Nothing Matters More than The Market


I’ve said we’ll be referring you to several of Marc Andreessen’s blog posts, and today I’m suggesting you read Chapter 4 in The Pmarca Guide to Startups: The only thing that matters.

Founding a company is like drinking from a firehose. Entrepreneurs often have a tough time prioritizing the many vital components of the startup business. As Marc writes: “You start to wonder — what correlates the most to success — team, product, or market?”

How you answer this questions will determine how you allocate your resources, man-hours, even certain aspects of your b-model or strategy.

Marc’s philosophy — informed by his own experience as a serial founder: Netscape; LoudCloud, which went public as Opsware, only to be purchased by Hewlett-Packard; and now Ning — is the best post I’ve ever read on why the market matters more than everything else, including your idea, your team, even your execution strategy.

Sound shocking? Borrowing from Marc’s analysis, I’ll boil it down to one sentence: even a great product, produced by a great team, will fail in a lousy market.

The inverse is not true, Marc explains in his post. In a good market, even mediocre products, and mediocre teams succeed.

In honor of VC Andy Rachleff, formerly of Benchmark Capital, who crystallized this formulation for me, let me present Rachleff’s Law of Startup Success: The #1 company-killer is lack of market.

Andy puts it this way:
* When a great team meets a lousy market, market wins.
* When a lousy team meets a great market, market wins.
* When a great team meets a great market, something special happens.

You can obviously screw up a great market — and that has been done, and not infrequently — but assuming the team is baseline competent and the product is fundamentally acceptable, a great market will tend to equal success and a poor market will tend to equal failure. Market matters most. And neither a stellar team nor a fantastic product will redeem a bad market.

Read the whole or Marc’s post. But remember this: even if there is a great customer base out there with a big need; and even if you put together a great team to produce a great mousetrap to solve that need for them; in the absence a marketplace where your great team can “meet” the great customer and hand over your great mousetrap … none of it matters.



Agreed. However the question remains is how do you validate the market assumption?

Asides from the obvious (i.e. google and finding a bunch of ppl to survey), does anyone have any links or good literature on frameworks and methodologies to do this?


Very true! The trick is to time your product with the need of the market. Many great companies/apps were built way before people knew with even 60 to 80% surety (in my opinion) there would be a market as big as it turned out to be. For example PCs and therefore operating systems turned out to be much bigger markets than people envisioned…there were quite a few naysayers. Take the Internet and it’s subsequent applications…I don’t think even the best analyst could have predicted that sucesss. It even seems like the success of applications like Facebook and other social networking sites were not easily predicted. I’m not an expert but from my observations it seems like it can take some time for markets to develop and there in lies the luck, the spark, the fun!

As Marc says you have some control over most risks (people, technology/product, etc.) but you can be totally blindsided by market changes/risks/unknowns. You can do the best market study in the world and can end up scratching your head when it doesn’t pan out like you thought it would.

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