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So, do I have Product-Market Fit or not?

Updated: May 7

by Edwin Maganjo, Verdant Frontiers Fintech Fund

Without Product-Market Fit (PMF), start-ups cannot scale sustainably. Start-ups that cannot scale sustainably eventually either have to pivot (if they’ve got the runway for it) or shut down. So if you’re running a start-up, or thinking about running one, a key question to continue asking is: what does PMF look like for us and are we there yet?

Reflecting on this question, one word that keeps coming to mind is "repeatability."


If you can’t repeat, you better retreat 🏃🏾

I remember running a B2B e-commerce start-up back in 2018 in Nairobi, Kenya. We had a choice selection of high-end retailers paying to use our solution. I thought we were onto something great, but we ran into a challenge; scaling was HARD.

Our growth team encountered long sales cycles with approvals needed from multiple, hard to reach, decision makers. The effort to onboard one new customer didn’t make sense for us as we were only charging slightly over $100/month. We also could not increase our pricing as that would scare prospective customers away. Eventually we had to pivot owing to the inability to efficiently replicate our initial success.

Drawing from this experience, I believe that a start-up with PMF distinguishes itself by its ability to profitably replicate results within a defined customer niche. It is vital to prove the following:

a.) You are able to efficiently acquire businesses within your niche. To measure this, I recommend analyzing your monthly customer growth projection accuracy.

b.) Your customers are able and willing to pay enough. There’s a lot behind the word enough here. Please briefly indulge me as I explain:

i.) It is not sufficient to have paying customers. The amount each customer pays should more than cover the variable costs incurred each time the product/service is used, leaving the business with a healthy gross profit margin.

ii.) The gross profit generated per customer per month should be enough to allow the business to reach break-even with a conservative number of monthly paying customers. As a rule of thumb, the fewer customers needed to reach break-even, the better.

c.) You can retain a healthy % of customers month after month. To measure this well, I recommend analyzing customer metrics on a cohort-by-cohort basis. There’s a lot to be said about this, and we’ll hopefully do a post on it in the future.

Do not despise early beginnings 👣

In the past, my desire to have our product work for multiple groups of users has often overpowered the wisdom of nailing a product for a niche. Yet this is the foundation for PMF → success with a well-defined, small, homogenous group of early customers.

Take DoorDash for example:

“​​We interviewed over 200 small business owners all over the Bay Area — from San Mateo to Mountain View — and we kept hearing the same thing over and over again: deliveries are painful.


At the same time, we had a strong need ourselves. We all came from big cities where food delivery was a common thing. But out in Palo Alto, none of the restaurants delivered. So, we decided to do something about it. We put our coding hats on and built our initial prototype in a few hours.”


- “The DoorDash Story”, DoorDash Blog 


How did a $52 billion, NASDAQ listed company begin its journey? Success with a small group of restaurants in a small town.

DoorDash’s initial product was built to serve restaurants within a relatively small radius. It is only against the back of this success that they were later able to scale into other towns, cities, and eventually countries. As an aside, I love the fact that despite being the giant that it is today, DoorDash still primarily focuses on food deliveries!

Palo Alto delivery landing page in 2012

(soon after they called it DoorDash)

DoorDash landing page in 2024

So, hats off to you if you have achieved success with a meaningful % of a small niche of customers. Do not despise the early beginnings.

Founder’s note:

Focus, focus, focus. Go as granular as you can with your target niche then seek to successfully onboard a meaningful % of them. Examples of niches:

-       Accounting firms that serve manufacturing businesses

-       An embedded finance application targeting fish traders in Lake Victoria

-       An insurance application targeting Nairobi-based moms who’ve recently given birth

Can the niche scale? 🚀

As earlier mentioned, the ability to replicate success evidences product market fit. Problem is scaling in Africa and scaling in the US are two very different things.

The tricky thing about stories like DoorDash for African founders is that they are derived from the operational context of the world’s wealthiest continent. The US is a great place to build a high growth tech start-up; high disposable income, humongous and culturally aligned addressable market, public availability of market data, high value for time & convenience etc...

Africa as a whole (and in part) is the total opposite: low disposable income, small and culturally misaligned addressable markets, unreliable and outdated market data, low value for time & convenience etc...

What does scaling your niche look like in this context? There are many things to be said about this question, but for now I will focus on one:

I would advise African founders to abandon outlandish market size figures informed by development bank reports for market size figures informed by well researched and verified distribution channels. Let’s call this concept “Channel Driven Market Sizing” (CDMS).

As an investor, I can honestly tell you that the TAM, SOM, etc numbers don’t mean much in the African context. The fragmented nature of our markets, languages, and cultures makes scaling across cities and countries a major pain.

Channels are great because they present pockets of homogeneity and a transfer of trust that start-ups can leverage to achieve J curve like results.

Here’s an example of what a channel driven market sizing deck slide would contain:

Total Market Size: $10m (this is just an example, but it would be refreshing to see more realistic market sizes!)



Channel A: XYZ LTD

Channel A customer base: 25,000

Conversion target: 20%

Channel A ARR target: $500k



NB: “Total Market Size” would be the sum of ARR from all channels identified.

Founder’s note:

Channel Driven Market Sizing should happen at the beginning.

Before selecting a niche to work on, validate that solid channel partners exist and the terms under which they would be open to exposing their customer bases to you. Rank potential niches on this basis and go for the ones with the most promising channel partners.

In conclusion, I can’t help but wonder if start-ups pursuing PMF in Africa should take a leaf off the page of old successes. There’s an operational wisdom these businesses possess. Take Unilever, for example. They have enjoyed PMF in Kenya for decades. I’d be curious to know how their growth managers think about distributing new products in Nairobi County vs Kisumu County, for example. How do they respond to the cultural and language differences? How do these differences inform product development?

At Verdant Frontiers Fintech Fund, we not only invest in start-ups, but we leverage our decades of entrepreneurial experience to help our portfolio companies accelerate PMF. Reach out to us here if you would like to learn more.

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