Back in 2007, Marc Andreessen, of Andreessen Horowitz, published a post detailing “the only thing that matters for a new startup”.
I’d recommend that you read the whole thing, but if you’d like a topline, here’s the bits that I ran my trusty, neon-green highlighter over.
At any given startup: the team will range from outstanding to remarkably flawed; the product will range from a masterpiece of engineering to barely functional; and the market will range from booming to comatose.
And so you start to wonder what correlates the most to success, team, product, or market?
Or to frame it in terms of risk:
What’s most dangerous: a bad team, a weak product, or a poor market?
It seems that different people, in different professions have somewhat different answers to this question.
If you ask entrepreneurs or VCs which of team, product, or market is most important, many will say team. This is the obvious answer, in part because in the beginning of a startup, you know a lot more about the team than you do the product, which hasn’t been built yet, or the market, which hasn’t been explored yet.
On the other hand, if you ask engineers, many will say product. This is a product business, startups invent products, customers buy and use the products. Apple and Google are the best companies in the industry today because they build the best products. Without the product there is no company. Just try having a great team and no product, or a great market and no product.
So that’s product and market. But what about market. Andreessen goes on to explain:
Personally, I’ll take the third position — I’ll assert that market is the most important factor in a startup’s success or failure.
In a great market, a market with lots of real, potential customers, the market pulls product out of the startup.
The market needs to be fulfilled and the market will be fulfilled, by the first viable product that comes along.
The product doesn’t need to be great; it just has to basically work. And, the market doesn’t care how good the team is, as long as the team can produce that viable product.
In short, customers are knocking down your door to get the product; the main goal is to actually answer the phone and respond to all the emails from people who want to buy.
And when you have a great market, the team is remarkably easy to upgrade on the fly.
It’s a position that is perhaps easiest to justify by considering the alternative.
In a terrible market, you can have the best product in the world and an absolutely killer team, and it doesn’t matter, you’re going to fail.
Neither a stellar team nor a fantastic product will redeem a bad market.
The only thing that matters is getting to product/market fit.
Product/market fit means being in a good market with a product that can satisfy that market.
You can always feel when product/market fit isn’t happening. The customers aren’t quite getting value out of the product, word of mouth isn’t spreading, usage isn’t growing that fast, press reviews are kind of “blah”, the sales cycle takes too long, and lots of deals never close.
And you can always feel product/market fit when it’s happening. The customers are buying the product just as fast as you can make it — or usage is growing just as fast as you can add more servers. Money from customers is piling up in your company checking account. You’re hiring sales and customer support staff as fast as you can. Reporters are calling because they’ve heard about your hot new thing and they want to talk to you about it. You start getting entrepreneur of the year awards from Harvard Business School. Investment bankers are staking out your house. You could eat free for a year at Buck’s.
What should a start-up learn from this?
I believe that the life of any startup can be divided into two parts: before product/market fit (call this “BPMF”) and after product/market fit(“APMF”).
When you are BPMF, focus obsessively on getting to product/market fit.
Do whatever is required to get to product/market fit. Including changing out people, rewriting your product, moving into a different market, telling customers no when you don’t want to, telling customers yes when you don’t want to, raising that fourth round of highly dilutive venture capital — whatever is required.
As I read through Andreessen’s piece, Paul Graham’s post “Why Smart People have Bad Ideas” sprung to mind. In the piece Graham explains that many start-ups fail not because they have incapable people or because their product is poor but because they’ve chosen the wrong problem to solve.
I think the problem with many, as with people in their early twenties generally, is that they’ve been trained their whole lives to jump through predefined hoops. They’ve spent 15-20 years solving problems other people have set for them. And how much time deciding what problems would be good to solve? Two or three course projects? They’re good at solving problems, but bad at choosing them.
And so to the key takeaway: Always start with the market. Spend time finding a problem for which a solution has a scalable, marketable opportunity. Don’t run before you can run.