

that we really try to understand what

their challenges are because every

Trader has a different challenge so for

instance you might find out that some

Traders are dealing with Renewables but

they are very aware of the gas market

why are they aware of the gas market

well because if they know two weeks in

before that a specific area is lacking

the production of energy then they can

send the ship with gas there MH so these

kind of insight are only coming if you

start to really understand your

customers and then you kind of need to

also translate this so this is becoming

less of a business about convincing

people that oh we are good enough it

really is about look here's what we have

do you think we have something valuable

it's really an honest conversation and

this needs to happen nowadays because

everybody can claim nowadays that they

are the best very very easily why can

you do that because you have generative

AI that can create your marketing

campaigns create all your BS marketing

slogans that sound good enough but that

are not really good enough right like

everything sounds looks perfect but the

proof in the pudding is still in the

quality of the data so how do we get you

how what is the time to Value from this

first Contact to you making a decision

it's not to make trust us it's to you

getting here's every information that we

have that we can potentially give you do

you trust us to asking the question sure

the goal is to get someone to tr trust

us and then sign a contract but we want

to shorten the time it takes them to

validate whether they are the right

person for us and whether we are the

right supplier for them and this kind of

shift in mindset is super important

because if you have a shitty product if

the data is not good maybe I can sell to

one unsuspecting client that is going to

fall into our trap but fundamentally I

want to know how strong our pipeline is

the faster we get the customers through

the better for them the better for us

because if we have 20 pitches and we can

close no one after 6 to 12 months that's

a problem so the product is not good

enough or the messaging is not good

enough right so like we're doing

something wrong we're not understanding

something about the problem that the

customer has or our data is not good

enough and this is extremely important

because especially in a young company

like this we're like 20

people we have a massive product this

product is as big as chat GPT

3.5 that's how big this is right so like

in terms of data storage and

everything if you're this small your job

is not to establish a sales pipeline of

1 million 2 million 3 million your job

is to establish some kind of sales

pipeline at a specific

efficiency that you can repeat because

what we do not want is we don't want to

have a bucket with holes in it that are

so big where you like oh look I'm just

putting in 10 million at the top this is

amazing and then right at the bottom 8

million of those are flowing out again

after like two to three months MH that's

the one thing that cannot happen so

product Market fit or customer Market

fit in that sense as well is really

about whatever you're selling to whoever

you're selling which is your brand in

the end as well how little is Flowing

out at the bottom I don't care how much

you have in your bucket I really don't

what I care about it how long does it

stay in because that is a predictable

Revenue in the future because if you

tell me if I pour one liter of top of it

in and you can hold it for a very long

time so you can keep people into the

product then you have customer Market

fit then you have product Market fit

that is an investable business case and

that million is far more worth than a

leaky three million from another product

that just looks nice on a spreadsheet

because I can scale the first one and

with the second one I'm like okay that

is nice but you cannot scale

this for the next 10 years right like

it's not to be sustainable business I

also think of a flywheel versus a funnel

yeah you know I talk to a a lot of a lot

of my clients entrepreneurs and they

seem very intent on going with the

weakest circle of influence which is

advertising to people who don't care

about you try to bring them in sell them

something and then they'd never hear

from them again and I said why don't you

get just the the the the closest people

to you and the people who love you who

have given you money say twice and try

to figure out how they can keep giving

you money and create a flywheel where

you build something for them they buy it

they tell you how to make it better you

sell it to them again etc etc you need a

fraction of the marketing budget and a

fraction of the headaches to to keep

these people happy I've heard the I've

heard it before with entrepreneurial

small entrepreneurial companies you need

a thousand

people um well that depends right like

sometimes you just need three accounts

to be closed but you better be sure that

what you're doing is efficient enough it

is not about the money it really isn't

it is more about how how many leads did

we go through to get to these three

paying accounts yeah that's what counts

and how you hang on to them yeah and

you're going to kill yourself if you

start to scale with a CAC payback of 16

months it's just what it is right so

like if you had paid advertising so like

ah we spent $5,000 and we made $15,000

out of this over the next three years

and I'm like okay your cash payback is

36 months and now you want to spend more

money on on this channel which is going

to buy more of your capital and paid

advertising is not something that you

can scale because it's just going to

cost you more and more and more sure you

can start to optimize your keywords a

little bit and so forth but paid

advertising has this very nasty habit

that becomes more expensive as you scale

so it is an unscalable channel it's a

good support channel for most companies

but this is a very good example yeah now

we've got a couple minutes I've just

walked into your door I've uh I've heard

about you you're going to help my small

relatively unsophisticated company

achieve product Market fit or product

customer

fit what are without knowing what

product is or grabbing just a product

that you like to talk about what do you

do first what or what would you advise

me as a relatively naive entrepreneur on

product customer fit what would you

advise me to do first second and third

so I think let's take this from the side

of like what do most people get wrong MH

I think companies are jumping too fast

around when they think they're being

successful so I'm going to be very Frank

you can stumble into the first five

million of your ARR it's definitely

possible it it is difficult right so

like most companies do not make it to

that particular border that's toally

true as well you can actually run five

million in any successful business uh

without getting your go-to market right

but

let's say you're driving most of your

acquisition through a community or

through content production or through

SEO or through whatever whatever your

channel is whatever your poison

is don't give up on it keep figuring it

out try to scale that first before you

layer in something else that is quite

important right so like instead of oh we

need to do a geographical expansion over

there oh now we need to start to have um

content over there we've never done this

before and so forth get the money into

your bank first scale you know is

working and add another 20% for your

experiments afterwards oh my God that's

that's genius I'm I'm actually doing

that right now we're exactly at that

stage with uh a couple of my clients who

uh who again I I say the entrepreneurs

that I meet the first thing I usually do

is just for fun I asked them to show me

the closet where they have all the dead

tools that they tried and failed because

they didn't stick with them and then

they say oh we got to try this and we

got to do this and we got to this and

nothing works because they don't pay

attent they don't consequently follow it

through yeah so it died and they just

burn burn burn and they're super

unsatisfied yeah because what you're

going to do is if you start to have

these vanity projects that you cannot

wait you know like maybe you've been

building tech for two and a half years

and you're starting to be bored

and you just want to do something new

this is going to attract new people that

you have to hire and these people are

going to sit on your payroll and if your

primary channel is getting hit by

something unforeseen you suddenly lack

the money now what you gonna do you're

gonna scale back you have a Down Round

and that's it yeah Leah um I really

really really appreciate you sharing

your wisdom here because what you've

done is taken something that I know

something about because I work with

clients but on a very stripped back

scaled back level and you're very deep

in this field and and I hope that I can

help some entrepreneurs find you because

I think you're a vast Treasure Trove of

information on product Market fit I

really appreciate you taking the time

thank you Mark I appreciate that you

have yourself a good day thank you you

[Music]

[Applause]

[Music]

too