The term product market fit, or PMF is widely used by VC funds to describe the scenario when a company's product and value proposition meets the demand of a viable and growing market. When customers are eagerly buying and using the company's product and the company cannot keep up with demand, then a company knows it has reached. PMF. PMF has become an industry standard milestone in the life of a SaaS company because until the company can demonstrate or confirm that enough customers are willing to pay for their product or subscription, the company cannot afford to focus on any other revenue streams like upselling to existing customers.

And until a company can demonstrate PMF, it would likely not be able to raise a series A round of capital from institutional investors like VC funds.

B2B SaaS companies typically use their seat round capital to establish PMF and then move quickly to raise a series A with VC funds.

PMF, while very important for a B2B SaaS company, is a universal metric typically looked at by VCs.

There are three metrics and benchmark targets that demonstrate PMF. For churn, he target benchmark is a minimum 6 to 12 months track record of less than 30% annually, or two to 3% monthly. And the churn metric applies to both customer count and recurring revenue.

For the LTV to CAC ratio, a three to one ratio is balanced and indicates that a company is spending enough on marketing to acquire new customers. If the ratio is low, like one to one, the company's marketing costs are likely too high. And if the ratio is high, like five to one, the company's likely not spending enough on marketing. And lastly, for MRR or monthly recurring revenue, a minimum 6 to 12 months track record of month over month growth of 10% is the target benchmark.

These are common requirements for Series A, but many larger VCs will have their own internal benchmarks where these three metrics would form part of a larger portfolio of metrics depending on the type of company.