Product-Market Fit
When a product satisfies strong market demand and customers keep coming back.
Definition
Product-market fit (PMF) is the point at which a startup's product clearly satisfies a real, urgent need in a large enough market. Signs of PMF include organic growth, high retention, strong word-of-mouth, and customers who would be very disappointed if the product disappeared. It is the single most important milestone for an early-stage startup.
Why it matters
Companies without PMF are high-risk; your equity may never be worth anything. Once PMF is achieved, the company can raise larger rounds at higher valuations, making early equity much more valuable.
Example
A B2B tool sees 40% month-over-month growth, 95% monthly retention, and customers signing annual contracts without needing a sales call. Investors see these signals and offer a Series A at 3x the seed valuation.