Are Partnerships a stronger indicator of Product-Market Fit than revenue?

I am going to make a polarizing argument in saying; a SaaS startup with numerous consultants and digital agencies selling services on their solution has stronger product-market fit than a competitor with 10X more revenue, but 10X?fewer active solutions partners...

**Let's apply this thought exercise to a year-old software startup.

The discussion started with this LinkedIn post asking:

Which is a better indicator of Product-Market Fit:?

1. 10,000 users resulted in 29%
2. $1M in ARR resulted in 47%
3. 100 active partners resulted in 24%

But, Chris Lavoie, PhD had a great suggestion:?

"Perhaps another convo is what is the current ARR for benchmark for PMF, and what % of ARR is coming from partnerships for modern SaaS..."

I love this thought - so I?asked a follow-up poll question:

Which is a better indicator of Product-Market Fit for SaaS?

1. $1M ARR, 50% from partnerships.

OR -

1. $10M ARR, 10% from partners??

As you can see... 65% of those responding had the same knee-jerk reaction to vote for the startup with more revenue.

But humor me. Read my argument against the second option...

The reason I?find this frame of the question so interesting is because of how many SaaS startups with traditionally-accepted PMF?metrics I have seen fail in my career... Gone in a year after they believed they had PMF...

As a former digital agency operator, I?am conscious of the risks of referring clients to software that may not be around much longer.

There is a risk to my reputation, and therefore a risk to my revenue and the future of my business.

When I began working as a VP inside tech companies, I would always base my software decisions on what I my digital agencies were recommending. (This was also the genesis for Partnerprograms.io in 2019...)

Consider the fragility of the companies under each?scenario:

1. 100 department heads (CMO, COO, CSO, CTO...) have bought software using their employers' money…
2. - Versus -
3. 10 successful digital agency CEOs have decided to build new services and risk their company on the success (chance of demand going up) of the competitors' product…

In my opinion and experience, scenario #2 represents hight product-market fit than #1 ??

Especially since the digital agencies ("solutions partners") are typically 6 months to a year ahead of the direct market…

I think the market would follow the companies the service providers go with...

Justin Graci, Partner GTM & Product Readiness at HubSpot replied:?"That's an interesting (and good/fair) point to raise. In that scenario, I could see that being more attributed/telling of market fit if your agency partners are the ones ahead of the market compared to direct. It'd be a case by case scenario I suppose. I can see both sides of this ??"

Cory Snyder, VP of Partnerships @ Sendoso didn't agree:?"Alex ???? Glenn 100% agree partners impact revenue. In those examples, the products had PMF already IMO. Arguably why it made sense to launch a partner program. Partners provided the gas and ability for land and expand and so on. Keap had product market fit AND a need for partners. Once launched it drove 500 new customers per month when I left. But again PMF was already there."

?? Cory makes a valid argument - PMF usually comes before partners.

But, my point is not whether a tech org should wait for PMF signs before working with agencies.

In fact, most of the early success of solutions partner programs is due to the fact that solutions providers were already promoting, referring, and building services on top of the tech (like Keap, HubSpot...) long before they rolled out a "Partner Program".

So that further solidifies my point - these tech org's we know of as successful today had

A good example is Zoho versus HubSpot versus SugarCRM?between 2010 and today...

HubSpot grew from $255,000 in revenues in 2007, Pete Caputa (15th employee, VP of Sales, and the originator of their formal partner program) launched their partner program for agencies in 2009, and by 2010 HubSpot reported grew to $15.6 million in annual revenue with a few hundred partners.

[Pete told me he proposed a partner program to Dan their CEO in 2009 because he was seeing how many marketing agencies were involved in their product adoption...]

However, that same year, the competitor Zoho reeled in $100 million in revenue!

But check this out... by 2022, Zoho reported $1 billion in annual revenues, while HubSpot reported $1.73 billion!

That example, to me, makes the point even strong.

If you're still not convinced, check out another major CRM?called SugarCRM.?

Sugar had roughly 250 partners in 2010 and $18M in annual revenues.

Today, 12 years later, SugarCRM has only doubled 500 partners, while HubSpot has more than 23X'd their solutions partnerships to over 7,000 agency partners globally ?? ??

What we should learn from this is that, especially in large markets like CRM?buyers, revenue is not as good of a predictor of PMF?as is active partners.

Tyrone Lingley, Head of Partnerships @ Microsoft commented:?"Nice little chicken and egg here. Option 1 seems like an early indicator of distribution-market-fit, but Option 2 would have you believe the end customer is speaking louder with their own wallet."

In short, my 3 reasons for suggesting active partnerships with digital agencies are a better indicator of product-market fit for early-stage SaaS companies are:?

1. Recent history has shown us - more revenue can mean a better sales team, they were first to market, or maybe they had better PR... But it does not mean the company has product-market fit. In fact, those companies with more partners earlier on are shown to quickly outpace the revenue growth of those with fewer partnerships.
2. Having active partners (businesses or people building services on top of your product) means third parties are betting their businesses on you. This means you can spend more time and effort on product innovation - strengthening your product-market fit - while your partners are selling and marketing your product for you.
3. Agencies are way ahead of software buyers. They need to know what trends are coming and help their clients accordingly in order to stay in business. They are strategic consultants first, campaign managers or content creators second. Their purchase decisions are a more accurate prediction of the long-term success of those products.

I know this topic is polarizing, so please add your opinions to the discussion here.