Product-market fit — when a startup’s product sells well — has become increasingly elusive in the AI era. Despite startups achieving record-fast growth, not all customers are sticky, and products can be replicated more easily than ever. Anu Bharadwaj, a partner at Iconiq; Rajeev Dham, a partner at Sapphire Ventures; and Rahul Vohra, the founder of Superhuman Mail, discussed the new rules for product-market fit last week at TechCrunch Disrupt.
““It’s never been easier to gain a bunch of pilots because lots of companies across the board are open to trying new things,” Bharadwaj said to the audience. “But going from pilot to production is really the hard thing.”
Currently, Bharadwaj noted that many founders pitch revenue metrics to investors without clarifying which revenue they are referring to.
““Is it true ARR or is it run rate?” she asked. “There’s many ways to obfuscate the whole thing.”
Recently, discussions on X have highlighted concerns about AI founders inflating ARR numbers, which could refer to either “annualized run rate” or the more solid “annual recurring revenue.” A common tactic involves counting pilot customers, who may only use the product for a couple of months, in the annualized run rate revenue number, suggesting that income is expected to continue for the entire year.
Bharadwaj emphasized the importance of transparency:
““It’s definitely in your long-term interest that you be very honest and upfront about what quality of revenue this is.”
