- SparkNotes, the book-summary site, is one example of a startup that was so popular in its early days that it couldn’t keep up with customer demand.
- Other examples include GOAT, the world’s largest resale marketplace for high-end sneakers, and VIPKid, a Chinese education startup.
- At least one entrepreneur says this is the sign that a company has achieved product-market fit.
Of the many reasons startups fail, being too popular isn’t the first that comes to mind.
And yet that’s exactly what (almost) happened to a series of now-successful companies.
Take book-summary sites SparkNotes, for example. Sam Yagan was a Harvard undergrad when he cofounded the company along with his roommate; the site went live the spring of their senior year.
As Yagan told Business Insider’s Richard Feloni on an episode of the podcast “Success! How I Did It,” the immediate response was that “people were pissed.” Specifically, because the site didn’t have the book they needed yet.
“That’s the best kind of hate mail to get, is we need more product,” Yagan said. That summer, they hired some editors to put up more SparkNotes, “and the rest is history.”
Eddy Lu had a similar experience when he cofounded GOAT, which is now the world’s largest resale marketplace for high-end sneakers.
On Black Friday 2015, GOAT blew up and couldn’t keep up with customer demand; thousands of orders were left unfilled.
As Lu told Feloni on another episode of the podcast, “We responded to every single customer-service message. I think there were about 4,500 that day. But at that point it was better to be hated than unknown.”
Untenable customer demand can be a sign of product-market fit
Unprecedented customer demand nearly put VIPKid out of business. As Business Insider’s Harrison Jacobs reported, the Chinese education startup connects native English-speaking teachers with young Chinese students for virtual English lessons.
While the company was in its pilot stage in 2014, a friend of cofounder Cindy Mi tried out the service and posted about it on Weibo (China’s version of Twitter).
Within a day, Jacobs reported, the company was receiving calls and messages from people who wanted to try the service for themselves. People started to get angry because the company wasn’t able to respond to all their requests.
Mi’s team ultimately resolved the problem by putting out a statement that read: “Give us a couple of months and, when we’re ready, we’ll come back to you.”
Mi told Jacobs that the message conveyed to customers that the company was professional instead of sleazy and wasn’t simply trying to get money out of them before the product was ready.
This is a phenomenon that Y Combinator CEO Michael Seibel has seen before – and he thinks it’s a good thing. In an “Ask me Anything” interview, Seibel said, “My definition of product-market fit is: You are drowning in demand – your product is being used by so many customers that you cannot handle all the new people knocking at your door!”
Seibel acknowledged that not every successful company achieved this milestone. And yet he said, “I don’t understand how you can have product-market fit and not a lot of people wanting your product. The two go hand-in-hand.”
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