Product Market Fit and Traction

In working with startups/entrepreneurs there is one common misconception that many founders have. They confuse product market fit with traction and vice versa. I would like to clarify what each means and why the distinction is important.

Product market fit is about getting users to be engaged with your product. The best proof for that is cohort data analysis on a statistically significant set of users.

Traction is all about the number of users you have and the growth in user base. Most often, this means something going viral and people sharing the product organically or through word of mouth.

This distinction is very important because of two factors:

1. Product market fit can be achieved by analysis, iterations and intuition but traction is always tricky to predict or even achieve in any sure way. So initially, startups should focus on product market fit rather than traction because even if they do get lucky and get virality without product market fit, it will not last and die out very soon.

2. At startups, resources are always scarce, be it bandwidth, cash or man power. Spending the resources on marketing/user acquisition before product market fit is going to waste them. Product market fit achievement is often the signal to shift focus from product iteration to building the marketing/user acquisition processes. Traction will come sooner or later if you have product market fit and market size is big enough- both the factors are very transparent with little room for ambiguity.

3. Funding- ideally you should raise just after the initial signs of traction since you have most leverage at that point. But that rarely happens because traction does not come easy or soon after product market fit. The second best time to raise is after product market fit, you know the magic formula, you just have to keep working on getting it in front of maximum users. Raising capital before PMF often leads to burning money in marketing to forcefully get traction and it rarely ends well.

What are your thoughts? Let me know in comments.