Five Fits Ventures - Insanely focused entrepreneurship for 0-1 ventures.

Five Fits

There are five "fits" required for a venture to achieve breakout growth: Market, Product, Channel, Funnel, and (monetization) Model. Each fit contains many risk dimensions, a red flag in any of which is enough to block breakout growth:

Market fits

Breadth. Do a ton of people feel this pain, or just a few?

Depth. Does this pain cost each person a lot of revenue or expenses, or not much?

Hair On Fire. Is the pain procedurally blocking when it occurs, or does the person typically ignore it as they are preoccupied with other things?

Awareness. Is the person actively trying to solve this pain, or do they accept it as a cultural element of their workflow?

Buyer Abstraction. Is the buyer acutely aware of the user's pain, or insensitive to it?

Readiness. Are good circumstances to try a new solution frequent, or rare?

Incentive Purity. Do all stakeholders' incentives align with solving this pain, or will someone try to block the purchase because their job is at stake or they don't see value?

Product fits

Strength. Is the upside available from solving the pain large, or small?

Competition. Is the venture's advantage at solving this pain unfairly large, or small?

Scalability. Does the marginal effort to solve this pain for the next customer drop off quickly, or slowly?

Durability. Does the solution grow its own moats (value to every customer grows with more users or data), or not?

Cost. Is the solution cheap to build compared to its upside, or expensive?

Channel fits

User Reach. Is the attention of most people who feel this pain converged via a few similar channels, or scattered across many?

Buyer Reach. Is the attention of most decisionmakers about how to solve this pain converged via a few similar channels, or scattered across many?

State of Mind. For each channel, are most targets in the right state of mind to think about their pain and your solution, or are they distracted or unthinking?

Funnel fits

Convergence. Is the market niche who feels greatest pain easily identified and positioned for, or are they a variety of edge cases across market niches?

Clarity. Can you explain your market's pain and how you solve it in 20 words each, or do you need many more?

Objection Handling. Can your funnel predict and address all the top risks a target might see in trying your solution, or few/none?

Time To Value. Can the target receive meaningful value in one call or five-minute self-serve journey, or does it take lots of initial effort?

Payback Period. Is the cost to acquire a new customer recouped quickly, or slowly?

(Monetization) Model fits

Willingness-to-pay. Is the customer willing to pay a large fraction of the value your solution creates, or a small one?

Efficiency. Is your pricing efficiently correlated to value created, or inefficiently? (perpetual < subscription < consumption < outcome)

Thesis

At Five Fits Ventures, we believe:

Entrepreneurship is the "fourth factor of production" that measures and minimizes risk to the others (Capital, Labor, and Land).

Most new ventures fail to achieve breakout growth.

They fail because they lack Entrepreneurship - they talk to too few customers, listen with bias, lack design ingenuity, lack technical expertise, and/or lack risk judgment.

This failure rate means most Capital, Labor, and Land allocated to any given venture is wasted.

Five Fits Ventures contributes industry-leading Entrepreneurship to hugely mitigate risks to a venture’s other investors of Capital, Labor, and Land.

Whom We Serve

FFV adds value to several categories of investors and operators who are often stretched too thin to fully de-risk their investment in a venture they need to achieve breakout growth. Here are some examples.

For an early-stage venture capital (“VC”) firm preparing to invest $4M into a software startup with strong founders and proprietary technology, but few repeatable sales, we diligence and de-risk the company’s likelihood of acquiring the Five Fits for their critical first product.

For a growth-stage VC preparing to invest $40M into a company with $25M/yr revenue, on the thesis that two new products could sustain its growth rate at >100% for three years, we diligence and de-risk those products’ likelihood of acquiring the Five Fits.

For a 200-person company with two products succeeding in one market, preparing to spend $4M building a third product for a new market, we diligence the product concept and recommend the minimum-risk development and go-to-market plan.

For a 2,000-person company with a broad portfolio of products preparing to spend $20M extending a product family to a new market, we diligence the new market and recommend the highest-ROI development and go-to-market plan.

We don’t add value when the venture is not sensitive to growth, alpha, customer attunement, or technology / market / execution risk. Private equity roll-ups and turnarounds don’t need our help. Product teams who derive their roadmap based on what executives or founders asked for, or what is politically possible within their company, don’t need our help.

How We Diligence

Firsthand

Over 2-3 weeks, we interview 150 potential customers of a new business venture, rapidly and rigorously, and develop firsthand models of the venture’s risks in every category: market, product, channel, funnel, and model.

Each interview is 15 minutes. Each target is interviewed at least once, but sometimes twice.

This is hard. It's also the most important Entrepreneurship of the venture. We're world-class at it.

Secondhand

Like everyone else, we also measure the venture's various risks by constructing models from secondhand information - market maps, competitive landscapes, economic models of customers, key product requirements, theoretical opportunities for the Five Fits.

This is easier, and lower-leverage, than firsthand diligence. We're very good at it, but so are others.

Deliverables

We deliver the following at the end of our diligence:

A map of Market sub-niches, their economic levers /pains, and a valuated list of opportunities to Fit them.

A list of 150 pre-customers excited to co-develop a solution to their pain, who would likely become the venture's first customers.

Product and GTM roadmaps that sequence product wedges against market niches

Product design mockups validated by pre-customer reactions.

Channel and funnel experiments validated by pre-customer engagement.

Benchmarks (against other ventures) of the venture's relative risk and likelihood of achieving the Five Fits.