How do I know if I have product-market fit?

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The term product-market fit was coined by Marc Andreessen of Andreessen Horowitz back in 2007 as a way of describing a startup in a good market with a product that can satisfy that market.

Andreessen’s belief is that in a good market — one with lots of real potential customers — the market pulls product out of the startup. Markets with a strong need would be fulfilled by the first viable product that comes along. The product doesn’t need to be great, it just has to basically work; the team doesn’t even need to be great, as long as the team can produce that viable product.

Today, product-market fit is cited by many venture capitalists as one of the most important indicators of startup success. At the seed stage, some investors will fund pre-product-market fit startups based on a hypothesis or minimum viable product. However, beyond the seed stage, product-market fit is often seen as a prerequisite for financing.

So many founders and investors claim that their startups have product-market fit, when, in fact, very few companies ever truly reach this milestone. In this post, I want to talk about how I measure product-market fit, and I’d love to hear in the comments how you measure product-market fit in your company.

Ask An Investor is a new weekly series by Betakit that you should check out, where two investors give advice about topics all startups encounter at some point.