Investors and Superhuman Founder Warn That Product-Market Fit Is Harder to Prove in the AI Era

Finding product-market fit, the point at which a startup's product sells well, has grown more difficult in the age of artificial intelligence. Startups are growing at record speed, but not every customer sticks around, and competitors can copy products more easily than before. That was the backdrop for a panel on the new rules of product-market fit at TechCrunch Disrupt last week.

The discussion featured Anu Bharadwaj, a partner at Iconiq; Rajeev Dham, a partner at Sapphire Ventures; and Rahul Vohra, founder of Superhuman Mail. Bharadwaj said pilots are plentiful because companies across industries are willing to experiment. "But going from pilot to production is really the hard thing," she told the audience.

She also raised concern about how some founders describe revenue to investors, often without saying what kind of revenue they mean. "Is it true ARR or is it run rate?" she asked, adding that "there's many ways to obfuscate the whole thing." The topic has drawn considerable discussion on X, where AI founders have been accused of inflating ARR figures. The abbreviation can mean either annualized run rate or the sturdier annual recurring revenue. One common trick is folding pilot customers, who may use a product for only a couple of months, into a run-rate figure, which implies the income will last a full year.

Bharadwaj said honesty serves founders in the long run, and that companies should separate hype from reality when assessing revenue quality. Warning signs include a handful of customers accounting for most of the revenue, or customers who can easily switch to a cheaper vendor. Churn and retention, she said, depend heavily on those factors.

Vohra advised startups, particularly those with consumer products, to track customer engagement and dollar retention, and to work out what counts as good, great and excellent benchmarks in their own field. At Superhuman, he said, the team followed ARR but also an internal measure called "delighted ARR," which counted only revenue from highly engaged customers. The metric showed how sticky customers were and how long they were likely to stay. Those users and companies, he said, are still customers, and the team "obsessed over serving that particular category."

The panelists also described signs that a startup has found fit. Vohra suggested asking customers what value they get from the product and how they would feel if they could no longer use it, then being honest when interpreting the answers. "If you're 15%, 14%, 13% or below, consider a complete pivot," he said, suggesting founders could keep the codebase and team and build something new. "But if you're 20%, you can totally optimize your way from 20% to 40%."

Dham cautioned founders not to confuse having a vision with having a good business. Bharadwaj said pivoting is acceptable at the seed stage, where she does not look for product-market fit at all. Instead, she asks whether a founder has a plausible thesis and the agility to adapt as conditions change.

Dham added that he increasingly values founders who have pivoted several times, since it shows they have had to make difficult decisions in a fast-changing environment. He said product-market fit is never settled: "Even at a billion in revenue, these companies are re-earning their product-market fit," and "you constantly have to be innovating on products."