One for investors The factor will almost always be head and shoulders above the rest: your TAM (Total Address Market) must exceed at least $1 billion.
But along with a huge targeted market, investors also want to see that you have existing customers, even if they are few, who really love your product.
However, the exchange of steps between your existing users (wedge) and your long-term potential as a company (TAM) can be incredibly difficult.
Early on this month’s TechCrunch, we sat down with Felicis Ventures partners Viviana Faga and Niki Pesashchi to talk about scaling, product-to-market fit, and why it’s important to be “10x better” than incumbents.
Product to market fit
Startups need to be able to demonstrate that they have users who love their product. But what does “love” really mean?
Faga and Peseschki believe that startups need structure to measure their initial push towards a niche audience. They suggest that you conduct a survey among your first group of users to find out how they would feel if the product no longer existed. Anything below the 50% threshold – in other words, every second user should be upset if this product ceases to exist – is not enough to move on to the next step.
Even so, they warn, it’s important to stay focused on the niche you’re creating before moving on.
Faga talked about a founder she currently works with who works in the beauty industry and they are interested in applying what they create to the consumer goods market.
“We had to take a step back and say, ‘Let’s own beauty,'” she explained. “Let’s do it really well. Let’s repeat this. Let’s scale it up. And then it gives you the right to move into the CPG space, because what will happen is that the CPG space can take you in a completely different direction. You may eventually achieve this, but first own the beauty. Do it really well. This gives you a chart that is at the top and to the right, which is very encouraging for many investors.”
While staying focused on your niche and working towards reaching the 50 percent threshold of users who would not be able to continue without your product, start paying close attention to your customer loyalty index (NPS). Using this, find a group of users who rate your product nine out of 10 and charge them for it. If your NPS drops to two, your product is out of market.
Credit: techcrunch.com /