The Truth About Product-Market Fit

Why Most Founders Get PMF Wrong—and How to Fix It

Introduction: The Most Misunderstood Concept in Startups

Every founder has heard the mantra: “Find product-market fit (PMF) before you scale.” But the reality is, most early-stage startups struggle to define what PMF actually means, leading to premature scaling or costly pivots.

At BAT VC, we’ve seen firsthand that PMF is rarely a single moment—it’s a continuous process of refinement. Startups that fail to measure PMF correctly risk scaling a product that isn’t truly solving a pain point. A false sense of PMF can lead to wasteful spending, team misalignment, and an eventual pivot that could have been avoided.

The 3 Stages of Product-Market Fit

Idea-Market Fit – Does anyone care about your problem?
- Before writing a single line of code, validate demand through customer conversations, shadow testing, and pre-sales.
- A strong indicator of idea-market fit is when users express a willingness to pay or heavily engage with early prototypes, even in a rough, non-scalable format.
- Example: Dropbox famously validated demand through a demo video before building their actual product, leading to thousands of waitlist sign-ups overnight.
Solution-Market Fit – Does your product solve the problem well?
- A working MVP isn’t enough; pay close attention to engagement metrics, usage frequency, and organic referrals.
- Look for consistent usage patterns, repeat engagement, and voluntary referrals from early adopters.
- Example: Slack realized it had strong solution-market fit when teams started using the product daily and recommending it internally within companies without heavy marketing.
Scaling PMF – Can you acquire customers profitably?
- If you rely on paid ads to drive all growth, you likely don’t have strong PMF yet. A great product grows organically through word-of-mouth.
- Retention rates, NPS (Net Promoter Score), and a high percentage of inbound demand are strong indicators that PMF has been achieved.
- Example: Airbnb struggled early on but found true PMF when users started referring friends and hosts began actively listing properties without paid incentives.

Investment Insights from BAT VC

Retention is the real measure of PMF. If users don’t come back, the product isn’t solving a meaningful problem.
PMF is found, not forced. You can’t “sell” your way into PMF—you discover it through continuous iteration and customer feedback.
The best startups scale after PMF, not before. The right time to invest in growth is after you’ve proven demand through high retention and organic word-of-mouth.
Metrics to track PMF:
- Net Promoter Score (NPS) above 50
- 30%+ of users saying they would be “very disappointed” if they could no longer use the product
- DAU/MAU (Daily Active Users / Monthly Active Users) ratio of 40% or higher
- Positive unit economics with high LTV (Lifetime Value) relative to CAC (Customer Acquisition Cost)

Conclusion: PMF is a Process, Not a Destination

At BAT VC, we help founders navigate the messy reality of finding PMF—because it’s one of the hardest but most critical steps in building a scalable startup. The companies that win are the ones that iterate ruthlessly until the market pulls the product, not the other way around.

Founders who recognize that PMF is a continuous journey of refinement—rather than a single milestone—are the ones who go on to build legendary companies. We partner with startups that embrace this process, helping them move from validation to scale with strategic clarity and data-driven decision-making.

—