A Founder’s Guide to Product Market Fit: Steps and Costs for Building a Product-Led Startup in Dubai

Introduction to Building and Fundraising for a Product-Led Startup in Dubai

You have probably read that a great product is one that is desirable, feasible, and viable. It’s every founder’s dream to have an “end” product like this.

But what about the start or the middle parts of building a great product? How do startups get to the “end” in the first place? And how much money do they need to get there?

Well, great startups line up their product strategy with their fundraising strategy. And in this article, I’ll be sharing my thoughts on what makes a great product, how to strategically build towards product market fit, and how much money you will need along the way.

But before we dive deep into it, let’s clear up the air and define what desirability, feasibility, and viability in product management actually mean, and how do they contribute to your startup’s success.

What is Product Management? What is desirability, feasibility, and viability in product management?

“Desirability” is evaluating if customers actually want or need your product. And the way to evaluate desirability is by stacking enough evidence that what you are building is indeed in need.

“Feasibility” is evaluating if you and your team can actually build what customers need. And a great way to evaluate feasibility is in trios where you have a design, tech, and a product person collaborating together and sharing their experiences.

“Viability” is evaluating if it makes sense from a business perspective to build the product. Are customers willing to pay for your product? How much money do you need? What are the possible risks associated? Are there any legal constraints? Is it worth venturing into? Etc..

At the intersection of these 3 criteria lies the essence of a great product and a successful startup. And product management in a startup is the work needed to continuously achieve desirability, feasibility, and viability.

In fact, a great product “constantly” helps your customers realize their needs in alignment with your business objectives.

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So if you are a first time founder reading this, you need to understand that every tech startup requires consistent and constant work that makes sure that all 3 criteria are met.

And if, and only if, you meet these 3 criteria repeatedly, does your startup get to qualify for reaching product market fit.

And guess what, when you do get to product market fit, the fundamentals don’t change, your startup has to continuously maintain and grow its product market fit position to stay competitive, let alone in business.

You are going to have more customers, different needs, and evolving business objectives and that’s why the fundamentals of building a desirable, feasible, and viable product are important.

There will come a time, and without a doubt, that you will have to question your business objectives: Profitability over growth? Or growth over profitability? A USD 25M exit or a USD 1B exit?

But that’s a topic for another day.

For now, just remember to stick to the fundamentals as that will get your startup to a solid product market fit that paves the way for scalability.

Road to Product Market Fit for a Product-Led Startup in Dubai

If your startup is in the tech business, your goal is to transform your product into a desirable, feasible, and viable one as quickly and efficiently as possible so that you reach product market fit and become more valuable as a business.

A valuable business provides founders with options. You can choose to sell your startup, scale it to become a public company, or just make it a long lasting profitable business.

Regardless of your goals, you’ll need to build a great product, and here’s how:

1. Defining Your Product
2. Understanding the 4 Parts of a Great Product Anatomy
3. Adopting a Product Led Approach to Funding Your Startup in Dubai
4. Truths about a Solid Product Market Fit

1. Defining Your Product

The biggest mistake you can do here is define your product as a set of features.

Your product is not a feature factory.

Instead, your product is a tool that helps influence your customer’s behavior in a way that makes their lives easier thus generating business value for your startup.

So your product is highly tied to how good your startup is at understanding your customer and influencing their behavior. And their behavior is dictated by how they actually “use” and “feel about” your product.

This is extremely important to understand as now “customer behavior” becomes “measurable” and therefore “understandable”.

The best approach to make sense of your customers and their behavior is actually in 2 ways, quantitatively and qualitatively.

• Quantitatively means understanding how many of your customers are actually being influenced along the customer journey of your product.
• Qualitatively means understanding how your customers’ beliefs, motivations, and feelings are being influenced along the customer journey of your product.

Now that we have better defined what a product is in the context of your startup, let’s break it down to its 4 key parts so that we can understand which parts we need to prioritize and raise funds for to get your startup to a solid product market fit.

2. Understanding the 4 Parts of a Great Product Anatomy

A great product anatomy is one that breaks down your product into 4 parts where each part serves a purpose, takes your customers on a journey, and helps your startup learn more about your customer and business with every journey taken.

Let’s explore each part in more depth.

Part 1: Your Product’s Trust Engine

This part quantitatively focuses on “Acquisition” and “Activation”. And qualitatively focuses on “Awareness” and “Trust”.

The key objective here is to take your customer on a journey that starts with getting them "aware" about the problems that your product solves, the value it brings them, and perhaps what makes it different from what’s in the market. Next, you want to transform your customer’s beliefs and motivations from just being "aware" about your product to actually establishing an "initial trust" with your product.

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And that’s basically having them say “Yes, I like what this app stands for, I can relate. Let me give it a shot.”

What I mean by “giving it a shot” is getting the user to take the very first necessary actions to get the value that your product promises.

An example of how this journey translates quantitatively can go like this:

• The number of users who saw an Ad → Visited your website → Saw your content repeatedly on social media → Converted to signing up on your app
• Followed by the number of users who took the initial valuable action on the app (like completed profile, invited a friend, uploaded document, requested payment, etc...)

Great products minimize the friction and time to value so that customers don’t get confused and lose interest and trust in your product.

Part 2: Your Product’s Core

This part quantitatively focuses on “Activation” and “Retention”. And qualitatively focuses on “Hopefulness” and “Satisfaction”.

In this part, the customer has signed up for your product, they clicked through it, and ideally have taken some key actions that have helped them establish trust with your product.

The key objective for this part is to take your customer on another journey that transforms the "initial trust" that they have established with your product into something that is more profound, "hope". And the trick here is that your product should help customers find hope repeatedly so that they eventually become satisfied customers.

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Hope, in this context, means that your customer is convinced that your product is “The Cure” that will help solve all their problems.

It takes a long time to cross the hopeful stage. Customers may stay many months, if not years in this state. They might even pay for your product in the hopeful stage.

The reality is there are a ton of things that can change their minds and churn them away. Perhaps it’s a bad user experience, different bugs that keep popping up, or just inconsistencies in the way your startup deals with your customer.

So there’s a lot to get right before customers become satisfied.

Satisfied means that you have probably not solved for everything, but the things that you have solved for just hit the mark for your customer, and in fact this establishes your product as indeed “The Cure” that they were looking for.

From a quantitative stand point, the journey can look something like this:

The number of users who visit your app regularly and that could be on a daily, weekly, or monthly basis depending on what your product does. Fun fact, if you are like instagram or facebook, then it could be monitored on an hourly basis.

But measuring the number of visits alone won't cut it. Your customers need to be able to take meaningful actions repeatedly in your product such that these actions contribute to solving their problems and addressing their needs.

Here are some useful examples:

• If your product is a social media app, an example of taking key actions can be something like connecting, becoming friends, commenting, sharing, and uploading content.
• If it’s a payments app, an example would be uploading an invoice, setting up a payment method, and making a payment.
• If you are a marketplace like Airbnb, then there are 2 sides to consider, the consumer’s actions and the supplier’s actions. The consumer actions can be searching for apartments, saving them, booking, and paying for them. While the supplier actions can be adding an apartment, setting the price per night, adding photos, and collecting reviews.

I bet you can see why getting a customer get past the hopeful stage is difficult.

It requires a lot of meaningful actions to go right consistently. And rightfully so, any disruption to this consistency truly delays customer satisfaction.

Part 3: Your Product’s Money Maker

This part quantitatively focuses on “Activation” and “Revenue”. And qualitatively focuses on “Trust” and “Hopefulness”.

It’s one thing for customers to be satisfied, but it’s another thing to actually pay for a product. And that’s because this part is tied to the “business model” (or how your startup intends to make money) and your “pricing strategy”.

Turns out there are 9 business models that you can copy for your startup according to YCombinator:

1. SaaS (cloud based subscription software)
2. Transactional (Facilitate transactions and take a cut)
3. Marketplace (Facilitate transactions between buyers and sellers)
4. Hard-Tech (Physical products that are technically challenging and take a very long time)
5. Usage-based (Pay as you go based on consumption)
6. Enterprise (Sell large contracts to huge companies)
7. Advertising (Sell ads to monetize free users)
8. Ecommerce (Sell products online)
9. Bio (Science based tech companies)

Say you run a SaaS business model and happen to have a freemium pricing strategy. This means that you are enabling your user to take key actions in your product but with limited capabilities.

What this does is allow the user to realize some value from your product; however, for them to get “The Cure”, they will need to subscribe for it.

The key objective here is to increase your customer’s trust in your product so that they are hopeful enough to pay for it. And satisfied enough to keep paying for more.

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A Quantitative example can look at:

• ‍The number of free active customers that are converting to pay for your product.
• The number of paying customers that are converting to recurring paying customers (or customers with repeat purchases).

Part 4: Your Product’s Growth Engine

Finally, this part quantitatively focuses on “Activation” and “Referral”. And qualitatively focuses on “Satisfaction” and “Passion”.

The key objective here is to enable your customer with the capabilities of getting more customers into your product so that they can find value from your product too.

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Some of your "satisfied" customers when provided with the right tools and incentives will transform into "passionate" customers who will help you acquire more customers at the lowest possible cost.

Quantitatively, an example could look like this:

• The number of users who generated a personal referral link → The number of users who shared a link →
• → The number of users who signed up from a referral → The number of users who ended up paying

Reward systems can be created in a way that provides the referred user with a discounted version of your product, and simultaneously reward the referrer with credits as well. This creates a win-win situation for the referrer, the referred, and your startup.

3. Adopting a Product Led Approach to Funding Your Startup in Dubai

I hope that, by now, you have established a good understanding of what your product is made of and how each part of it creates value in your customers’ lives and for your business.

Now, it's time to build.

Let's explore one of the most effective ways that I have found to get you to a solid product market fit while exploring how much money you need to get there.

There are 3 assumptions that we are taking here:

1. You have a Startup Idea: You have no product yet, but you have spoken to potential customers, and you have established that there is some demand for the problem that you want to solve for.
2. You have a Business Model Idea: You have considered one of these most popular business models that have similar funding requirements: SaaS, Marketplace, E-commerce, or some cases of Transactional business models.
   • The reason being is that if you are adopting a Bio-tech (like Pfizer) or Hard-tech (like SpaceX) business model then your funding requirements for building the core of your product are going to be much, much larger than a Transactional model (Fintechs like Stripe or Sarwa). And likewise, the Transactional model is going to be more expensive than building a SaaS (like Slack), Marketplace (like Careem), or E-commerce (like Mumzworld) business model.
3. You have No Idea about Fundraising: You are not Elon Musk or Peter Diamandis with a track record of raising billions.

With those assumptions captured, let's line up your product strategy with your fundraising strategy.

Phase 1 of Funding Your Startup in Dubai (Pre-Seed)

The first thing you need to do is to build the leanest version of your product’s core and that is focusing mainly on Part 2 of your product according to “the 4 parts of a Product’s Anatomy” highlighted above.

And this means limiting yourself to building one entry point and one specific workflow that will solve an important problem for your customer.

And to get that part right, you’ll likely need a few iterations. What you think is important for your customers can be slightly different from what they think. And so you need to meet their needs.

Therefore, in this phase of the fundraise, you will need anywhere between USD 50k to USD 200k to figure that part out and build it.

There are a few ways to get access to that money:

1. Bootstrap which basically means using your own money, time, and experience to build the product out.
2. Apply for early stage accelerators
3. Apply for Grants (these are equity free)
4. Raise from friends and family (F&F)

Personally, I would bootstrap as much as possible and de-risk the business before I fundraise externally.

Phase 2 of Funding Your Startup in Dubai (Seed)

In this phase of the fundraise, you’ll need to work on Part 1 of your product and that is your product’s trust engine.

For this phase, you’ll need about USD 100k to USD 150k to figure out how to repeatedly acquire and activate customers to get them aware and then hopeful about your product. And you’ll need another USD 100k to USD 150k to further improve your product’s core.

Think of this phase as aligning your marketing and sales efforts with your product efforts.

The more customers you’ll interact with, the more you will realize that there are additional workflows or improvements that need to be there to get your customers to be more hopeful about your product.

So, for this phase, my recommendation is to raise between USD 200k to USD 300k.

At this point, it makes more sense to start targeting accelerators and angel investors.

Phase 3 of Funding Your Startup in Dubai (Product-Market Fit)

At this point customers are signing up for your product, they are using it, they are seeing the value, and some are coming back for more. However, a fair chunk of them are churning. Notably, you might have some paying customers. At this point, there is good momentum, your startup is starting to grow and you can feel that you are getting closer to product-market fit.

But to get to product market fit, you’ll need to strengthen your retention while keeping acquisition and activation stable.

And so we are back to Part 2 (Your Product’s Core).

We need to move customers from the hopeful state to the satisfied state. It is really about answering what is it about your product that gets customers retained for a long period of time? And building towards that.

For this phase of the fundraise, you’ll need anywhere between USD 300k to USD 500k.

By the end of it, you are going to have a growing customer base that are satisfied with your product with very little churn.

This phase is more suited for angels and venture capital firms.

Phase 4 of Funding Your Startup in Dubai (Early Growth)

This phase is all about growth.

And I don’t mean growth at all costs.

I am talking about the kind of growth that first aims to solidify your product-market fit position and, second, sets you up for grow.

The last thing you want to do here is blow up all the work that you have done to get to this point.

So the 2 key metrics to keep track of here are Customer Acquisition Cost (CAC) and Revenue:

We want to acquire as many customers as possible and at the lowest cost possible so that we can grow the business sustainably. Additionally, we want to figure out pricing plans and how they align with the business model.

How many pricing options are we going to provide customers, how much are customers actually willing to pay, are we gating features or not, is it a commission based on a transaction, is it a combination?

Food for thought:

You may have implemented a pricing strategy in the earlier phases of the fundraise. And that’s ok. It’s important to note that you need to be iterating in this phase on your pricing strategy to unlock the true value of what your customer is willing to pay.

Though this topic might seem daunting and risky, but there are a few ways to go about it.

• ‍If you want to increase your price for existing users, one way is to make sure to tell your users ahead of time.
• Another option is to keep your existing customers on the old rates, but for new ones try out different pricing points and strategies.

Increasing prices is the most cost effective way of growing your revenues.

And so this brings me back to part 4 of the product, your product’s growth engine.

You want to transform as many satisfied customers as possible to passionate customers who tell their friends about your product.

Why? because it’s the cheapest and most effective way to acquire a new customer and scale your user base responsibly.

So this part is really about figuring out how to make it easy for your customers to refer others, working on improving your acquisition strategy, figuring out the incentive structure, and aligning all of that with your pricing strategy, costs, and revenue goals.

For this phase you’ll need a minimum of USD 500k. But that's just the beginning.

Venture capital firms are best suited for this phase of fundraising for your startup in Dubai.

It is worth mentioning that there are different tiers of VCs that can help support the different phases of your startup's growth with bigger pay checks.

Alternatively, you can benefit from other forms of funding from registered lenders such as Invoice Factoring or Revenue-based-Financing depending on the type of business model you have adopted and your revenue growth.

4. Truths About a Solid Product Market Fit

There isn’t just one way to get to a solid product market fit. Sometimes you just need more time, more money, or simply the right person to help you figure it out. And that’s ok.

There is no escaping building a healthy product, otherwise your startup will inevitably die.

The market always wins, figure out what the market needs, help solve some of its problems and then build. Don't build and then search for a market.

Your product always needs to deliver value, leverage this article to ground your journey in building a great product and startup. Tweak where needed to fit your context.

A product’s anatomy stands true for all the stages of a startup. And therefore, you can’t cheat your way to product market fit with a bad product. Something will break and you will end up needing more money and time to fix it. For instance, if you decide to not focus on your product’s core and immediately jump towards building your growth engine then that’s just a recipe for disaster. On one hand you have user growth, on another hand, you will end up with a leaky bucket where customers are not sticking long enough to get the value from your product and ultimately pay for it

During product-market fit, your product will switch from a “push” to a “pull” effect. Instead of you having to aggressively push the product uphill to get it in the hands of customers and pushing them to use it, customers will pull the product from you and run with it.

There is no defined timeline to get to product market fit. However, from what I have seen that it takes about 3 years to get to product market fit predominantly for business models like SaaS, Marketplaces, E-commerce, and Transactional.

Pouring all of your funding in one phase of the product's lifecycle will not get you closer to product market fit. You need all 4 phases. Each completed phase will compound its outcomes to the next phase until you reach to a solid product market fit.

Notably, everything compounds, the good and the bad outcomes. The more bad outcomes you accumulate, the harder and more expensive it will be to correct later on.

The time and money you need to build your product and hit your product KPIs are dependent on your business model. For instance, the closer your product is to a transaction, the more likely it is to be in a highly regulated industry which ultimately will drive your costs up and therefore will require you to raise more funds to achieve your goals. Likewise, technically challenging products take a long time to execute and therefore require more time and money.

Final Note

I hope this article gave you perspective on how to build your product, your startup, and what to consider along the way whether you are a SaaS, Marketplace, E-commerce, or a Transactional business model in Dubai.

Getting to a solid product market fit is not easy. And the estimate here is that it would take approximately USD 1M and around 3.5 years to get there.

Use this table to ground your approach and remember, your goal is to figure out what problems are important to solve and to go out there and solve them. Your product is the tool that will help you do that in a way that also makes business sense for your startup. Use your product KPIs and funds as proxies for helping you achieve your goals.

Feel free to tweak the numbers as you see fit in the context of your startup and country of operations.

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