Table of Contents
Todd Jackson from First Round Capital reveals why 60% of B2B startups stuck at the earliest stages, and introduces a proven four-level framework that maps the real journey from zero to extreme product-market fit.
Product-market fit isn't a destination—it's a progression through four distinct levels, each requiring different strategies, metrics, and mindsets. This comprehensive framework helps B2B founders understand exactly where they are and what to focus on next.
Key Takeaways
- Product-market fit progresses through four levels: nascent, developing, strong, and extreme—each taking 1-6 years to achieve
- 60% of B2B startups get stuck at levels one or two, never reaching the "fish jumping in boat" stage
- The "Four P's" framework (Persona, Problem, Promise, Product) provides clear levers for pivoting when stuck
- Success requires balancing three dimensions: demand, satisfaction, and efficiency—but not all at once
- Level one prioritizes satisfaction over efficiency; manual processes are acceptable if they deliver incredible customer value
- The transition from level two to three marks the shift from grinding for customers to customers finding you
- Each level has specific benchmarks for team size, revenue ranges, and key metrics that indicate progress or stagnation
- Dollar-driven customer discovery techniques reveal true willingness to pay beyond polite customer conversations
- Getting unstuck often requires dramatic pivots—changing 200% rather than incremental 10% adjustments
Timeline Overview
- 00:00–08:30 — Introduction and Todd's Background: From Gmail product lead to First Round partner, why VCs rarely appear on product podcasts, and the unique perspective of a builder-turned-investor
- 08:30–18:45 — The Product-Market Fit Problem: Why existing advice is too vague, the mystery surrounding PMF, and introducing the scientific framework with three core dimensions
- 18:45–35:20 — Level One Deep Dive: Vanta's manual SOC 2 story, the importance of satisfaction over efficiency, and understanding the Four P's pivot framework with Lattice's OKR-to-performance management transition
- 35:20–50:15 — Level Two Strategies: Looker's forward deploy process, Ironclad's positioning pivot from AI assistant to CLM, and the critical transition from grinding to scalable demand generation
- 50:15–68:40 — Level Three Breakthrough: The "fish jumping in boat" phenomenon, Retool's boulder analogy, and why this stage feels visceral after years of uncertainty
- 68:40–82:30 — Level Four Excellence: Expanding TAM through multiple products, Vanta's trust platform evolution, and the never-ending journey of finding PMF repeatedly
- 82:30–90:00 — Dollar-Driven Discovery: Advanced customer interview techniques, avoiding "happy ears," and practical scripts for testing willingness to pay
The Vanta Case Study: When Manual Beats Scalable
The most illuminating example in Jackson's framework comes from Vanta's early days. Christina Cacioppo's journey from failed B2B Alexa concept to compliance automation powerhouse demonstrates level one principles perfectly.
When Cacioppo discovered that startups desperately needed SOC 2 certifications to close enterprise deals, she didn't build software—she became the software. "She was literally the one behind the email address, posing as the AI but doing it herself," Jackson reveals. This manual approach unlocked immediate revenue for customers like Segment and Front, proving the core value proposition before any scalable technology existed.
The Vanta story challenges conventional startup wisdom about efficiency. At level one, "it's okay to be inefficient as long as you're delivering incredible satisfaction." This insight liberates founders from premature optimization, allowing them to focus entirely on solving real problems with transformational impact.
This approach extends beyond Vanta. Ramp initially had employees manually updating dashboards behind the scenes. Many successful B2B companies start with "Wizard of Oz" approaches that prove market demand before building scalable solutions.
The Psychology of Product-Market Fit Progression
Jackson's framework reveals a crucial psychological dimension often overlooked in traditional PMF discussions. The emotional journey from grinding uncertainty to confident growth creates distinct phases that founders experience viscerally.
"Every customer we got felt like the last customer we were ever going to find," explains Retool's David Hsu about their early years. This sentiment captures the psychological reality of levels one and two—persistent doubt despite growing traction.
The transition to level three represents a fundamental shift in founder psychology. As Jack Altman from Lattice describes: "I remember thinking I don't even know where these leads are coming from, just more and more of them are showing up each month." This marks the emotional breakthrough where market pull becomes undeniable.
Even at massive scale, this uncertainty persists. Ali Ghodsi from Databricks admitted feeling unsure about product-market fit even at $100 million ARR. This perpetual paranoia, rather than being a weakness, often drives continued innovation and customer focus among the most successful companies.
The Four P's: A Systematic Pivot Framework
Traditional pivot advice lacks specificity, leaving founders to guess which elements to change. Jackson's Four P's framework (Persona, Problem, Promise, Product) provides clear levers for systematic experimentation.
The framework's power lies in its combinations. Lattice "kept the first one but changed the others" when pivoting from OKR management to performance management. Founder Jack Altman maintained relationships with HR leaders (Persona) while completely reimagining the Problem, Promise, and Product.
Conversely, Vanta "changed all four" when moving from earlier concepts to compliance automation. This represents the most dramatic type of pivot—essentially starting over while leveraging accumulated customer insights.
Plaid exemplifies a third pattern: keeping the Product (bank connection technology) while transforming the other three P's. Zach Perret's team discovered that their consumer budgeting app's most valuable component was the underlying API, leading to a complete business model transformation.
"Most founders do a 10% pivot when what they need is a 200% pivot," Jackson quotes from Altman. This insight challenges founders to make bold changes rather than incremental adjustments when stuck.
Dollar-Driven Discovery: Beyond Polite Conversations
Standard customer discovery often yields misleadingly positive feedback because "customers are nice—they're going to be polite." Jackson's dollar-driven discovery methodology cuts through social pleasantries to reveal genuine purchase intent.
The approach centers on identifying "extreme value" through non-leading questions, then systematically testing ability and willingness to pay. Key techniques include asking about existing budgets, current spending on competing solutions, and procurement processes.
Jackson's favorite technique comes from Maverick Simantov: asking customers for "fair," "expensive," and "prohibitively expensive" price points. "When people tell you the fair price, they're trying to get a deal. The expensive price is the one they would actually pay if the product's really good."
This methodology extends beyond individual conversations to systematic pattern recognition. "If you talk to enough people and predict 70-80% of what the next person will say, that's when you've talked to enough people." This benchmark helps founders know when they've gathered sufficient market intelligence.
The program Jackson developed includes watching actual customer discovery recordings from multiple founders, creating highlight reels of effective and ineffective techniques. This observational learning addresses the gap between theoretical knowledge and practical execution.
Conclusion
Todd Jackson's four-level product-market fit framework transforms an abstract concept into an actionable roadmap for B2B founders. Rather than treating PMF as a mysterious binary state, this systematic approach reveals the specific challenges, metrics, and psychological shifts that define each stage of the journey. The framework's power lies not in guaranteeing success—Jackson acknowledges that 60% of companies still get stuck at early levels—but in providing clear diagnostic tools and intervention strategies for founders navigating the most critical phase of company building.
Practical Implications
• Reframe PMF expectations: Understand that reaching extreme product-market fit takes 4-6 years, not months, reducing founder anxiety about slow early progress
• Prioritize satisfaction over efficiency initially: Accept manual, unscalable processes at level one if they deliver transformational customer value
• Use the Four P's systematically: When stuck, evaluate which elements (Persona, Problem, Promise, Product) need dramatic rather than incremental changes
• Track level-specific metrics: Monitor appropriate benchmarks for your stage rather than vanity metrics from more advanced companies
• Implement dollar-driven discovery: Replace polite customer conversations with specific techniques that reveal genuine willingness to pay
• Expect psychological shifts: Anticipate the emotional journey from grinding uncertainty to market pull, using these feelings as stage indicators
• Plan for repeated PMF: Recognize that new products or markets require starting the PMF journey again, even for successful companies
• Embrace 200% pivots: Make bold strategic changes when progress stalls rather than incremental optimizations that maintain the status quo
Level One: Nascent Product-Market Fit - Foundation Building
Level one focuses entirely on satisfaction while accepting inefficiency. Your goal is finding three to five customers with a problem worth solving and delivering them a solution that truly matters.
At this stage, you're typically a pre-seed company with fewer than 10 people. Most demand comes through warm introductions—expect roughly 20 conversations to yield one customer. Revenue ranges from zero to $500,000 ARR, and traditional efficiency metrics don't apply yet.
Vanta exemplifies level one execution perfectly. Founder Christina Cacioppo initially struggled with various product ideas until she identified the pain of compliance questionnaires. She manually completed SOC 2 certifications for early customers like Segment and Front, enabling them to close Enterprise deals. Her "product" was essentially a spreadsheet, but it unlocked millions in revenue for customers.
The key insight from Vanta's early days is that efficiency doesn't matter when you're delivering transformational value. Christina was literally the person behind the email address, manually fulfilling promises. This approach proved the core value proposition before building scalable technology.
Signs you're stuck at level one include customers who wouldn't be disappointed if you disappeared, different customers requiring entirely different features, or consistently low product usage. The solution typically involves changing your Four P's: Persona, Problem, Promise, or Product.
The Four P's: Your Pivot Framework
When progress stalls at any level, the Four P's provide clear levers for change. This framework helps founders think systematically about pivoting rather than making random adjustments.
Lattice founder Jack Altman kept his Persona (HR leaders) but changed the Problem from OKR management to performance management when the original approach failed. Conversely, Vanta changed all four P's when pivoting from earlier product attempts to compliance automation.
Plaid represents another pattern—keeping the Product (bank account connection technology) while completely changing Persona (from consumers to fintech developers), Problem (from budgeting to API integration), and Promise (from personal finance to developer infrastructure).
The choice of which P's to change depends on founder strengths and market feedback. Technical founders often find it easier to adjust positioning and persona before rebuilding products, while some discover adjacent use cases for existing technology.
Level Two: Developing Product-Market Fit - Scaling Demand
Level two requires scaling from five to 25 satisfied customers while building repeatable demand generation. This transition proves whether your solution has broader market appeal beyond your initial customer set.
Companies at this stage typically have 10-20 employees and revenue between $500,000-$5 million ARR. Cold outreach conversion rates around 10% indicate healthy but not effortless sales. You're investing in content, events, and scalable channels beyond warm introductions.
Looker demonstrates successful level two execution through their "forward deploy" process. Founder Lloyd Tabb spent 20-40 hours with prospects, modeling their data and demonstrating insights before any purchase decision. This investment in customer success created a 75% close rate and zero churn, enabling rapid scaling from five to 25 customers.
Ironclad shows how positioning changes can unlock level two progress. Initially marketed as an "AI legal assistant," the company struggled until repositioning as a "contract lifecycle management platform"—an existing category with established buyer intent. This change opened demand floodgates without requiring product modifications.
Warning signs of level two stagnation include regretted churn above 20%, difficulty opening demand channels, or extended periods without brand recognition. The marginal customer should become progressively easier to acquire as you approach level three.
Level Three: Strong Product-Market Fit - The Tipping Point
Level three marks the famous "fish jumping in the boat" phase where demand starts finding you. This transition typically occurs around 25-100 customers and represents the psychological shift from pushing rocks uphill to chasing rolling boulders.
Companies reaching level three usually have 30-100 employees, $5-25 million ARR, and multiple scalable demand channels. At least 10% of inbound leads come from referrals and word-of-mouth. Sales conversion rates exceed 15%, and efficiency metrics like burn multiple below 3x become critical.
Retool founder David Hsu captured this transition perfectly: "Every customer we got felt like the last customer we were ever going to find until we had a few million in ARR. That's when the boulder went down the other side and we had to chase it."
This level introduces new challenges around maintaining satisfaction and demand while optimizing efficiency. Competition intensifies as success becomes visible. Previously successful demand channels may saturate, requiring diversification into new customer acquisition methods.
The most successful companies maintain their competitive edge through superior customer satisfaction and continued product innovation. Efficiency optimization cannot come at the expense of the core value proposition that created initial traction.
Level Four: Extreme Product-Market Fit - Sustained Excellence
Level four represents the pinnacle of product-market fit achievement. Companies exceed 100 customers, $25 million ARR, and demonstrate exceptional metrics across all three dimensions: demand, satisfaction, and efficiency.
At this stage, gross margins exceed 80%, burn multiples stay below 1x, and net revenue retention surpasses 120%. Sales conversion rates top 15%, and CAC payback periods remain under 12 months. These companies have become category leaders with strong competitive moats.
The primary challenge at level four involves expanding total addressable market through new products or markets. This requires finding product-market fit repeatedly—success with one product doesn't guarantee success with additional offerings.
Vanta exemplifies this expansion through their trust management platform, security questionnaires, and vendor risk management. Stripe built multiple products around their core payments infrastructure. Each expansion requires treating new products like level one experiments rather than assuming existing success transfers automatically.
Common Questions
Q: How long should each level typically take?
A: Level one ideally takes 12-18 months for proper foundation setting. Level two might take one year if executed well. Levels three and four can each span 1-2 years depending on market dynamics.
Q: What if we've been stuck at level two for 18 months?
A: Consider significant changes to your Four P's rather than incremental adjustments. Most successful pivots involve 200% changes, not 10% optimizations.
Q: Can companies skip levels or move backward?
A: Companies rarely skip levels, as each builds essential capabilities for the next. However, market changes or execution failures can cause regression to earlier levels.
Q: How do we know which of the Four P's to change first?
A: Start with Persona and Problem validation through customer discovery. Product changes are most expensive and time-consuming, so exhaust positioning and market changes first.
Q: What percentage of companies reach each level?
A: Roughly 60-70% get stuck at levels one or two. Only about 30% reach level three, making it a critical threshold for startup success.
