Todd Jackson (First Round Capital)11 April 2024

A framework for finding product-market fit

4Frameworks

15Insights

Episode overview

Todd Jackson presents First Round Capital's four-level framework for B2B product-market fit: nascent, developing, strong, and extreme. He explains that founders should initially prioritize customer satisfaction, then build repeatable demand, and finally improve delivery efficiency. Examples from Vanta, Lattice, Plaid, Looker, and Ironclad show how changing the persona, problem, promise, or product can help a company escape a plateau. The conversation also introduces dollar-driven customer discovery as a way to test whether buyers recognize enough value and have both the ability and willingness to pay.

Key ideas

Extreme product-market fit combines widespread demand, satisfaction of a critical need, and repeatable, efficient delivery.
Level one targets three to five satisfied customers; level two expands to 25; level three approaches 100 or more; level four combines scale with strong efficiency.
The optimization sequence is satisfaction first, demand second, and efficiency later, while preserving gains from earlier levels.
When progress stalls, founders can reconsider four linked elements: persona, problem, promise, and product.
The marginal customer should become progressively easier to acquire and serve as product-market fit strengthens.
Early B2B founders should seek important, urgent problems and may deliberately use manual or Wizard-of-Oz delivery to validate satisfaction.
Dollar-driven discovery tests extreme value, existing budget, buying processes, and willingness to pay instead of relying on polite customer enthusiasm.
Reaching strong product-market fit often takes several years, and expansion products must earn product-market fit again rather than inheriting it automatically.

Transcript available · source text is retained privately and is not published

Frameworks in this episode

Sales3 steps

Dollar-Driven Discovery

Test the dollar potential of a hypothesis, not just whether customers 'like' the idea

Read →

Entrepreneurship4 steps

The Four Levels of Product-Market Fit

Sequence PMF as four levels, optimizing satisfaction, then demand, then efficiency in turn

Read →

Strategy3 steps

The Four Ps of Pivoting

Persona, Problem, Promise, Product — the four levers to change when you're stuck

Read →

Sales3 steps

The Friend-Zone Test

Sit customers down and force the truth: do you need me, or do you just like me?

Read →

People & resources mentioned

Attributed to the moment in the episode. Timestamps are approximate.

People · 12

Todd JacksonMentionsDescribed as a former Gmail product leader and venture capitalist.
“today my guest is Todd Jackson Todd is a partner at the legendary VC from first round capital”
▶ Watch at ~0:30approx.
Lenny RachitskyMentionstoday we've got another very special compilation episode something I've been pulling on more and more with the podcast and the newsletter
“Todd thank you so much for being here and welcome to the podcast”
▶ Watch at ~4:30approx.
Rahul VohraCoinedRahul from superhuman is kind of well known for his approach to finding product Market fit
“Rahul from superhuman is kind of well known for his approach to finding product Market fit”
▶ Watch at ~7:30approx.
Christina CacioppoCoinedI am very excited to have Christina Copo CEO and co-founder vanta joining me
“vanta you know was founded in 2016 by Christina Copo”
▶ Watch at ~22:30approx.
Zach PerretCoinedZack parrot was building uh plaid started out not as as like a API for bank accounts
“Zack parrot was building uh plaid started out not as as like a API for bank accounts”
▶ Watch at ~32:00approx.
Rick SongCoinedthere's this founder uh from a called Persona his name is Rick song
“there's this founder uh from a called Persona his name is Rick song”
▶ Watch at ~36:00approx.
Jason BoehmigCoinedfounded in 2015 uh Jason big is the founder
“founded in 2015 uh Jason big is the founder”
▶ Watch at ~46:00approx.
David HsuMentionsyou mentioned Lenny this this quote from David Sue from ret which I love too
“you mentioned Lenny this this quote from David Sue from ret which I love too”
▶ Watch at ~55:30approx.
Filip KaliszanMentionsPhilip kazon from verata he's in you know some of the videos on our website too
“Philip kazon from verata he's in you know some of the videos on our website too”
▶ Watch at ~56:30approx.
Ali GhodsiMentionsanother quote from uh Ali go gosi from data bricks
“another quote from uh Ali go gosi from data bricks”
▶ Watch at ~59:30approx.
Casey WintersCoinedwho's had the most influence on you in your career well we mentioned him before so I gotta bring him back up Casey Winters
“Casey winners has this great point also that expectations of customers ever increase”
▶ Watch at ~1:05:00approx.
Josh KopelmanCoinedJosh Kopelman is the partner there who was just a massive supporter of mine
“my partner Josh coppelman talks about this all the time”
▶ Watch at ~1:07:30approx.

Resources · 26

First Round CapitalMentionscompany
“Todd is a partner at the legendary VC from first round capital”
▶ Watch at ~0:30approx.
AuthKitMentionssoftware · WorkOS
“work OS also recently launched authkit a complete El authentication and user Management Service”
▶ Watch at ~2:30approx.
WorkOSRecommendscompany · WorkOS, Inc.
“that's where work OS comes in making it fast and painless to add Enterprise features to your app”
▶ Watch at ~2:30approx.
EppoRecommendssoftware · Eppo
“EPO is a Next Generation AB testing and featured management platform”
▶ Watch at ~3:30approx.
CoverCoinedcompany · Todd Jackson
“I started a company in 2013 called cover”
▶ Watch at ~5:00approx.
TwitterMentionswebsite · Twitter
“we ended up selling cover to Twitter in 2014”
▶ Watch at ~5:30approx.
GmailUsessoftware · Google
“before that I had worked on Gmail as the product lead”
▶ Watch at ~5:30approx.
DropboxUsescompany · Drew Houston and Arash Ferdowsi
“I was the VP of product and design at Dropbox”
▶ Watch at ~5:30approx.
FacebookUsescompany · Meta
“before that I had worked on Gmail as the product lead kind of in the early days you know early 2000s and at Facebook”
▶ Watch at ~5:30approx.
SuperhumanMentionssoftware · Superhuman
“Rahul from superhuman is kind of well known for his approach to finding product Market fit”
▶ Watch at ~7:30approx.
First Round ReviewMentionswebsite · First Round Capital
“we've published dozens of articles on the first round review”
▶ Watch at ~8:30approx.
Product-Market Fit MethodCoinedcourse · First Round Capital
“we launched a new program and we call it product Market fit method”
▶ Watch at ~13:00approx.
WeWorkUsescompany · Adam Neumann and Miguel McKelvey
“I was a big fan of wework like as a as a customer of wework”
▶ Watch at ~17:30approx.
VantaMentionssoftware · Christina Cacioppo
“one of the best examples I can think of that is this company called vanta”
▶ Watch at ~22:30approx.
LatticeMentionscompany · Jack Altman
“Lattis actually started as an okr tool”
▶ Watch at ~29:00approx.
FigmaUsessoftware · Figma
“Jack literally showed them figma mockups like there was no product”
▶ Watch at ~31:00approx.
PlaidMentionscompany · Zach Perret and William Hockey
“I don't know if you know the story of plaid”
▶ Watch at ~32:00approx.
PersonaMentionscompany · Persona
“there's this founder uh from a called Persona his name is Rick song”
▶ Watch at ~36:00approx.
CommandBarRecommendssoftware · CommandBar
“command bar is an AI powered toolkit for product growth marketing and customer teams”
▶ Watch at ~38:00approx.
LookerMentionssoftware · Google
“looker is a is a first round company”
▶ Watch at ~43:30approx.
IroncladMentionssoftware · Jason Boehmig and Cai GoGwilt
“a really different example uh is a company called Ironclad”
▶ Watch at ~45:30approx.
RetoolMentionssoftware · Retool
“we honestly never felt that in the first couple years at retool”
▶ Watch at ~56:00approx.
VerkadaMentionscompany · Filip Kaliszan, Benjamin Bercovitz, James Ren and Hans Robertson
“Philip kazon from verata he's in you know some of the videos on our website too”
▶ Watch at ~56:30approx.
DatabricksMentionscompany · Ali Ghodsi, Matei Zaharia and co-founders
“another quote from uh Ali go gosi from data bricks”
▶ Watch at ~59:30approx.
Lenny's PodcastCoinedpodcast · Lenny Rachitsky
“you are um you're doing Lenny's newsletter and you're building Lenny's podcast”
▶ Watch at ~1:15:30approx.
Lenny's NewsletterCoinednewsletter · Lenny Rachitsky
“you're doing Lenny's newsletter and you're building Lenny's podcast”
▶ Watch at ~1:15:30approx.

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Insights & moments

The myth-busts, hot takes, explainers, and tools worth keeping.

Hot Take· 2

Hot Take06:30

Product-Market Fit Is a Science, Not Just an Art

Todd argues that most PMF advice is uselessly vague ("you'll know it when you see it"), unlike other startup topics where specific tactical content exists. For sales-led B2B specifically, there is a repeatable science to finding fit, which is what made pieces like Superhuman's PMF method so popular.

Most internet advice on PMF is general, not specific or tactical
Bottom-up and consumer product is more 'alchemy' and taste; sales-led B2B has more science
Superhuman's 2018 PMF approach went viral precisely because it was specific and tactical
PMF is the single most important thing a startup does in its first three years

“people tend to think about it purely as an art rather than a science”
Todd Jackson · 06:30

“product Market fit is the single most important thing that your startup does in the first three years and it's just underexplored”
Todd Jackson · 08:00

#product-market-fit#b2b#startups

Hot Take1:07:30

Founders Spend 99% of Time Building, 1% Picking

Citing partner Josh Kopelman, Todd argues the most important founder decision is the 'pick' — the persona, problem, and market — yet founders spend 99% of their time building and only 1% choosing. That pick sets the constraints for the next decade, so he'd spend 12-18 months at level one just getting it right.

Founders over-index on building because that's the skill they have
The choice of persona, problem, and market defines your next 10 years
Todd would spend 12-18 months at level one nailing the four Ps
There's a real imbalance between time spent building vs. picking

“Founders spend 99% of their time building because that's what they've done right and they spend like one % of their time picking”
Todd Jackson · 1:07:30

#founder-strategy#market-selection#product-market-fit

Explainer· 2

Explainer17:30

The $100 Vending Machine: Why Efficiency Is Part of PMF

Todd shares his partner Brett Berson's metaphor: a vending machine that spits out a $100 bill for every $1 you insert would have insane demand and satisfaction, but the business is absurd because it isn't viable. Many startups effectively give away $2 for $1, which feels like traction but isn't real product-market fit. Efficiency is the dimension most people leave out of their PMF definition.

Extreme PMF requires demand, satisfaction, AND efficiency delivered repeatably
WeWork and Casper achieved demand and satisfaction but never got efficiency right
A product that subsidizes itself heavily can look like PMF but isn't viable at scale
Efficiency is the part most founders omit when they define product-market fit

“you put a dollar in and $100 bill comes out and that's the product like that would have insane sort of like demand”
Todd Jackson · 18:00

“they're basically with their products giving away $2 for $1 and it gets them pretty far but that's not real product Market fit right”
Todd Jackson · 18:30

#product-market-fit#unit-economics#efficiency

Explainer1:14:00

Dollar-Driven Discovery and the Three-Price Question

Todd contrasts normal customer discovery with 'dollar-driven discovery': customers describe problems well but can't predict their own behavior. He looks for 'wow' statements and demonstrated behavior (asking to meet again, requesting the deck), then quantifies willingness to pay with a three-price question borrowed from Madhavan Ramanujam — fair, expensive, and prohibitively expensive.

Customers are good at describing problems but bad at predicting their behavior
Look for 'wow' statements and demonstrated interest, not polite enthusiasm
Confirm ability to pay: existing budget, active search, or a failed internal build
Ask fair / expensive / prohibitive price; buyers usually pay the 'expensive' one

“they're very good at talking about their problems but they're not necessarily good at predicting their own behavior”
Todd Jackson · 1:14:30

“the expensive price is the one like if the product's good the expensive price is the one that they would actually pay”
Todd Jackson · 1:21:30

#customer-discovery#pricing#willingness-to-pay

Story· 6

Story22:30

Vanta Started as a Manual Spreadsheet, Not a Product

Christina Cacioppo built Vanta by interviewing security engineers and CISOs, who repeatedly said they hated filling out compliance questionnaires. Her early 'product' was her manually filling out a SOC 2 spreadsheet for design-partner customers like Segment, Front and Figma — posing as software but doing it herself. It unlocked enterprise deals, proving satisfaction matters more than efficiency at level one.

Cacioppo tried B2B-Alexa meeting-recording and drop-shipping ideas before Vanta
She asked security people what they hated most; answer was compliance questionnaires
Early customers (Segment, Front, Figma) needed a SOC 2 to close Fortune 500 deals
She delivered a manually-filled spreadsheet with no product behind it

“she was the one behind the email address you know like sort of posing as the AI but doing it herself”
Todd Jackson · 25:30

“I hate feeling out the security questionnaires I hate doing the compliance audits it's like so much grungy manual work”
Todd Jackson · 23:30

#vanta#compliance#wizard-of-oz#case-study

Story28:30

Lattice Pivoted From OKRs by Keeping the Persona

Lattice started in 2015 as an OKR tool that customers used for one quarter then churned. Founder Jack Altman kept his persona — heads of HR he'd built close relationships with — but changed the problem and promise to performance management, which was swinging back into favor. He sold his first 5-10 customers on Figma mockups alone before building anything.

Lattice's original OKR product had customers churn after a single quarter
Altman kept the HR-leader persona he knew well and changed problem + promise
Timing helped: performance management was returning to favor around 2015-2016
He closed the first 5-10 customers with Figma mockups and no product

“he sold his first five or 10 customers like with figma mockups right like before he had built anything really”
Todd Jackson · 31:00

#lattice#pivot#case-study#hr-tech

Story32:00

Plaid Kept the Code and Flipped Everything Else

Plaid began as a consumer budgeting app that wasn't popular, but the founders had built the piece that connected the app to users' bank accounts. Friends at companies like Venmo wanted to license that connectivity, so Plaid kept the product/code and changed the other three Ps — from consumers with budgeting problems to developers at fintechs needing bank-account access.

Plaid launched as a consumer budgeting/savings app that never took off
The founders had solved the hard problem of connecting to bank accounts
A friend at Venmo wanted to license it; Robinhood and Coinbase followed
They kept the product but flipped persona, problem, and promise entirely

“plaid started out not as as like a API for bank accounts it started out as a consumer budgeting app”
Todd Jackson · 32:00

#plaid#pivot#fintech#case-study

Story36:00

Don't Get Friendzoned by Your Customers

Persona founder Rick Song was paranoid about customers who liked him but didn't truly need his product. His technique was to sit his first 5-10 customers down one-on-one and demand brutal honesty: is Persona a necessity, and would you switch to a competitor charging half as much? It's a simple way to tell whether you're critical or just in the friend zone.

The 'friend zone' is when customers like you but don't love you or need you
Song told customers not to be nice and to reveal if the product was essential
He asked whether they'd defect to a competitor at half the price
The sooner you learn the uncomfortable truth, the better

“you don't want to get friendzoned by your customers like you like where your customers like you but they don't love you and they don't…”
Todd Jackson · 36:30

#persona#customer-discovery#case-study

Story43:30

Looker Spent 40 Hours Per Customer Before They Bought

Looker is a product people don't understand until they see their own modeled data in it. Founder Lloyd Tabb spent 20-40 hours modeling a prospect's data and teaching them before they were even a customer — a process Looker later called 'forward deploy.' It took a long time at level one, but once repeatable they flew from 5 to 25 customers with a ~75% close rate and near-zero churn.

Looker couldn't be sold with Figma mockups; buyers needed to see their own data
Tabb did 20-40 hours of unpaid data modeling per prospect ('forward deploy')
They only sold customers who were already using it, yielding ~75% close rate
Slow at level one, then very fast through level two

“looker people don't get looker until they see their own data in it right and their data is modeled and they see the dashboards”
Todd Jackson · 44:00

#looker#forward-deploy#sales#case-study

Story45:30

Ironclad Won by Repositioning From 'AI Legal Assistant' to CLM

Jason Boehmig struggled selling an 'AI legal assistant' in 2014 because no one was looking for one. An inbound email asked 'are you a CLM?'; he Googled it, replied 'yes we are a CLM,' and had his co-founder code the demo on the train to the meeting. They won against 10-12 established vendors because customers were already looking to buy a CLM — expanding an existing category beat creating a new one.

'AI legal assistant' positioning was a slog nobody was searching for in 2014
An inbound prospect asked if Ironclad was a CLM (contract lifecycle management)
Boehmig said yes, then had co-founder Kai build the demo en route to San Jose
They beat 10-12 vendors because buyers already had CLM budget and intent

“on the Train Jason is is telling his coer Kai hey like I need you to code this up right now to make it look…”
Todd Jackson · 47:30

“we changed our positioning to play in an existing category of CLM but a much better CLM but customers are already looking for a CLM”
Todd Jackson · 48:00

#ironclad#positioning#category-design#case-study

Takeaway· 5

Takeaway19:00

The Marginal Customer Should Get Easier and Easier

Todd introduces the concept of the 'marginal customer' — the next incremental customer. If you truly have product-market fit and are progressing, each new customer should be easier to acquire and serve than the last. When the marginal customer keeps feeling just as hard, your fit is not strengthening.

The marginal customer is the next incremental customer you acquire
With real PMF, acquiring and serving each new customer gets progressively easier
This is a signal that efficiency is increasing and PMF is strengthening

“the marginal customer should be getting easier and easier and easier to get like easier to acquire them easier to to give them good service”
Todd Jackson · 19:30

#product-market-fit#growth#metrics

Takeaway50:00

'Interesting' Is a Polite Way of Saying No

Todd warns that customers are nice, so soft language masks rejection. 'We don't have the budget,' 'it's not the right time,' or reacting with 'that sounds interesting' all mean no. What you want is a customer who says the price is high but they'll make it work because they need it.

'No budget' and 'not the right time' from customers usually mean no
A lukewarm 'that sounds interesting' is a polite rejection
A real buyer says it's expensive but they'll make it work because they need it

“the word interesting is a polite way of saying no right”
Todd Jackson · 1:18:00

#customer-discovery#sales#signals

Takeaway51:00

Most Founders Do a 10% Pivot When They Need a 200% Pivot

Quoting Jack Altman, Todd notes that stuck founders tend to make timid 10% pivots when the situation demands a 200% one. It's psychologically hard to let go of a business you've built to many customers, but plateauing founders often have to fully re-nail the four Ps rather than tweak.

Stuck founders default to small, safe pivots
Escaping a plateau often requires a much larger change
The emotional trap is not wanting to 'throw away' what you've built
Level two is the second-most-common place for companies to get stuck

“the most Founders do like a 10% pivot and what they need to be doing is a 200% pivot”
Todd Jackson · 51:00

#pivot#product-market-fit#founder-psychology

Takeaway53:30

The Quadrant of Death: Slow Sales Cycle + Low ACV

Todd explains that long sales cycles are survivable if the contract value is high, and low ACVs are survivable if you close very frequently (like Looker). What kills you is the worst of both worlds — a slow sales cycle paired with a low average contract value.

Six-figure contracts can justify 3-6 month sales cycles
Low-ACV products (e.g. $20-30k) work if you close very repeatedly
The fatal combination is a slow cycle AND a low ACV
Todd calls that combination the 'quadrant of death'

“you can't basically be in the worst of Both Worlds where you've got a slow sales cycle and a low ACV like that is the…”
Todd Jackson · 53:30

#sales#acv#unit-economics

Takeaway1:10:00

There's No Shame in Returning the Money After 4-5 Years

Asked what to do if a founder has spent 4-5 years without feeling market pull, Todd is candid: the odds of suddenly finding it are low, and it's the exception rather than the rule. Returning capital to investors or seeking a soft landing carries no shame, because product-market fit is genuinely very hard and everyone knows the odds going in.

After 4-5 years without market pull, a magical turnaround is the exception
Returning money or seeking a soft landing is a legitimate choice
PMF is very hard and failure is the expected base rate
Todd says he'd fully support a founder who takes that path

“if a Founder wants to return the money to investors if a Founder wants to look for a soft Landing there's no shame in that”
Todd Jackson · 1:11:00

#founder-psychology#startups#when-to-quit

Key ideas

Frameworks in this episode

Dollar-Driven Discovery

The Four Levels of Product-Market Fit

The Four Ps of Pivoting

The Friend-Zone Test

People & resources mentioned

People · 12

Resources · 26

Insights & moments

◆Hot Take· 2

Product-Market Fit Is a Science, Not Just an Art

Founders Spend 99% of Time Building, 1% Picking

✶Explainer· 2

The $100 Vending Machine: Why Efficiency Is Part of PMF

Dollar-Driven Discovery and the Three-Price Question

❝Story· 6

Vanta Started as a Manual Spreadsheet, Not a Product

Lattice Pivoted From OKRs by Keeping the Persona

Plaid Kept the Code and Flipped Everything Else

Don't Get Friendzoned by Your Customers

Looker Spent 40 Hours Per Customer Before They Bought

Ironclad Won by Repositioning From 'AI Legal Assistant' to CLM

▲Takeaway· 5

The Marginal Customer Should Get Easier and Easier

'Interesting' Is a Polite Way of Saying No

Most Founders Do a 10% Pivot When They Need a 200% Pivot

The Quadrant of Death: Slow Sales Cycle + Low ACV

There's No Shame in Returning the Money After 4-5 Years

Hot Take· 2

Explainer· 2

Story· 6

Takeaway· 5