How do you know if you have product-market fit?

How do you know if you have Product-Market-Fit?

Source: here

What to look for Pre-Product?

1. Visible Excitement: “The real metric for both consumer apps and enterprise is — do someone’s pupils dilate when they use your stuff? Whether you’re handing them a demo or if you drew something on the whiteboard. Do they say, ‘You’re not leaving’ or ‘Where have you been all of my life?’”
2. People are willing to pay for it now: “Are people willing to pay you for this product? Ask them this directly. Even try to get them to pay you now (i.e. literally send them an invoice) to get early access to the product. Nothing will be a better signal of interest and PMF if you can get people to put down money before you have a product. Try this even if it’s a consumer app that you won’t charge for — it’ll show you how much value you’re creating in people’s lives.”

What to look for after you've built the product?

1. Retention: users stick around. “Plot the % active users over time (for various cohorts) to create a retention curve. If it flattens off at some point, you have probably found product/market fit for some market or audience.

“Long term cohort retention is the best metric for determining if there is product market fit. Once you have a few cohorts that level off at a vertical-specific number, then you’ve achieved product market fit! 2. Surveys: Users say they would be very disappointed if your product went away

“Survey your users and ask them ‘How would you feel if you could no longer use the product?’ and measure the percent who answer ‘very disappointed.’ If that percentage is over 40%, you have PMF.” 3. Exponential organic growth: For consumer apps, you start experiencing exponential organic growth driven by word of mouth 4. Cost-efficient growth Burn Multiple = Net Burn / Net New ARR The higher the Burn Multiple, the more the startup is burning to achieve each unit of growth. The lower the Burn Multiple, the more efficient the growth is. 5. CAC < LTV “You have found product/market fit when you can repeatably acquire customers for a lower cost than what they are worth to you.” 6. Customers clamor for your product “You can always feel product/market fit when it's happening. The customers are buying the product just as fast as you can make it -- or usage is growing just as fast as you can add more servers. Money from customers is piling up in your company checking account. You're hiring sales and customer support staff as fast as you can. Reporters are calling because they've heard about your hot new thing and they want to talk to you about it.” 7. People are using it even when it's broken “If your product is broken and people are still using it, if you have high retention with a broken product, that’s a clear sign you have PMF. When Twitter was constantly going down in the fail whale days, and no one moved off of Twitter. That was a sign of raw market adoption.”