First Round Capital has a helpful guide to product market fit that helps to orient founders so they can focus on the right things. Rather than a binary, yes/no, evaluation of product market fit, the guide discusses different levels.
Level 1 - Nascent PMF is when you have some initial customers mostly from warm intros. Churn, gross margin, burn multiples, don’t really matter at this point so much as quickly discovering who the right customer is and solving their problem well.
Level 2 - Developing PMF is when you have customers, the solution delivered is more repeatable, you have up to $1MM ARR, generating your own leads, and customers would be very dissapointed if you went away. Some metrics around go-to-market efficiency start to matter like net revenue retention, gross margin, and burn multiples because you are proving the business can effectively drive demand.
Level 3 - Strong PMF is when demand is flooding in and this is often what founders refer to as “feeling the pull” and everything feels easier. There is strong growth of 3x revenue or higher, more leads are coming from word of mouth, and marketing/sales is very efficient with low CAC/burn multiples/churn and high gross margin and sales conversion rate.
Level 4 - Extreme PMF is when companies earn permission to build new products that expand TAM, the brand starts to become synonymous with the product category, and the business is growing fast. Burn multiple is < 1 and there are more scalable customer acquisition channels.
Read Levels of PMF by First Round Capital.