One aspect will almost always stand head and shoulders above the others for investors: At least $1 billion in TAM (total addressable market) is required. But, in addition to a large addressable market, investors want to know that you have actual consumers who adore your product, even if they are few. However, conveying the stages between your current users (wedge) and your company’s long-term potential (TAM) may be quite difficult.
We spoke with Felicis Ventures partners Viviana Faga and Niki Pezeshki about scaling, product-market fit, and why it’s critical to be “10x better” than the competition at TechCrunch Early Stage this month. Fit between the product and the market Startups must be able to show that their product is well-liked by its users. But, exactly, what does “love” imply?
Startups, according to Faga and Pezeshki, require a framework to evaluate their initial push into a niche market. They recommend doing a poll with your initial cohort of consumers to see how they would feel if the product was no longer available. Anything less than 50% — in other words, one out of every two consumers should be disappointed if this product went away — isn’t good enough to go to the next level. Even then, they caution, staying focused on the niche you’re designing for is critical before moving on.
Faga talked about a company she’s now working with who’s creating in the beauty sector and wants to translate what they’re doing to the CPG industry. She continued, “We had to take a step back and say, ‘Let’s own beauty.'” “Let’s do a fantastic job on that.” Let’s say it again. Let’s take it up a notch. Then you have the right to go into the CPG area, since the CPG space may lead you in a completely other way. You’ll get there someday, but first you must own your beauty. Do things very well. That gives you the up-and-to-the-right graph, which gets a lot of investors pretty excited.”
Start paying attention to your Net Promoter Score while staying focused on your specialty and aiming to reach that 50% barrier of people who couldn’t live without your product (NPS). Find a group of people who are giving your product a nine out of ten rating and charge them. You don’t have product-market fit if your NPS falls below two.