chatter on X has focused on AI founders<\/a> inflating ARR numbers (which could mean \u201cannualized run rate\u201d or the more solid \u201cannual recurring revenue\u201d) to make it seem like their companies are doing better than they are. A common gimmick is counting pilot customers, who might only use the product for a couple of months, in the annualized run rate revenue number, implying that income is expected to continue for the entire year.<\/p>\nIt should be obvious, but Bharadwaj pointed out, \u201cIt\u2019s definitely in your long-term interest that you be very honest and upfront about what quality of revenue this is.\u201d <\/p>\n
She said companies need to separate hype from reality when looking at the quality of their revenue. It\u2019s a red flag, for example, if only a few customers make up much of a company\u2019s revenue or if the customers can easily go to another vendor for a better price. \u201cChurn rate and retention [are] really dependent on that,\u201d she continued. <\/p>\n
That\u2019s why Vohra advises startups to track customer engagement and dollar retention, especially for consumer products. \u201cFigure out what benchmark [is] good, great, and excellent for your space,\u201d he said. <\/p>\n
For example, at Superhuman, he said that the company tracked ARR but also had their own internal metric called \u201cdelighted ARR,\u201d which, he said, \u201cwas the ARR only from customers who are super engaged with the product.\u201d He said that metric helped them see how sticky the customers were and how long they were likely to stay around.<\/p>\n
\u201cThose users are now still users, those companies are now still customers,\u201d he continued. \u201cWe obsessed over serving that particular category of our user base and our customer base.\u201d\u00a0<\/p>\n
The panelists also discussed green flags that indicate a startup has indeed found product-market fit. For Vohra, he said talk to customers to understand what value they find in the product and how they would feel if they could no longer use it. Then be honest with yourself when measuring those responses.<\/p>\n
\u201cIf you\u2019re 15%, 14%, 13%, or below, consider a complete pivot. Take the codebase, take the team, build something entirely new. \u201cBut if you\u2019re 20%, you can totally optimize your way from 20% to 40%,\u201d Vohra said.<\/p>\n
Actually, Dham said, it\u2019s important for a founder not to confuse having a vision with having a good business. <\/p>\n
At the seed level especially, Barudvaj said that it\u2019s fine to pivot. She doesn\u2019t even look for product-market fit at that stage, but \u201cdoes the founder have a thesis that seems plausible and do they have the agility to duck and wave as the situation changes?\u201d she said.<\/p>\n
Dham added that he values founders even more these days who have made numerous pivots because it shows they\u2019ve had to make very hard decisions in this ever-shifting moment.\u00a0<\/p>\n
Product-market fit, therefore, is something founders will always have to redefine and re-earn. \u201cEven at a billion in revenue, these companies are re-earning their product-market fit,\u201d he said. \u201cYou constantly have to be innovating on products.\u201d\u00a0<\/p>\n
When you purchase through links in our articles, we may earn a small commission<\/a>. This doesn\u2019t affect our editorial independence.<\/p>\n","protected":false},"excerpt":{"rendered":"Product-market fit \u2014 when a startup\u2019s product sells well \u2014 has become even harder to find in this…\n","protected":false},"author":2,"featured_media":663552,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[15],"tags":[72,191,61,60,6845],"class_list":["post-663551","post","type-post","status-publish","format-standard","has-post-thumbnail","category-entrepreneurship","tag-business","tag-entrepreneurship","tag-ie","tag-ireland","tag-techcrunch-disrupt"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/663551","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/comments?post=663551"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/663551\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media\/663552"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media?parent=663551"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/categories?post=663551"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/tags?post=663551"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}