Product Market Fit [PMF]

Pre-Seed PMF

PMF is considered the first level of revenue success. PMF requires a sell-able product, a defined market willing to purchase and this problem and solution Fit a known business model. Fitting a business model is a key requirement for PMF that is largely ignored. The business model is the structure that investors use to judge the veracity of your opportunity. To illustrate, if you are pitching a new digital encryption startup, it matters if the business model is SaaS, PaaS, 2-sided marketplace etc. The model is the box the tech and customer need to fit in.

Most pre-seed raises are pre-revenue, this means the investors need to see how you plan to test and iterate to find PMF. Also, they need to know what you think PMF will look like. Most early stage teams do this poorly. Bear in mind, most investors believe your current idea of generating revenue, will not pan out. The reality is they have never seen a pre-revenue team accurately predict any part of their revenue strategy.

Seed PMF

Last year ~55% of Seed VC required a base version of PMF to invest. [So what of the 45% that raised without revenue you ask. I believe nearly all are famous founders or have invested years building a core IP. It’s hard for me to find a Seed investment without revenue, fame or IP. When you think about it, why would anyone invest without 1 of the 3?]  

The general definition of Seed PMF is:
$50-200K annual revenue
Product as is
Early adopter customers fit into a definable customer segment
Company can sell product as is to 5-10x the number of the same customers
Business model basics worked out, e.g. unit economics, GTM, costs, team, etc.

The key to PMF, is to get their rapidly. Or die trying.