Product-market fit — when a startup’s product sells well — has become even harder to find in this AI era. Despite startups achieving record-fast growth, not all customers are sticky and products can be replicated more easily than ever.

Anu Bharadwaj, a partner at Iconiq; Rajeev Dham, a partner at Sapphire Ventures; and Rahul Vohra, the founder of Superhuman Mail, discussed the new rules for product-market fit last week at TechCrunch Disrupt.

“It’s never been easier to gain a bunch of pilots because lots of companies across the board are open to trying new things,” Bharadwaj said to the audience. “But going from pilot to production is really the hard thing.”

Right now, she said, a lot of founders pitch revenue metrics to investors without specifying which revenue they are talking about. “Is it true ARR or is it run rate?” she said. “There’s many ways to obfuscate the whole thing.” 

Lately, much chatter on X has focused on AI founders inflating ARR numbers (which could mean “annualized run rate” or the more solid “annual recurring revenue”) to make it seem like their companies are doing better than they are. A common gimmick is counting pilot customers, who might only use the product for a couple of months, in the annualized run rate revenue number, implying that income is expected to continue for the entire year.

It should be obvious, but Bharadwaj pointed out, “It’s definitely in your long-term interest that you be very honest and upfront about what quality of revenue this is.”

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