Are customers showing up?
Understanding market fit for startups
You have confirmed your idea makes sense.
You have found a real problem worth solving.
Your solution works well enough for early users.
Now comes the step where reality hits: Is the market showing you enough traction to justify scaling?
This is market fit, your proof that what you’ve built has real demand beyond your early adopters.
What is market fit?
Market fit means customers are not just saying they love your product, they are proving it with their actions and wallets. It is the difference between having 20 enthusiastic beta testers and having a repeatable way to acquire and keep hundreds or thousands of paying customers.
Think of market fit as the tipping point where:
New customers come in consistently, not just through your network.
Word-of-mouth starts to work in your favor.
Revenue begins to cover your cost to acquire new customers (or shows a clear path to do so).
How market fit differs from solution fit
Solution fit: You have a product that works for early users.
Market fit: You have a product that works for the broader market and you can reach that market efficiently.
Startups that confuse these two often scale too early. They blow money on ads or sales teams before they have figured out how to turn a handful of happy users into a sustainable stream of new ones.
How to know if you are getting market fit
Look for these real-world signals:
Consistent month-over-month growth in active users or paying customers.
Positive unit economics: your customer lifetime value (LTV) exceeds your customer acquisition cost (CAC).
Customers refer others without heavy incentives.
Your retention curve flattens at a healthy level, meaning people stick around.
Example:
Dropbox grew from a few thousand beta testers to millions of users largely because the referral program worked with the product’s strong core value; cheap, reliable cloud storage people genuinely needed.
How to test for market fit
Run small-scale, repeatable acquisition experiments
Test different channels: content, ads, partnerships. See what reliably brings in the right users.Measure LTV and CAC early
It does not have to be perfect, but you should see a path to healthy unit economics.Watch retention and churn
New signups do not mean much if people drop off after a month. Focus on improving the experience until retention stabilizes.Track referrals and word-of-mouth
Are people recommending your product without being pushed? That is market fit at work.
How investors view market fit
At this point, traction becomes your strongest argument for funding. Early-stage VCs look for:
Healthy, predictable growth, not just spikes.
A scalable acquisition strategy.
Evidence that your market is big enough to support a venture-scale outcome.
They will ask:
How will you scale distribution without burning unsustainable cash?
Are early channels saturated, or is there room to expand?
Does the product have natural network effects or stickiness?
Common Pitfalls
Spending too much on paid acquisition too soon.
Mistaking a marketing “blip” (like a viral launch) for real, sustainable demand.
Ignoring churn and assuming new signups will always outpace lost users.
Expanding to new markets before fully owning the first one.
Checklist: Do you have market fit?
Ask yourself:
Are new customers finding me without personal outreach?
Does my cost to acquire a customer make sense for their long-term value?
Are users sticking around and coming back?
Is there organic growth happening; referrals, word-of-mouth, repeats?
If you can answer yes to most of these, you are on track. If not, stay focused: improve retention and strengthen your core channel before pushing to scale.
Closing Thoughts
Market fit is the bridge between a great solution and a real business. It is the stage where you prove, to yourself and to investors, that your startup can grow beyond your early believers.
Do not rush this. Grow slowly if you must, but keep your eyes on the signals that your market wants more of what you have built.
Adraudis Santos
Helping founders achieve to product-market fit
Sources
Y Combinator: How to Get and Keep Users
Brian Balfour: Building a Growth Framework Towards a $100 Million Product
First Round Review: How Superhuman Built an Engine to Find Product Market Fit