This is a series of articles from the biggest names in VC. Wilson, Feld, etc. about product/market fit, the illusion of product market fit and vanity metrics.

1. The Case for the Fat Start-Up

Ben Horowitz, Co-founder and General Partner, Andreessen Horowitz makes the case for why businesses should not focus on saving money they have raised, but on raising enough to make sure they capture the market.

There are only two priorities for a start-up: Winning the market and not running out of cash.Running lean is not an end

  • September 1999: Loudcloud founded
  • November 1999: Loudcloud raises $21 million at a $45 million pre-money valuation (Benchmark Capital is the lead investor)
  • January 2000: Loudcloud borrows $45 million from Morgan Stanley (MS)
  • June 2000: Loudcloud raises $120M at a $700M pre-money valuation
  • March 2001: Loudcloud goes public on Nasdaq, raises $160 million and is valued in the public markets at approximately $480 million. Total funds raised to this point: $346 million.
  • August 2002: Loudcloud sells the managed services business to EDS (this was the only actual business we had at the time) for $63.5 million and becomes a software company (and changes its name to Opsware).

Make sure you read this. It’s fascinating.

2. Being Fat Is Not Healthy,

Fred Wilson over at USV rebuts Horowitz.

The very best investments that I have been involved in established product market fit before raising a lot of money. That’s how Geocities did it. That’s how Twitter did it. That’s how Zynga did it. That’s how every single one of my top twenty web investments in my career did it.

Many of them also went on to raise and spend a boatload of money on the way to getting profitable. Not all of them needed to do that. But the thing that is true about every single one of the twenty most successful web software investments I’ve been involved in is that they had significant user or customer adoption before ramping up hiring and spend.

3. The Revenge of the Fat Guy,

Horowitz counters Wilson’s counter

He breaks down some common myths about product market fit,eg product market fit is a once off event that declares itself with bells and whistles.

4. The Illusion of Product/Market Fit for SaaS Companies,

Brad Feld at Foundry/Techstars picks up the product market thread and outlines the stages of PMF.

5. Be Honest About Whether Your Product Really Makes a Difference,

Mark Suster, GP at Upfront Ventures, talks about vanity metric and how they may lie to companies that they have achieved PMF.

“Are we really making a difference? Are our users addicted to our product? Are we making their lives better? Will we win the battle for share-of-mind every time they pick up their phone or log into their computers?”