(2024-02-06) Chen Startups Need Dual Theories On Distribution And Product Market Fit One Is Not Enough

Andrew Chen: Startups need dual theories on distribution and product/market fit. One is not enough. A common startup situation. A team busts their ass for months building the first version of their product. It’s almost done. Now a big question emerges — how do you get the first people to use your product? Hmm… If you find yourself at this moment, then you are already in a bad place.

99% of startups are not differentiated on their underlying technology, and there is very little engineering risk involved.

most products are succeeding or failing due to core product/market fit followed by the distribution strategy.

*This is why I think startups end up needing both:

1. an insight about customers that gives them product/market fit
2. an insight about distribution that creates traction*

People building products often have an easier time (on?) product/market fit because they are building for themselves, or a customer that they already know well.

But the latter, about distribution, is often super difficult

you then dive into the world of growth marketing strategies and tactics which are its own very particular learned skill set.

Sometimes when there’s a new breakthrough technology, as with what is happening in AI, or the Apple vision Pro, or Web3, it’s simply enough that the product has a “it works” feature.

But what happens when you are trying to launch the 9,000,001th mobile app? The first thing you do, naturally, is to try to read what’s out there

The other counterintuitive thing, is that although most of the knowledge in writing out there pertains to channels like SEO or paid marketing (advertising) or influencer campaigns, many of these tactics best fit already successful products that have money and aim to accelerate growth

So what should you do instead?

Examples of products with natural distribution

Dropbox

Uber has natural virality

A product for creators, like Substack, will naturally encourage people on the platform to write and share content, attracting an audience who ultimately may also be writers themselves.

Even once you have a basic theory for how your product will naturally distribute itself, you’ll still need to identify the first generation of users to help iron out all the issues

A few years ago you saw a trend were products would launch a huge conferences like SXSW. (Because of Twitter.)

These days you see more effort on getting influencers involved early

Or “building in public” which makes yourself into an influencer

The problem with these initial channels is that they eventually tap out.

Thus starts the journey of startups to grow and expand their portfolio of distribution channels

sometimes imagine a X Y axis, where X is volume of the channel, and Y is responsiveness. Early channels are often very low volume. But you want that. The reason is that they are highly relevant and they are small enough that larger companies do not focus on them

if you find this channel to be successful, you’ll also eventually one more scale. This involves you jumping onto the next set of channels, which will provide more volume but be much more competitive as a result.

Your efforts here should be experimental and iterative.

You can often look at direct competitors as well as adjacent products

The natural cadence of products will indicate to you the channels that are most likely to work.

If you have episodic usage, you’ll probably need to do SEO/SEM, affiliate, or referral — something that helps you target high intent users. This is where sometimes I’ll see people working on episodic usage apps, like travel/health/etc asking the question, how do I make my product virally? I want free users! Of course the problem is, there’s a natural fit between a product and it’s distribution channels... only very specific niches of networked products are able to grow freely. Generally everybody else must pay for their distribution, whether via referral or advertising.

Eventually you want to move on the XY axis towards volume. There are only about a dozen large scale distribution channels that can propel a product to scale. Advertising is on that list, SEO too, and so is viral growth.

you end up competing with some of the most famous brands in the industry as a result

Ironically, this is where great products become to dominate.

The reason is the following — the ability for a company to operate out in these most expensive and highly scaled channels comes from having a great product that generates a ton of word of mouth.

the marketing costs that do exist end up being blended in with the large number of organic users.