Unfortunately, it can.
Before you hit PMF, you should be suspicious of growth metrics, even revenue isn’t always trustworthy.
It can make sense to fire your users and change course.
Here’s what I mean…
On the Pod: Dara Ladjevardian
Dara sold his first AI company in 8 months. Then he built trust with Keith Rabois by helping out at OpenStore, founder a co-founder, and has now raised $2.7M from Keith and Founders Fund to take a big swing.
That swing is helping anyone build an AI clone version of themselves, and he’s already got big names like Ryan Hoover onboard (stay tuned for a Houck clone…).
And the whole thing was inspired by wanted to get entrepreneurial advice from his grandfather, who was known as the Rockefeller of Iran.
We talked about…
How he impressed and built a relationship with Keith
How he knew he’d finally found the right co-founder
How software products can build defensibility in the age of AI
Check it out below on YouTube, Spotify, or Apple Podcasts.
New Case Studies
SimpleClosure ($5.5M raised) → Automation platform for helping to shut down companies. Got a term sheet within 24 hours of meeting their lead investor.
ettitude ($9.1M raised) → A great story of how the founder successfully raised while pregnant, despite some questions from investors.
TextPower ($1M raised) → Got acquired after raising solely from angels.
Thanks for being a member! Since this is one of our ✨ members-only ✨ posts, you can read it below.
8 Ways Momentum Lies
If you take one thing away from this week’s issue, let it be this:
When you’re in the idea maze, the only truths are failures.
You can learn what doesn’t work but you won’t actually know what works until you hit PMF and, by definition, are no longer in the idea maze.
Success is truth. Failure is truth. Everything in between isn’t.
This implies a few things:
You’re going to run into a lot of false signals
Honing your instinct to make correct decisions based on those signals is critical
Signing one customer does not necessarily mean you can sign 100.
The stakes are high. What you do based on these signals directs your time, and what to work on in the first place. Should you pivot or not?
Here are 8 signs the signals you’re seeing may be lies:
Unscalable Customer Acquisition
Initially you should comb your network for customers, but if there’s no economically feasible strategy to acquire more at scale then that early revenue means very little… even if you actually are solving a pain point for them.
Solution Seeking a Problem
When you talk to users what are they most excited about?
If they’re talking about your product’s features rather than the resulting transformational benefit, the chance you’re building something highly retentive are very low.
Linear Opex
You can build a good business with high opex, but it’s an extra level of difficulty higher to build a venture-scale one with high opex.
If things are working but you’ll need to scale headcount linearly to service your revenue, investors will shy away.
Leaky Bucket
Everyone’s telling you they love the product but they’re churning after a short time… if this happens, there’s something wrong and you will ironically kill the company by scaling it.
Focus on solving the issues first.
Dragging Their Feet
How long does it take users to complete onboarding? What’s the time-to-value?
If they keep putting you, and your product on the backburner then the pain point isn’t intense enough. They won’t be evangelists and the solution isn’t magical yet.
Customization Requests
I never see founders track this, but they should:
What percentage of new users ask for custom features, or features that don’t exist yet?
In some ways this can be good, it shows they want to like the product, but if it’s too high it means either the product is incomplete or the market is too fragmented. You might end up spreading yourself too thin trying to service every customer.
Low Willingness to Pay
This one is obvious, be honest with yourself about what you’ve actually been able to prove. If people aren’t paying, unless you’re building a consumer social app, you probably haven’t proven much.
No Obvious Market Expansion
Dominating a niche market early on is good. It lets you focus on the customer instead of outflanking competition.
But if that niche market is the entire addressable market, and there are no tangential markets to expand into, you’re in trouble.