💬 In this issue:

  • The Retention Challenge: The importance of retaining genuine users over time and its role in finding sustainable product-market fit for startups.
  • Emotional Connection: How customer emotions reflect the effectiveness of a product in solving problems and the significance of feedback in navigating product-market fit challenges.
  • Adapting or Pivoting: Exploring the difficult decisions startups face when product-market fit is elusive—whether to pivot, persevere, or return to investors.
If you have a boatload of money, you can acquire millions of users at a stunning pace, publish press releases about those numbers, and maybe even raise even more money. Yet, the actual test is not really in the acquiring of said users but in ensuring they’re using the product. If they are, you’ll arrive at the most critical metric: retention. - Olumuyiwa (Writer & Contributor, African Pre-seed Podcast).  

🧭 Genuine users stay the course. Acquired users come and go depending on the cheque

In July, a report showed that an African-focused crypto startup paid users referral fees to acquire users. It touted those 4 million users in the press. One year later, one company executive claimed that “75% of the 4 million verified users reported were fraudulent accounts.”

We’re circling right back to the importance of retaining genuine users. 

Retaining many customers over time is at the heart of finding product-market fit, something we’ve discussed a lot this year as we’ve seen more startups close their doors after failing to find PMF. 

Before we go down that rabbit hole, a definition.

“Product-market fit describes a scenario in which a company’s target customers are buying, using, and telling others about the company’s product in numbers large enough to sustain that product’s growth and profitability.”

Notice how PMF isn’t just about finding new customers willing to spend money to try the product once? It’s about ensuring you have a significant user base that uses the product on a recurring basis so your business can grow sustainably. It also helps if those customers do the most scam-proof referral of all time: good ol’ word of mouth *chef’s kiss*. 

You have a defensible product if your target audience pays money for your product repeatedly. 

On a chart, PMF will look like acquiring paying customers, churning some of them but retaining a significant number over a long time. It is possible for a product to be around for a long time without finding PMF. It’ll likely mean they’ll spend money and energy to keep going and like we’ve seen a few times this year, those products become unsustainable once venture funding stops coming. 

🤔 What emotion does your product evoke?

This week, I overheard friends talking about their finances. One friend, an entrepreneur, was sharing his plans to scale his business using his own funds by the end of the year. He was saving money using a popular fintech app. While setting up the app, he had unknowingly picked an interest-free plan. 

His friend, who also used the app, talked him through moving to a plan with an interest rate. Hours later, his first interest rate was paid, and it’s impossible to describe his joy. That’s one customer who’s never ditching that app. 

Emotions tell you how well your product solves the defined problem. This means you should speak to your customers frequently and take in all of that feedback. 

While I’d love to tell you that speaking to customers and taking feedback is the magic bullet, sometimes PMF is nowhere to be found—you may be too early, or the market just doesn’t think the product solves a real problem— in your first couple of iterations, so pivoting or persevering may be the next best thing. There’s also the option of returning whatever money is left to investors and setting out on a new venture. 

📚 What I’ve been reading

💥  Parting shot

What's on your mind? Drop us a note via connect@africanpreseed.com to let us know. Or, tag us on socials using #africanpreseedpodcast, #APSnewsletter or #APSVibeCheck.

That's it for now. See you next month! 😉