Good vs Bad Product Market Fit

What is Product-Market Fit?

In "Dont do anything before you sell", we explained what we think about product-market fit or PMF.

"While there are many explanations of a product-market fit, we think of it in very simple terms. A product-market fit happens when you get more customer calls to inquire about your product, than you calling them to pitch your product. When this happens, the team focus shifts from reaching out to people, to managing the people. You need more customer service people than marketing people. More customer service means customer delight, leading to more retention, leading to lower customer acquisition costs, leading to scale!

And this is why having a product-market fit is essential. The business model develops after you achieve product-market fit."

Today, we share what separates Good PMF from Bad PMF

Organic traction

When is organic traction an indicator of good PMF? When most sign-ups come from non-paid sources, and consistently increase MoM.

When is organic traction an indicator of bad PMF? When most sign-ups come from paid sources.



When are sign-ups an indicator of good PMF? When sign-ups are more than 5% (i.e. visitor to sign up ratio)

When are sign-ups an indicator of bad PMF? When sign-ups are less than 2% (i.e. visitor to sign up ratio)


Conversion rates

When are conversion rates an indicator of good PMF? When sign-ups are more than 5-10% (i.e. free trials to paid users)

When are conversion rates an indicator of bad PMF? When sign-ups are less than 2-3% (i.e. free trials to paid users)


Length of sales cycle

When is the length of sales cycle an indicator of good PMF? When sales cycle is less than 30 days, or when low-to-no-touch sales start happening

When is the length of sales cycle an indicator of bad PMF? When sales cycle is more than 60-90 days, and a high touch model is required


Churn rates

When are churn rates an indicator of good PMF? When churn rates of new users is less than 1-2% per month

When are churn rates an indicator of bad PMF? When churn rates of new users is more than 2-3% per month


All the above will depend from industry to industry, however the general sentiment remains the same for a SAAS business, edtech, e-commerce, and other enterprise software models.

Why quality and not quantity matters in dealflow for angel investors

"We end up funding only 1.234567% of the number of deals evaluated!"

- VCs humblebragging!

What are they trying to say?

Their threshold for investment is so high, that not many companies can clear it


Their scope is so wide, that they evaluate every company they can find

These are neither awe-inspiring nor productive. It is no secret that most VCs consider the number of deals screened every year as a barometer for 'hustle' and 'grind'.

Gary Vee would not be proud fellas!


Consider the following

Scenario A

A VC firm with 2 Partners & 4 associates, screens and evaluates 400 companies a year and ends up funding 12 of them, implying a 3% acceptance. Cool. If we dig a bit deeper and divide the effort among the team, it means one associate probably screened 8 deals a month, or 2 a week (yes she was grateful for a 2 week leave!). Is this really possible to do with the same level of effort, engagement, productivity, and relationship?

Screening a deal, taking it up for evaluation, conducting diligence, primary & secondary research, reference checks, product demos, investment memos, partner meetings, IC meetings, term sheet negotiations, SHA negotiations, closing a deal, and finally going from a company to a portfolio company takes a huge amount of effort.

If you want to fund 12 companies a year, is it really important to screen hundreds?



Scenario B

A VC firm with 1 Associate and 1 Partner knows they can not physically screen and evaluate three-to-five hundred deals a year! But even they have to fund 12 companies a year and deploy that capital in the first few years of the fund. So, they decide to be more productive - they set a very high threshold of parameters beyond which they do not evaluate companies. They work with a narrow scope so as to only spend time on companies that they believe they can potentially fund. 

In doing so, while they generate sizeable inbound interest, they only end up evaluating a handful of companies that they really believe in. A less number of companies to evaluate mean more time available to spend per company, thereby providing them the ability to engage deeply and develop an insight that other investors do not have the liberty to.

Guess what, they are still able to fund 12 companies a year!


Prioritizing Quantity over Quality?

At Malpani Ventures, we believe QUALITY and not QUANTITY matters in deal flow. We do not have internal targets to present 'X' number of deals for funding every week/month/year. While we do measure our acceptance rate, we see a low number not as a badge of honor for doing more work than the next investor - but as a reminder to not spend a lot of time doing unproductive things. The number of deals screened per year is a vanity metric that we do not fall for. Being a family office, we have the liberty of deploying capital faster or slower than others.

If an investment team spends the majority of its time finding 'the next big thing', how will it find time to engage with the existing next big things in the portfolio?

And this is precisely why, at Malpani Ventures, we are fiercely protective of our time. Just as capital is a finite resource for most investors and funds, excluding some Japanese & American ones, time is a finite resource for our investment team. We have very high threshold parameters for companies we taken from incoming deals to evaluation. It does not behoove us to spend time evaluating 20 companies we would never fund, thereby expending precious bandwidth of both - the founders of those companies and our investment team. Any company that does not fit our investment thesis, will be a quick no. And for companies we evaluate but do not take to the next stage, we offer explicit reasons as to why we can not take the evaluation ahead - signifying our level of engagement in understanding the company, and as a mark of respect for the founders.


Is platform risk okay for a young startup?

I recently came across this post. Here is the gist:

  • This founder set up a custom domain & analytics that sat on Substack
  • It was a niche with no competitors, with users willing to pay
  • Substack started offering the same services that killed this startup

This is a major worry for many startups. And this is called Platform risk.

What is Platform Risk?

Platform risk is the risk of debt associated with adopting a platform. Platform risk gains momentum when the following happens:

1. Platform becomes critical to company operations

2. Company is unaware of the risk assumed

3. There is a likelihood of adverse platform change

This is a major source of worry for founders. For an e-commerce company in our portfolio, Facebook is the single major source of customer acquisition. For a habit-building startup we have invested in, LinkedIn referrals are free, but the only source of customer acquisition. As investors, we also worry that if something were to happen to that channel, the company might face an existential crisis!

However, is platform risk really that big a deal for a young startup?

As a young startup, often the only thing that a company does is to be exceptionally well at one thing. Do one thing consistently, repeatedly, exceptionally better than the competition and make your customers fall in love with you! This also means for an e-commerce company - they focus on making the best product and let the acquisition channel do its work for the time being. Only then can the company become an efficient, and scalable business model.

Any e-commerce company by default runs platform risk because Facebook owns almost all of the customer acquisition channel. During times of flash sales by behemoths like Amazon & Flipkart, we have seen the ROI on Facebook ads fall significantly because of flooding by these e-commerce giants. During such times, startups in our portfolio have faced revenues falling off a cliff, falling efficiencies in customer acquisition, and also at times halted business.

But this does not mean you stop using such channels. As a young startup trying its best to attain product-market fit in a highly competitive world, the focus should, and has to remain on perfecting the product. It is hard to get one thing right for hyper-growth, let alone build an acquisition strategy from scratch without the help of these platforms. And that invariably means when founders find a platform that works, they will want to milk that cow!

Once startups have established their presence, and are looking to scale their business, it can be an opportune time to diversify the acquisition channels. But the groundwork needs to start early. Building and nurturing an acquisition channel without throwing truckloads of cash takes considerable effort and time. But when you find a channel that works for you, milk it while you can. As an early-stage company, you do not need to diversify yet.

This article originally appeared here.

Why we decided to fund Biomoneta


"Learn the rules like a pro, so you can break them like an artist"

-Pablo Picasso

There are times when you come across an opportunity so brilliant, that you break all your rules to grab it. For Malpani Ventures, this rule-breaking, once-in-a-decade opportunity came in the name of Biomoneta.

Our firm has been in touch with Janani from Biomoneta even before I considered venture capital as a career path! Knowing that she is conducting path-breaking research in infection control, it was a no-brainer for us to support her vision. We do not participate in pre-revenue opportunities, but Biomoneta is once in a blue moon.

Previously supported by DBT-BIRAC, Biomoneta's ZeBox technology creates germ-free zones that can help break the chain of infection transmission, thereby protecting patients, healthcare workers, and the community.

Why is Biomoneta the Special One?

Biomoneta’s ZeBox decontaminates the environment with its patent-pending technology that not only captures but also kills microbes before they can infect people or contaminate products.

The device sucks in air from the environment where it is deployed and takes it into its capture zone, where microbes are trapped and retained. Its highly-efficient mechanism disintegrates the cells, killing microbes in large numbers as long as the device is on - creating a contamination-free zone.

The plug-and-play B2B device was developed to keep hospitals, especially ICUs, free of infection. Co-founder Arindam explained: “ZeBox is a very low maintenance device. Only a small component in the device needs to be replaced after every 2.5 years. Apart from this, the device works without human intervention.” The devices can be operated continuously in the presence of humans without worrying about their safety and does not generate any radiation or toxic by-products.

Biomoneta co-founders Arindam Ghatak (L), Dr. Janani Venkatraman (R)

Malpani Ventures have been extremely privileged to participate in Biomoneta’s $500k seed round led by Beyond Next Ventures, and ArthaVida Ventures earlier this year.

The company is going to use the funds to take its decontamination devices to market, develop more products and work on its technology.

"This funding is testimony to our team's novel approach to supporting the global fight against infection spread while also providing a safe bubble for those susceptible to infection. We are scaling up our manufacturing to address the demands of the market"

-Dr. Janani Venkatraman, CEO of Biomoneta

The Covid-19 pandemic has also brought to light the need of preventing the spread of infection, particularly during a time where no cure or vaccine exists. During such times, deploying ZeBox units in controlled environments like hospitals, homes, offices and other enclosed spaces may have the potential to arrest the spread of a range of infections, including bacterial, fungal, viral among others.

This article originally appeared on vcble.

How to keep the spark with investors alive?

Raising funds is a major milestone in the history of every startup, and you should congratulate yourself for doing this successfully – after all, only a very small percentage of founders manage to get to this stage. After you’ve patted yourself on your back, accepted the congratulations which pour in, and issued the press releases to let the world know that you are on your path to building a world-class company, you then need to then get down to brass tacks.

The problem is that after founders get their first cheque, they’re so focused on fine-tuning their product and marketing it, that they forget that they also need to take care of their investors.

Here’s a simple solution – make sure you send a monthly email to all your investors on a regular basis, updating them as to what’s happening to the company.

You can use a basic template that covers all the major areas – product updates; hires and fires; revenue and cash burn; your plans for the next months; and what help you need from your investors. Lots of the headings will be blank, and that’s fine too.

Talk about both the highlights and lowlights, and don’t gloss over problems. This is stuff which you live and breathe on a daily basis, so you won’t need much time to do this – all you require is discipline! Not sure what to put in and what to leave out? The rule is simple – more is better, so overcommunicate, rather than censor. It won’t take your investors much time to read through your email, and they can always skip the stuff they aren’t interested in.

You could start off by saying, “I’m really excited to have all of you as our partners on this journey and I’d like to share information with you on a regular basis. Could you please give me permission to do so?” And then you should send them the email every Sunday. Providing regular updates is part of your shareholder agreement (SHA) in any case, but doing more than is required is a great way of standing out!

Are you scared that this will consume a lot of your time? It really shouldn’t. It’s just a question of compiling the information you already have at your fingertips on a regular basis. This is the Open Management concept, where the founder has a dashboard that they use to track the pulse of his business and shares with all his employees – you just need to share this with your investors. The weekly report only contains the key operating numbers – the tactics, insights, and strategy will be reserved for the monthly MIS.

Will your investors get worried and lose faith in you when you describe the fires you are having to put out? No – we know you will run into problems and would like to know how you plan to deal with them before they become unmanageable. Will they want to start micromanaging you? Again, this is unlikely – we have enough on our plates already, and are quite happy to give you the freedom to run your company, if you can show us that you are doing a good job!

This kind of regular contact is good for your investors because it will help them to trust you. It will show them that you are open and transparent, and are behaving like a real partner. This exercise demonstrates that you don’t just want their money – that you also value their expertise and feedback. The benefit is that the next time you do run into trouble (and I promise you that you will!), they’ll be much more inclined to help you as compared to the other founders that they have given money to because you’re going to stand out.

You should do this not just for the sake of the investors, but for yourself as well. The right time to fill your bucket with goodwill is when you don’t need to – when things are going well. Sharing updates regularly is a sign of respect, and by keeping them in the loop, it’s much easier for you to ask for additional assistance when you need this. You’ll be surprised how helpful investors can be if you adopt this approach, rather than run to them for help only when you run into problems.

This is also a great way of stepping back on a regular basis, so you get an overview of how your company’s doing – you will get a 30000-foot perspective as to how you are evolving. It’ll help you to stay on track and remain grounded so that you can no longer fool yourself about your failure to deliver what you originally promised ( and I can promise you that there will be hiccups along the way!).

And on a personal note, it will be fun to share your journal with your grandchildren when you finally become a millionaire.

Making memorable pitches!

Most founders get only one chance to raise money from a particular investor, which is why the pitch they make is so vitally important. The trouble with all these pitches is that because all the founders read the same books and use the same templates to create them, they end up looking very similar to each other. This is why they often end up putting the investor to sleep.




Founders need to work on their pitch in order to stand out from the rest of the competition. You need to think about what makes you different – what makes you memorable. This is why less is more – there is a reason why there is a premium for scarcity! The purpose of the pitch is not to get the investor to sign a cheque – it is simply to arouse interest, so you can keep the conversation going. This is why you can’t afford to pad your pitch with the same boring cliches and platitudes which everyone else does.



If you have a generic slide in your presentation, then please take it out. What is a generic slide? It’s a slide which any founder can use because it’s full of weasel words and jargon which means very little. They often serve only to switch the investor’s brain off, because they've heard it all before.

What you really want to do is to make the investor think. You need to provoke him a bit, and the best way of doing this is by asking intelligent questions. For example, if you wanted to create a better online grocery delivery startup, your first slide should ask – Why are companies like Grofer still losing money? This will get their attention, and force them to think, which means they will start actively listening to your presentation. You then need to provide them with a counterintuitive answer, so that whether or not they fund you, at least they will respect your depth of knowledge, and be happy to continue engaging with you. This is not easy, because you need to have a lot of expertise and a contrarian point of view. It’s hard work to come up with an original perspective, and you won’t be able to use canned presentations.

You need to polish and tailor your pitch, depending on who exactly you’re pitching to. You need to prove to the investor that you’ve done your homework – that you understand his sweet spot and investing thesis. Anticipate their objections, and answer their questions even before they ask, so they can see you are capable and competent.



The trouble with a lot of pitches is they’re usually peppered with fashionable buzzwords. For example, the current crop of buzzwords is artificial intelligence / deep learning / neural networks/ machine learning. Don’t forget, investors aren’t dumb. They have good bullshit detectors, and it’s easy to figure out when the knowledge of the founder is shallow. They can sense when the founder is using jargon only in order to impress the investor, rather than because they actually understand the space.

This lack of depth can backfire. When investors ask more probing questions, you’re not going to be able to answer them, and you will end up with egg on your face.

Be creative and innovative when crafting your pitch – make it an original work of art. Take a few risks! After all, if the definition of an entrepreneur is someone who takes intelligent risks, then why not use your pitch to show investors that you fit the bill!

The good thing about giving presentations is that you will get progressively better if you ask for feedback. Try to make your presentation short and sweet, so that you leave enough time for the investor to ask you questions, and they want to find out more about what you are doing!

Startup PR 101

PR (Public Relations) is usually not looked at as a priority item at many startups that we have worked with. While we are cognizant of the fact that founders wear multiple hats during the early stage to build a product, sell to customers, schmooze investors, grow your team, and what not; We also realize the importance of publicity that can provide a nudge to some of these initiatives. Mind you, PR won't build your product, but it can help you shape your brand!

Startups can use media coverage for their benefit in multiple ways. Good, positive coverage from the right publications can ensure a stream of inbound leads from your target customers. PR, when done right can also help you appear bigger than you are - always a good thing while negotiating with vendors, customers on the fence, and other partners. And lastly, positive communication of the ethos can help you attract, and retain the right kind of talent for your growing team.

Some know it well, some do not care about it, some fail miserably at it - that's PR for you. In this post, we want to highlight a few ways founders can get favorable coverage on media.

Target right

Just as you would target the kind of investors that you want to pitch to (we sure hope you are doing this!), it also makes sense to target the kind of publication, and journalist that covers the space you are operating in. Quickly check news archives of similar companies in the industry, and your peers to understand which kind of publications cover your space. Find a common ground, and try to find as much as you can about the said publication and journalist. If a journalist or publication has covered similar stories in the past, they can relate to the space and will more likely to be receptive than someone who has not!

Use your network

During your periodic communication with your investors, ask them specifically if they have connections to journalists or publications and if they can provide a warm introduction. Often, the fact that you've raised capital will give you some credibility. If investors found your story to be interesting, it will be interesting to a journalist as well! Use that!

Build relationships

Okay, you aren't ready for PR right now. Still, does not hurt to go out and build relationships ahead of time. Find the journalists, follow them on their social media, follow their coverage, like, share, comment, offer them your insights, offer any introductions with other people in your network that might be useful to them. All this works better than a warm introduction!

Keep it simple silly

Prepare a brief one-pager on your story, your business, and some key facts, and maybe quotes from customers or investors. Draft the message in a concise and crisp manner with proper grammar and punctuation. Do not gloat in your message, the journalist will most likely edit it out. Essentially you want to reduce the friction as much as possible. You want the journalist to be able to forward and publish your story as you sent it without them having to edit, and rewrite.

The key here is to have an ally that can portray a positive, yet truthful story about who you are, and what are you doing! 


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