Product Market Fit and your Exit
How you value your company will be greatly impacted by your current momentum – especially in sales and revenue growth.
Is product-market fit a mystical thing? Not really, though it can be defined that way at times (mostly as something you don’t yet have). For some B2C companies, it’s a radical point of customer adoption.
Marc Andreessen described the effects of Product/Market fit in his blog:
Are revenues growing? Are they growing greater than last year’s growth? Growth is a funny thing, you can have growth, but is the growth continuing to exceed previous years or is the growth flattening (though still positive)?
My definition of Product-Market Fit (PMF) is the same definition I use for “traction”, it’s forecastable and predictable revenue. What does that mean? If you invest $1K in marketing this month, how many days will it take for you to get Return on Investment (ROI) on that marketing spend? Is it 94 days or 32 days? If you don’t know, that’s a problem. It doesn’t matter if your spend is $1k or $10k dollars, it’s really about the tracking of the spend and time to ROI.
That’s the difference between risk capital and growth capital. Growth capital and the next round of funding is targeting scaling up. You’ll get a good bump in valuation and reasonable term sheets if you have forecastable growth.
Need to pivot or make a go-to-market change? That’s still risk capital.
If you have yet to validate your marketing spend, get to it. At least starting with a hypothesis on:
- Marketing Channel performance
- Lead Growth (MQLs)
- Sales Leads (SQL)
- Customer growth
- Time to close
If you need a marketing funnel breakdown, you can find one here.
Have a question, reach out, email@example.com, or click over to www.dkparker.com for my blog and additional resources.
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