First obvious fact: there is an incredibly wide divergence of success—some of those startups are insanely successful, some highly successful, many somewhat successful, and quite a few of course outright fail.
Second obvious fact: there is an incredibly wide divergence of caliber and quality for the three core elements of each startup—team, product, and market.
What’s most dangerous: a bad team, a weak product, or a poor market?
- The caliber of a startup team
- The quality of a startup’s product
- The size of a startup’s market
Team
If you ask entrepreneurs or VCs which of team, product, or market is most important, many will say team.
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.
Product
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.
Market
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.
Conversely, 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.
The #1 company-killer is lack of market
- 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
Market matters most.
Questions
Well, first question: Since team is the thing you have the most control over at the start, and everyone wants to have a great team, what does a great team actually get you?
Hopefully a great team gets you at least an OK product, and ideally a great product.
However, I can name you a bunch of examples of great teams that totally screwed up their products. Great products are really, really hard to build.
Second question: Can’t great products sometimes create huge new markets?
Absolutely. This is a best case scenario, though.
VMWare is the most recent company to have done it—VMWare’s product was so profoundly transformative out of the gate that it catalyzed a whole new movement toward operating system virtualization, which turns out to be a monster market.
Understand I’m not saying that you should shoot low in terms of quality of team, or that VMWare’s team was not incredibly strong—it was, and is. I’m saying, bring a product as transformative as VMWare’s to market and you’re going to succeed, full stop.
Third question: as a startup founder, what should I do about all this?
Let’s introduce Rachleff’s Corollary of Startup Success: The only thing that matters is getting to product/market fit.