Good morning, white sneaker fellows!

This is FounderForge. Your Europe-focused startup digest - just because we do things a little differently here! 🇺🇸 👀

Today's topics:

• How long it really takes to get to €1M ARR (the magic number 🔮)

• A deep dive into a simple method for measuring product-market fit 🎯

📊 Data Dive: The Road to €1M ARR

€1M in ARR* is often considered a pivotal milestone in a startup's journey.

👉 Suddenly, your startup is no longer an idea, but a serious business.

👉 Suddenly, you have reached the VC benchmark to raise your Series A.

👉 Suddenly, you have proven your model and are ready to scale.

However, if you don't reach that number 6 months after launch, you are falling behind.

You are losing.

That's how many of us feel - but the reality is, it takes a lot of time to get to €1M ARR.

ChartMogul shared the total number of days it takes the median to reach €1M in ARR**:

• €100K ARR takes 13 months

• €300K ARR takes 21 months

• €500K ARR takes 25 months

• €1M ARR takes 33 months 🤯

Even the very very best take at least 9 months.

At 18 months, we are still talking top league! 🥇

The tricky part is not the time it takes, but getting to the €1M mark at all.

➡️ Only 4% of all companies even make it to over $1M in yearly revenue.

And well, €10M is just a whole nother game…

So next time you are making yourself crazy, just remember:

Big numbers take time.

Play the long-term game! 💪

*ARR = Annual Recurring Revenue
**We know, we know... the data is in $. However, in Europe, we think in € and there is no need to complicate things just to prove a point.

🛠 Founder's Toolkit: Testing Product-Market Fit

Today, we are going to have a close look at the "Very Disappointed" method by Sean Ellis.

Sean Ellis is the author of the famous book “Hacking Growth” and has been driving growth at companies like Dropbox, LogMeIn, and Eventbrite.

What I really like about this method is that while it is very easy to use, it still gives founders a good - and quantifiable! - understanding of where they stand.

The Concept 

The core idea behind the method is to understand how many of your users consider your product not just as a 'nice-to-have', but as something they'd be genuinely disappointed to lose.

Implementation

1. Send out a survey to your users - typically those who have been actively using your product.

2. Ask the critical question - "How would you feel if you could no longer use [INSERT PRODUCT NAME]?"

3. Let them choose between:

   - Very disappointed

   - Somewhat disappointed

   - Not disappointed (it isn’t really useful)

   - I no longer use [INSERT PRODUCT NAME]

4. Analyze the results - the key metric is the percentage of users who answered "Very disappointed."

   - If over 40% of users respond with "Very disappointed", it's a strong indicator that you achieved product-market fit! 🥳 🎉

   - If it's between 25% and 40%, there's room for improvement, but things are on track.

   - Below 25% means there's significant work to be done.

Why It’s Great

First: Simplicity, Simplicity, Simplicity

Instead of going crazy with 100s of metrics and complicated analysis, this method offers a straightforward approach to getting a sense of how much value your product is delivering to your users.

As so often in life - things can be quite simple.

Second: Actionable Feedback

This survey provides the perfect foundation for some deeper follow-up questions.

Why do your customers think your product is a must-have?

Why not?

Use the results as a starting point for your next customer interviews.

Limitations

Ahhh, if there were no limitations, it would be too perfect, right?

As always, a framework or tool can only go so far.

Product-Market Fit is a tricky topic and there is no single way to measure it.

At some point, you will have to look at churn rate, daily active users, net promoter score, etc.

The legendary Lenny Rachitsky wrote a whole article about Product-Market Fit 👇

And let’s never forget…

🔗 Founder's Library: Curated Resources

• Why do investors care so much about LTV:CAC by a16z

• Do valuations even matter? by AngeList

• OMR Rabbit Hole: Die Samwer-Story (in German but ❤️)

• The state of Series A funding by sifted

• How SaaS startups grow from $0 to $30M ARR by ChartMogul

• AI is reinventing the legal industry by NfX

• How B2B startups came up with their idea (Lenny 1/3)

• How to validate a B2B startup idea (Lenny 2/3)

• How to identify your ICP (Lenny 3/3)

😂 Meme of the Fortnight

Founders in times of high valuations…

*VSOP because we are here in the EU where taxes > talent

That's all for this week!

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Cheers,
The Founders Blacksmith 👋

Issue #1 | 7. September 2023