I smiled, but inwardly, I winced.

It wasn’t the confidence that bothered me, it was the maths. The kind of maths that turns startup founders into debtors. Because behind every vanity metric is a hard truth. And here’s one that’s difficult to ignore:

90% of startups fail.

Nearly half collapse because they misread market demand. Not because they didn’t dream big. Not because their logo wasn’t trendy. But because they didn’t understand what the numbers were really saying.

At a stage where global venture funding dropped to $66.5 billion in Q3 2024, the lowest in three years, investors are buying proof, not dreams and visions. And if your startup can’t show that it earns more than it spends, you’re not in the game. You’re in a countdown.

Welcome to the end of “burn and brag.” Welcome to the new economy: earn, or exit.

Understanding the Core: What Unit Economics Actually Means

Let’s not get tangled in complex languages. Unit economics is just a way of asking two questions:

1. How much does it cost you to get one customer?
   (That’s Customer Acquisition Cost — CAC)
2. How much money will that customer bring you over their lifetime?
   (That’s Lifetime Value — LTV)

If your CAC is ₦15,000 and your LTV is ₦10,000, then congratulations, you’re spending ₦5,000 to lose a customer. Multiply that by 1,000 users and you’re running a charity, not a business.

Many Nigerian startups are walking this road. High marketing costs, weak retention, and poor product-market fit stretch CAC to breaking point. Meanwhile, LTV is crushed by churn, pricing issues, or over-reliance on freemium models that never convert.

Startups that fail to balance CAC and LTV almost always struggle with long-term profitability. And in this funding space, that’s beyond a delay; we can call it a death sentence.

The Collapse of “Grow Now, Monetise Later”

This model worked… once. A few years ago, if you showed rapid user growth, VCs would line up to invest. Profits? Not urgent. Just promise them a hockey stick graph and expansion plans into six African countries.

But the tide has turned.

Global venture capitalists are careful.
Investors are tired of exits that never come.
Unicorns are being questioned.

There are 1,565 unicorns globally. Many of them are now being pressured by investors to justify their lofty valuations. Some are laying off staff. Others are “restructuring”, a polite word for panic.

We’ve also seen this locally. Think about 54gene. It raised millions, expanded fast, then imploded. Why? Not just market challenges. They scaled before they nailed their business model.

And as Sequoia Capital said, “The market isn’t rewarding growth at all costs like it did in years past.”

“Companies who move the quickest have the most runway and are most likely to avoid the death spiral.”

“Hope for the best, but prepare for the worst.”

How to Fix Your Unit Economics Before it Kills Your Startup

The transition to solid economics is painful, yes. But it’s necessary. Here’s how founders can stop losing it:

1. Lower Your CAC, or Die Trying

Stop throwing money at ads that don’t convert. Referral systems, partnerships, community-led growth; these are more efficient. Know what works. Kill what doesn’t.

2. Increase LTV by Solving Actual Problems

If customers drop off after one month, your product has no stickiness. Improve value. Add retention features. Make people need you, not just try you.

3. Watch Your Margins Like a Hawk

What does it really cost you to deliver the product? If your margins are thin, scale makes it worse, not better.

4. Track Payback Period Relentlessly

How fast do you recover CAC? If it takes two years, you’re burning runway on wishful thinking.

5. Kill the Ego Metrics

Downloads, followers, media features; none of these pay salaries. Focus on revenue, retention, and repeatability.

We can’t keep building business models that need ₦1 billion in marketing to make ₦500 million in revenue.

Scale is a Privilege, Not a Right

Scaling isn’t a goal. It’s a reward for getting the fundamentals right.

A product that works in Yaba won’t magically work in Nairobi or Accra. Not if you’ve skipped the hard work of validating value. When you scale a broken business model, you scale the loss. Ask any founder who expanded too soon.

Y Combinator once warned, 

“Make something people want.”

“Stay lean and iterate fast.”

“Survival is the first priority.”

What Investors are Really Looking for Now

Startups that survive the next phase will be the ones who stop performing for investors and start performing for customers.

Investors today want:

• Positive contribution margins
• Clear LTV > CAC ratios
• 18 to 24 months of runway
• Evidence of product-market fit before scale

And here’s the irony: Only 18% of first-time founders succeed. Those with one failed company under their belt? 20% success rate. Failure educates. But why not skip the tuition fees by learning what matters now?

The Future is More Focused

The focus on unit economics is not the end of ambition. It’s the start of maturity. Investors are not rejecting innovation, it’s the waste they are rejecting.

We’re moving towards a startup ecosystem that prioritises fundamentals over fireworks. I welcome it.

If you’re a founder, it’s time to stop asking, “How do I raise my next round?”
Start asking, “How do I make this business make sense, without burning everything?”

Because in this new normal, burning money is not commended, it can be reckless. Profitability is not old-fashioned; it’s the future.

And for startups in Nigeria, where capital is scarce and unpredictability is plenty, understanding and acting on your unit economics is indispensable, not optional.

For years, product-market fit has been treated as a reliable signal that a product has found a stable position within its market, often validated through growth, retention, and engagement, yet these indicators were shaped in an environment where building required coordination, access to advanced capability was limited, and replication carried real cost, conditions that have shifted materially through 2024.

Artificial intelligence is no longer an experimental layer applied at the margins of products, but an embedded capability shaping workflows and expectations, while advances in developer tooling continue to compress the distance between idea and execution, reducing what previously required months of effort into cycles that can now be completed in days and, in some cases, hours.

Even the underlying capabilities are becoming interchangeable, with the CEO of Anthropic, Dario Amodei, noting in 2024 that “models are a bit more fungible than cars,” a shift that lowers the barriers that once separated established products from emerging alternatives.

This is reflected in how generative artificial intelligence is embedded into workflows, with developers relying on AI-assisted tools as part of their standard process, accelerating both the creation of new products and the replication of existing ones.

At the same time, capabilities that were once confined to specialised tools are now accessible through general-purpose platforms, enabling individuals and small teams to reproduce outcomes without recreating entire systems, which means that value is no longer tied exclusively to the product itself, but can be assembled through simpler paths.

The result is not just more competition, but a different kind of competition, because it no longer arrives only as a direct alternative offering a better version of the same product, but increasingly emerges as a more efficient way of achieving the same outcome.

This shift is reinforced by a growing preference for flexibility over lock-in, with Mark Zuckerberg arguing in 2024 that organisations “need to control their own destiny and not get locked into a closed vendor,” reflecting a broader move toward open models and architectures that reduce dependency on any single product.

As a result, what appears to be product-market fit is often less about deep alignment with enduring demand and more about timing, because a product may look successful not because it is essential, but because a simpler alternative has not yet fully emerged.

This becomes particularly evident in environments where products are built around organising access to capabilities, because as those capabilities become more accessible through artificial intelligence, the need for the product itself begins to weaken through gradual substitution.

Users do not necessarily abandon products outright, but instead adjust how they use them, relying less on certain features and reconstructing workflows in ways that reduce dependence over time, creating a situation in which usage metrics may remain stable even as underlying relevance declines.

This makes the transition difficult to detect, because traditional indicators of success continue to show positive signals even as the foundation that sustains them begins to shift, creating an illusion of stability at the moment when resilience is quietly eroding.

This dynamic is reinforced by the way artificial intelligence is being embedded into existing platforms, where new capabilities are introduced directly into tools that users already depend on, reducing the need for standalone products and shifting value toward those who control distribution and workflow integration.

Entire categories of product value are already being compressed into internal capabilities, with the CMO of Klarna, David Sandström, observing in 2024 that “essentially, we have removed the need for stock imagery,” illustrating how quickly previously monetised workflows can disappear.

The implication is that software is no longer competing as complete products, but as pathways to outcomes, and in such an environment, the simplest path to achieving a result becomes the most competitive one.

For product builders, this introduces a more fundamental question than how to achieve product-market fit, which is whether the value being delivered is deeply embedded in a way that can withstand simplification, or whether it exists within a structure that can be bypassed as more efficient alternatives emerge.

The risk, as evidenced throughout 2024, is not that products fail because they are poorly designed or executed, but that they become less necessary as the market discovers better ways to achieve the same outcomes.

What many teams interpret as product-market fit may, in practice, be product-timing fit, a reflection of when a product entered the market rather than how strongly it is anchored within it.

Moderated by Napa Onwusah, advisory lead at Novastar Ventures and managing partner at PlacidCode Labs, the session delved into essential tips for startups seeking funding from investors.

Understanding the Stages of Fundraising

Tosin Faniro-Dada outlined the various stages of fundraising:

• Pre-seed Stage: This initial stage often involves having a Minimum Viable Product (MVP) and a few customers for testing. Funding at this stage ranges from $300,000 to $500,000, sometimes reaching up to $3 million.
• Seed Stage: At this stage, startups are expected to generate some revenue, even if not profitable. Funding can range from $1 million to $5 million, with larger rounds reaching up to $10 million.
• Growth Stage: This stage focuses on scaling the product, with a proven ability to monetize and a solid customer base.

Tito Cookey emphasized that at the growth stage, the focus shifts to market expansion or consolidation, aiming to become a market leader.

Paris VC Firm Breega Launches $75M Africa Fund to Back Early-Stage Startups

Defining Product-Market Fit and Revenue Strategies

Tito Cookey highlighted the importance of balancing revenue generation with key performance indicators (KPIs) such as customer engagement. Founders must determine when to monetize and explore different revenue streams, tailored to their industry and market.

Tosin Faniro-Dada discussed various monetization models:

• Freemium Model: Basic features are free, with premium features available for a fee (e.g., LinkedIn).
• Transaction Fees: Charging a percentage of transactions.
• Subscription Model: Recurring revenue from subscriptions.
• Direct Sales: Selling products or services directly to customers.

Key Criteria for Evaluating Startups

Tosin Faniro-Dada outlined the important factors investors consider:

• Team: Experience and problem-solving skills are essential. The ability to adapt and work with investors is indispensable.
• Timing: The market readiness and the relevance of the pain point the product addresses.
• Market Size: The potential for market expansion and scalability.
• Competition: Understanding the competitive environment and identifying how the product stands out.

Tito Cookey added that governance, delegation, and managing regulatory relationships are essential at the growth stage. He stressed the importance of traction, whether through KPIs or revenue, to demonstrate market leadership potential.

What Investors Look for in Founders

Tito Cookey prefers founders who are driven, operational, and visionary. He noted the importance of having a balanced founding team to ensure both operational efficiency and apt storytelling.

Tosin Faniro-Dada further emphasized transparency, honesty, and self-awareness. Founders should acknowledge their weaknesses and work with investors to address them.

Conclusively, the fireside chat gave startups the very key insights needed to scale through the fundraising sector, achieving product-market fit, and generating revenue. 

ATE 2024 enlightened startups with the required roadmap needed in their journey. This session in particular pointed to the importance of a strong, adaptable team, strategic monetization, and transparency in enabling successful investor-founder relationships.

Without a firm grasp of Product-Market Fit and acute customer value, founders and their teams risk squandering precious resources and time on endeavors that might not significantly impact the viability of their venture.

According to Steve Waidelich, and many others within the tech ecosystem, there is only one thing founders should focus on: duct market fit (PMF).

“We are often shocked by how many founders lose sight of the most important thing they should be trying to do. Founders focus on what their logo looks like or their office space or their website or the latest conference or their business cards, any kind of distraction apart from the most important thing. That is building a solution that meets their customer’s needs,” Waidelich, Head of Growth at Founders Factory Africa, told a group of early-stage founders on Wednesday, 4 October.

He was speaking at The Path to Product Market Fit: A Founder’s Toolbox to Scaling Success event, co-hosted by Founders Factory Africa and Google Cloud for Startups at Founders Factory Africa’s Johannesburg office.

Quoting Marc Andreessen, the founder of venture capital firm Andreessen Horowitz, Waidelich told the audience, “For new startups, the only thing that matters is getting to product market fit.”

PMF is so vital to a startup’s future, as Waidelich explained as he walked the audience through Paul Graham’s now canon-like Startup Curve, “Product market fit is this incredible inflexion point for your business.”

“What we have discovered at Founders Factory Africa is that many founders are focused on generating scale, increasing revenue, and growing their customer base. They think they should be raising more venture capital to fund scale, and many venture builders are focused on helping founders at that point,” Waidelich said, pointing at ‘scale’.

“Even investors are pushing founders towards the scale trajectory when actually this here, the path to scale, is littered with the gravestones of endless startups that didn’t fund product market fit and ran out of many. We see far too much attention on the ‘scale’ part and not enough tangible frameworks, actions, and tools to navigate this precious path.”

Defining PMF and How Operators Have Changed VC

While the importance of PMF within the ecosystem is understood, its definition is contested. Waidelich told the audience that “there is little content and material describing what product market fit is.”

“At Founders Factory Africa, we believe the narrative around PMF has evolved. There are a number of factors that contributed to the definition of PMF. I put a lot of emphasis on ex-operators-turned-investors, like Allan Chan, former Head of Growth at Uber and now a partner at Andreessen Horowitz,” Waidelich said.

“It was these operators that understood the nuances of product market fit, who knew how hard it is to find product market fit and the timely signals that they are able to identify building businesses. They have evolved the narrative to be more definitive and concrete, embedding how important metrics and quantitative measures are.”

In Waidelich’s view, PMF is about finding a level of satisfaction measured through retention that will drive customer retention. Where PMF is concerned, retention is its “ultimate measure” since it shows that a founder is building something customers love to use every day.

Metrics to measure and plot Product-Market Fit success

While retention is a vital measure of PMF, as described by Waidelich, it was but one of three ways to measure PMF success. From Founders Factory Africa’s point of view, a combination of these three metrics or “key measures” shines a light on how close founders are to attaining PMF. In addition to retention, Waidelich listed acquisition/growth and active usage + engagement as measures that provide “evidence” of PMF.

“Acquisition/growth is a really interesting signal of PMF. We like to call it the ‘magic’ metric because a metric like organic acquisition, for example, if you are getting more than 60% of new users getting on your platform, it means that your platform has some kind of natural pull or value that is pulling them to your products,” he said.

“Another factor is your viral factor or viral coefficient. If you have users telling other users about the platform, that is another quality signal. If you have a viral coefficient of more than 0.5 — one current user is helping you to acquire ‘half a person’ — that is a good magic metric or natural indicator that people using your product want to tell others about it.”

As Waidelich went into more detail about each measure, he stressed that the combination used on each startup differs and that founders applying the measure should do so in such a way that it acknowledges their startup’s particular market, service, product, and operating model.

The theory of Product-Market Fit is linear but in practice, it’s messy

In wrapping up his presentation, which also covered the different stages of PMF and Founders Factory Africa’s Traction Framework, Waidelich noted that while the frameworks he’d presented were linear, neat, and orderly, in practice, finding PMF is “messy and highly iterative”.

“The touchstone will always be your metrics so you can navigate the PMF maze into a structured, step-by-step process,” Waidelich said. “The number one superpower of world-class founders is the ability to focus. Too many founders get distracted and forget about building value for their customers. Build value for customers and focus on finding product-market fit.”