StartUp Founders: Paying Customers Does Not Mean Product-Market Fit

January 15, 2023 2 mins read

I’ve seen many first-time founders make the same mistake: assuming that having paying customers means they have achieved product-market fit. While it is certainly a leading indicator, it is not the only factor. The key to knowing you have market fit is seeing your sales compounding and accelerating at a velocity that proves your product delivers value. This means that your customers need your product, not just want it.

As a founder, it’s critical to focus on achieving value for your customers. Are you delivering the results they need? What else do you need to iterate on, add, or think about? The answers to these questions will help you create a product that people can’t live without.

Take, for example, the story of Uber. In the early days, the company had paying customers, but it wasn’t until they focused on delivering a better experience for their riders and drivers that they achieved product-market fit. This led to their sales compounding and accelerating, which is what truly proved they had market fit.

Another factor to consider is churn. If your paying customers are leaving after just a few uses, it’s a sign that your product is not delivering enough value. As Sam Altman, the former president of Y Combinator, once said: “If you can’t retain customers, it doesn’t matter how many you have.”

So, while having paying customers is certainly a step in the right direction, it’s not the only factor to consider when determining if you have achieved product-market fit. As a founder, you need to focus on creating a product that delivers value and keeps customers coming back for more. Only then will you truly know that you have market fit.

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