Anu Bharadwaj Says Moving Pilots to Production Is a Hard Test

Startups can mistake short-lived pilot revenue for durable demand, Iconiq partner Anu Bharadwaj said, urging founders to distinguish recurring revenue from annualized run-rate figures as they assess product-market fit.

During a panel discussion last week, Bharadwaj said companies have become more willing to test new products, making it easier for startups to win pilot projects. The harder step is converting those trials into production use. She said founders should label revenue figures clearly, distinguishing annual recurring revenue (ARR) from an annualized run rate.

Some pilot customers may use a product for only a few months. Counting that business in a run rate can make it appear that the revenue will continue for a full year, even when the customer has not committed to long-term use.

Bharadwaj called it a revenue-quality red flag when a small group of customers accounts for much of a company’s revenue. She also pointed to customers’ ability to switch to a cheaper vendor, saying those factors affect churn and retention.

Superhuman Mail founder Rahul Vohra urged startups, particularly consumer businesses, to track customer engagement and dollar retention. He also advised founders to set benchmarks that reflect their market.

At Superhuman, the company tracked ARR alongside an internal measure called “delighted ARR,” which counted revenue from customers who were highly engaged with the product. Vohra said the measure helped the company judge how likely those customers were to remain. He said the team focused on serving that group.

Vohra also recommended asking customers how they would feel if they could no longer use a product. He said founders should consider a complete pivot if 15% or fewer gave a positive response, while a 20% result could be improved toward 40%.

Sapphire Ventures partner Rajeev Dham cautioned founders against treating a vision as proof of a sound business. He said he values founders who have made multiple pivots because those changes can reflect difficult decisions. At the seed stage, Bharadwaj said she looks for a plausible founder thesis and the ability to adapt, rather than product-market fit itself.

Dham said companies have to keep earning product-market fit, even at a billion in revenue, and continue innovating on their products.