5 Data Points to Show Product-Market-Fit

A core part of raising a Series A round is showing investors you have found  Product-Market-Fit (PMF).

The founders who fail at this stage do not track the right data to show it.

For founders raising Seed, you also completely miss the importance of PMF.

You see…

The goal of your seed round is to find PMF by the time you raise your series A.

So whilst you don’t have to show you have PMF at seed, you have to show how you will achieve it.

This is a major area that seed investors are looking at when investing at that stage.

Here are 5 data points to show investors that you will find PMF or already have it:

1. There is a Return-On-Investment to your Customers

An investor will always be looking at your product through an ROI lense in regarding to your customer.

They want to understand if it is a no-brainer that your customer will buy from you, so you have to make sure you have data points to show that the ROI to your customer makes sense.

Ask yourself thesse questions:

• Are you revenue-generating
• Are you cost-saving?
• Are you time-saving?
• What exact numbers are one (or more!) of the above?
• How does it relate to how much you are willing to charge?

2. Word of mouth is growing

If you have found PMF, your customers will want to tell everyone else about you.

This kind of organic reach is a constant in every successful company that an investor would have come across.

And companies with that achieve PMF have their super users talking to other customers all the time!

You can show this by having data on:

• Word-of-mouth growing and its affects
• How much your customers loves your product
• The large % of organic growht you have

3. Usage is growing

Hopefully this one is common sense. The more PMF you have, the more people want to use your product.

This is why its so important to get your product in the hands of your customers as early as possible. If users are engaging more and staying longer it's a good sign you are doing something right. Even when you haven’t launched yet.

At Series A, you should be doing proper cohort analysis and showing that your users are using the product more

Track things such as:

• Stickiness Ratio
• Retention Rate
• Conversion Rate
• Daily Active Users
• Monthly Active Users
• Customer Lifetime Value
• Average Revenue Per User  

4. You have a formalised sales cycle

Once you have found true PMF, scaling will be about how much money and people can be thrown at your process, rather than trying to figure out what that process is.

Once you reach a scalable solution (i.e. PMF) you will know:

• The exact channels you will work in
  
• Thje sales process and time to sale
  
• The people needed to make increase revenue

At seed you won’t need to have this all correct and sorted of course.

But you should have a plan of what you will do in the next two years to make sure you find PMF.

Is that testing different marketing channels if you are B2C?

Is that A/B testing your first two B2B customers to find out the best sales cycle?

By doing cohort analysis on your users what has the biggest improvement?

Your goal is to have the right strategies to make sure this all falls into place.

5. You are closing a high % of deals or its getting higher

Once you have found PMF your solution should be a no-brainer for customers.

In the VC world, we think of this such as a "10x improvement to current solutions".

This means that most customers will take you on.

And every month its only getting higher or staying high.

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Now, you may have realised there has been a common occurrence with all 5 of these data points.

And that is what I call “momentum”.

Investors are looking to invest into companies that will scale into massive companies.

To do that you have to have momentum, and a large part of having momentum is the same as having PMF.

This makes an investor confident you have PMF at Series A.

Or that PMF is inevitable at Seed or even earlier.