Friends and family are not a market
Anyone working in startups or ventures knows the situation. The product is ready. The first investments are in. But they came from friends, family and the founders' network. That proves trust. It doesn't prove a market.
This is exactly where an investment platform stood that gives private investors access to hydrogen and battery storage projects. Asset classes otherwise reserved for institutional infrastructure funds. Investors are pooled through special purpose vehicles and invest together in individual projects. The business model: a fee on assets under management.
This was 2022. The tailwind was there: the energy crisis had put storage and hydrogen at the top of the agenda, and with REPowerEU the EU aimed to produce ten million tonnes of renewable hydrogen domestically by 2030. Projects like these need enormous sums. What was missing was sales. There was none. And the investor wanted one question answered: can customers be won through scalable channels, or not?
A market is only proven when strangers buy. Through a channel you can grow with money.
Two channels, one goal: predictable demand
We deliberately did not rely on referrals, events or partnerships. They are valuable, but they don't scale linearly with budget. For a proof of market, only what you can turn up counts.
- Own performance marketing. Campaigns, landing pages, funnel. Fully in our hands, fully measurable, better every day.
- Purchased investment leads. From specialised providers who broker prospects for investments. More expensive per contact, but available immediately and an honest benchmark for our own channels.
Both channels ran in parallel and against each other. After a few weeks it was clear where a euro spent brought more assets under management.
Steering daily, from click to invested capital
The mistake in many tests: marketing measures clicks, sales measures deals, and in between is a black hole. We looked at the entire chain every day.
| Stage | What we measured every day |
|---|---|
| Marketing | Reach, click through rate, cost per lead, per campaign and channel |
| Qualification | What share of leads is reachable, fitting and ready to invest? |
| Sales | First calls, advisory calls, subscriptions |
| Outcome | Newly invested capital per week, which is what the business model lives on |
The lead metric was neither the lead nor the deal. It was weekly new assets under management relative to acquisition cost. If the business model is based on AuM, steering has to be based on AuM. Everything else is busywork.
The result after twelve weeks: weekly revenue multiplied, lead costs halved, the commercial team grew tenfold, and less than five days passed from first contact to first deal. Proof of market in under three months. Details are in the case study.
Why proof of market tests fail
Rarely because of the market. Almost always because of three things.
- Measurement. If you don't measure the funnel all the way to the money, you optimise for clicks and wonder why the account stays empty.
- Execution. A test with halfhearted campaigns, slow callbacks and no script doesn't test the market. It tests your own inertia.
- Ownership. When strategy, campaigns, content and sales sit in five hands, you get five explanations and no result. It takes one driver who owns everything, from the plan to the ad copy.
The uncomfortable truth: pragmatism beats perfection
A proof of market is not a lab experiment. You build marketing and sales at the same time, hire people, write scripts and scale an organisation while the test is running. If you wait for the perfect plan, after twelve weeks you have a nice concept and no proof.
What works: decide fast, adjust daily, learn something every day. A campaign that doesn't perform on Tuesday is off on Wednesday. A call script that doesn't convert is rewritten the same evening. Speed isn't rush here. Speed is the method.
When is a market proven? My threshold
I work with a conservative rule.
- Four stable weeks: for at least four weeks in a row, paying customers come through a paid, scalable channel. Not from the network, not through a single lucky spike.
- Payback within twelve months: acquisition cost per customer is earned back within twelve months. In an AuM model this means the ongoing fee on invested capital covers the cost of winning it within the first year.
- 70 percent at double budget: if you double the budget, at least 70 percent of efficiency remains. If the economics collapse as soon as you scale, it was luck, not a market.
That's deliberately strict. Whoever clears these three hurdles can tell an investor with a clear conscience: this is no flash in the pan, this is a machine you can feed.
What to do in the first 30 days
- Set the lead metricDefine the one metric your business model lives on and align the whole funnel to it.
- Pick two channelsPick two scalable channels and test them in parallel instead of five halfheartedly.
- Set up reportingSet up daily reporting from click to revenue before the first euro goes into ads.
- Name the driverName one owner who decides from strategy to content.
- Define the thresholdDefine the threshold for "proven" upfront, don't massage it afterwards.
Proof of market is not a marketing project. It's the first real test of a business model. If you are at exactly this point, it's a typical interim mandate: limited in time, clearly measurable, with a handover to a team that runs on its own afterwards.
FAQ
What is a proof of market?
Evidence that strangers buy a product through a scalable channel and the economics hold when the budget increases. First revenue from your own network doesn't count.
How long does a proof of market take?
With a finished product, clear measurement and daily steering, twelve weeks is realistic. Without measurement and a responsible driver it often takes months, without a robust result.
Which channels are suitable?
Only channels that scale linearly with budget, such as performance marketing or purchased qualified leads. Referrals and events are valuable but don't prove scalability.
What is the most important metric?
The one your business model lives on. For an investment platform that's newly invested capital per week relative to acquisition cost, not the number of leads.