Talking Business: The Hockey Stick Model & Achieving Product Market Fit

Emmet McGonagle

August 24, 2022

Teruel Carrasco - president at Valhalla Private Capital, co-founder of Radar Endeavour Group Inc and CEO of Lending Assist - has explained the logistics of achieving product market fit status as a startup.


The next logical step in the startup process (following the friends and family round, pre-seed and series A), product market fit takes place once a startup has rounded out its team and proven it’s product. Once a startup has rounded out its team and proven it’s product, the next stage is product market fit. 


“Product market fit means exactly that,” Teruel began, “the market has said 'checkmark, greenlight, great product'”.


At this point, all that’s left to do is “get the solution out to the masses”, at which point venture capital firms “write larger deals, mainly around accelerating growth” to achieve what is known as “hockey stick growth”.


According to Bobby Martin, author of The Hockey Stick Principles:  The Four Key Stages to Entrepreneurial Success, hockey stick growth occurs when revenue shoots up sharply in a curve shaped, like a hockey stick.


However, Forbes writer Mary Ellen Biery noted that some startups which aren’t hi-tech consider hockey stick growth to be “impossible” due to a lack of potential for surging growth.


Teruel also remarked that “the level of due diligence becomes a lot more sophisticated” at this point.


“It's very, very comprehensive,” he said, as at this point venture capital firms will sign off for a period of four to five years with prospects of a liquidity event in the not-too-distant future.


The Business Professor defines a liquidity event as “the merger, acquisition, sale, or purchase of a company”, as well as “the relationship whereby a company purchases the assets and assumes the debts of another company”.


However, Teruel noted that this moves into the “corporate finance” side of the startup journey.


Do you have a question about angel investing? Get in touch with Valhalla Private Capital via our contact page.

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