Product-market fit - the elusive moment when a startup's product actually sells well - has apparently become even harder to find in the AI era, which is saying something, because it was never exactly easy. Despite startups achieving record-fast growth, not all customers are sticky, and products can be replicated more easily than ever. In other words, the bar has moved, and it's now somewhere in the stratosphere.

Anu Bharadwaj, a partner at Iconiq; Rajeev Dham, a partner at Sapphire Ventures; and Rahul Vohra, the founder of Superhuman Mail, gathered last week at TechCrunch Disrupt to discuss the new rules for product-market fit. The panel was essentially a masterclass in separating actual traction from well-packaged wishful thinking.

"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 told the audience. "But going from pilot to production is really the hard thing." Right now, she said, many founders pitch revenue metrics to investors without specifying which revenue they mean. "Is it true ARR or is it run rate?" she asked. "There's many ways to obfuscate the whole thing."

And obfuscate they do. 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 their companies seem like they're 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's the financial equivalent of counting a first date as a long-term relationship.

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." She said companies need to separate hype from reality when evaluating revenue quality. It's a red flag, for example, if only a few customers make up much of a company's revenue, or if customers can easily go to another vendor for a better price. "Churn rate and retention [are] really dependent on that," she continued.

That's why Vohra advises startups to track customer engagement and dollar retention, especially for consumer products. "Figure out what benchmark [is] good, great, and excellent for your space," he said. At Superhuman, he explained, the company tracked ARR but also relied on an internal metric called "delighted ARR," which he described as "the ARR only from customers who are super engaged with the product." That metric helped them gauge how sticky customers were and how long they were likely to stick around. "Those users are now still users, those companies are now still customers," he continued. "We obsessed over serving that particular category of our user base and our customer base."

The panelists also discussed green flags that indicate a startup has actually found product-market fit. For Vohra, the key is talking to customers to understand what value they find in the product and how they would feel if they could no longer use it. Then, crucially, be honest with yourself when measuring those responses. "If you're 15%, 14%, 13% or below, consider a complete pivot. Take the codebase, take the team, build something entirely new," Vohra said. "But if you're 20%, you can totally optimize your way from 20% to 40%."

Dham added that it's important for a founder not to confuse having a vision with having a good business - a distinction that apparently requires reminding. At the seed level especially, Bharadwaj said it's fine to pivot. She doesn't even look for product-market fit at that stage, but rather asks: "Does the founder have a thesis that seems plausible and do they have the agility to duck and wave as the situation changes?"

Dham said he values founders even more these days who have made numerous pivots, because it shows they've had to make very hard decisions in this ever-shifting moment. Product-market fit, therefore, is something founders will always have to redefine and re-earn. "Even at a billion in revenue, these companies are re-earning their product-market fit," he said. "You constantly have to be innovating on products." Which is a polite way of saying: the finish line is a treadmill.