Andy Rachleff, founder of Benchmark Capital (one of the top venture firms), has a great new article up titled Why You Should Find Product-Market Fit Before Sniffing Around For Venture Money. In it, he argues that entrepreneurs should approach venture capitalists once it’s clear that there’s a set of users that truly value the product. Just because someone has tried a product doesn’t mean they love it.
Here are a few choice quotes from the article:
- Growth without value to the customer is likely to lead nowhere–or worse, to a big flameout.
- In my experience the best enterprise entrepreneurs pull trials after 30 days to determine if customers really need their product.
- Data tells us the ultimate size of market addressed is the single greatest determinant of outcome.
- In contrast to the majority of VCs, the best are riveted on product/market fit and want to invest before the growth hypothesis has been resolved.
Most startups fail to achieve product-market fit, then try to raise venture capital, and fail at that as well. Entrepreneurs should read Why You Should Find Product-Market Fit Before Sniffing Around For Venture Money and increase the chances of raising institutional capital by first achieving product-market fit.
What else? What are some more thoughts on product-market fit before raising venture money?