The most important thing is not an excellent team or a solid product, but the market and PMF.
By Marc Andreessen
Compiled by: Geek Translator
Abstract: This article is from a series of blogs written by Marc Andreessen, the founder of a16z and Netscape Navigator, in 2007, mainly focusing on topics related to entrepreneurs and VCs. In this blog, Marc Andreessen, based on his own experience and what he has seen and heard, points out that for a startup team, the most important factor for success is not the team and the product, but the market, or PMF (product-market fit).
Since Marc Andreessen is a successful serial entrepreneur and has made outstanding achievements in the Internet and venture capital industries, we believe that his insights are quite convincing. Therefore, we have translated this blog into Chinese, hoping to bring some inspiration to entrepreneurs.
Content: This post is about the only thing that matters to a startup. But first, some theoretical foundations: If you look at a large number of startups, say 30 or 40 or more, and try to eliminate random chance and look for patterns, you’ll find two obvious facts:
The first obvious fact:
There is a huge range of success among startups - some are incredibly successful, some are highly successful, many are just barely successful, and a significant number of them fail outright.
The second obvious fact:
The three core elements of a startup — team, product, and market — vary greatly in level and quality.
In any startup, the team members may be very good while others may have obvious flaws; some companies' products may be engineering masterpieces while others are barely usable; and the market in which the company is located may be a booming industry or a sunset industry.
So we started thinking: What factors are most relevant to entrepreneurial success - team, product, or market? Or more directly, what are the determinants of success? For those who study the failure of startups, what is the most dangerous: a bad team, a weak product, or an unsatisfactory market?
Let's start by defining a few key terms:
The quality of the team: How well-suited are the CEO, executives, engineers, and other key members to seize opportunities. When measuring a team, I focus more on execution rather than experience, because the history of the technology industry is full of examples of teams built by newcomers that have achieved great success.
Quality of the product: How attractive is the product to real users? Is the product easy to use? Is it feature-rich? Does it run smoothly? Is it easy to expand? How polished is it? Does it have defects?
Market size: refers to the number of potential customers/users facing the product and its growth rate (assuming profitability is feasible after scale, that is, the cost of acquiring customers is lower than the revenue brought by customers).
Some people might question my categorization: “How good can a product be if no one wants it?” In other words, isn’t the quality of a product determined by its appeal to many customers?
The answer is no. Product quality and market size are completely different concepts, and the classic example of this is that many software applications are developed for operating systems that almost no one uses. You can ask programmers who have developed for the BeOS, Amiga, OS/2, or NeXT application markets what the difference is between "a good product" and "a large market."
Team, product, and market priorities
So if you ask entrepreneurs or VCs which is most important to a startup: team, product, or market, many will say team. This is an obvious answer, in part because at the start-up stage of a company, you know more about the background of its team and less about the product and market — because the product is not yet finished and the market is often not fully explored.
In addition, we have been taught since childhood that "people are the most important asset." At least in the United States, the concept of valuing people is deeply rooted in our culture, including self-esteem education programs in high schools and the "right to life, liberty and the pursuit of happiness" mentioned in the (Declaration of Independence). Therefore, the answer "the team is the most important" sounds "very correct."
But if you ask some engineers, they may say that the product is the most important. For the technology industry, the product is indeed the center, and the mission of a startup is to invent products, and customers buy and use products. Apple and Google are the most successful companies in the industry today because they make the best products. Without products, there is no company. Imagine having a great team but no product, or having a huge potential market but no product, what will such a company become?
But personally, I hold a third view - I believe that the market is the most important factor in the success or failure of a startup. Why? Because in a large market - a market with a large number of real potential customers, the market will drive the product out of the startup. The market has a need, and the market will be satisfied as long as the first viable product appears. Such a product does not need to be excellent, it just needs to be basically usable. The market does not care how good the team is, as long as the team can deliver a basically usable product.
In other words, customers will come to you to buy products, and your main goal is to meet customer needs and deliver products. Even in a market with huge potential, the level of the team can be improved spontaneously. Specific examples can refer to search engines, online auction platforms and router markets.
Conversely, in a bad market, even if you have the best product in the world and an absolutely amazing team, you will still fail. You will waste years trying to find customers that don’t exist, your amazing team will eventually become demoralized and quit, and your startup will fail. Consider the markets for video conferencing, workflow software, and micropayments.
Rachleff's Laws of Entrepreneurial Success
Andy Rachleff (formerly a partner at Benchmark Capital) once summarized the following point:
When a great team meets a bad market, the market wins.
When a bad team meets a great market, the market still wins.
When an excellent team meets an excellent market, miracles happen.
The market is the determining factor in whether a startup succeeds or fails, and a bad market environment cannot be saved by a great team or a great product. You can screw up a great market - it has happened and it is not uncommon - but assuming the team is basically capable and the product is basically acceptable, a great market often equals success and a bad market often equals failure. Ultimately, the market is the most important, and neither a great team nor a great product can save a bad market.
The question is, what should a startup team do? First, since the team is the factor you can control the most at the beginning, and everyone wants to have a good team, what does a good team actually bring you? Maybe a good team can bring you an okay product, and ideally, a great product. However, I can give you many examples of good teams screwing up their products, and in fact, great products are really hard to build.
Hopefully, a great team will also get you a great market - but I can also give you plenty of examples of great teams doing great in bad markets, only to fail. A non-existent market doesn't care how smart you are.
In my experience, the most common combination of a great team and a bad product/bad market is second or third time founders who had a huge success with their first startup, got cocky, and then made mistakes. Consider a high profile, highly successful software entrepreneur who is pumping about $80 million into his latest startup, but has achieved little beyond getting in the news or a few beta customers because there is almost no market for what he has built.
On the contrary, many weaker teams have achieved great success due to the huge scale of the business in the market they are in. Finally, I would like to quote Tim Shephard: "Given the same market and product conditions, excellent teams will always beat mediocre teams."
This leads to the second question: Can't great products create huge new markets? In some cases, yes, but they are rare. VMWare is the latest company to do so - VMWare's product was profoundly transformative from the start, catalyzing a whole new movement in operating system virtualization, which ultimately became a huge market.
Of course, in this case, it doesn't matter how good your team is, as long as the team can get the product to market with the basic quality that the market needs. I'm not saying that you shouldn't focus on team quality, or that VMWare's team is not strong, I'm saying that as long as you bring a product as revolutionary as VMWare to market, you will succeed, that's all. Beyond that, I wouldn't expect your product to create a new market from scratch.
The third question: As a startup founder, what should I do? Here is Rachleff's corollary to entrepreneurial success: The only thing that matters is achieving product/market fit, or PMF. PMF means having a product that meets the needs of the market under good market conditions.
When there’s product/market mismatch, customers aren’t getting enough value from the product, word of mouth isn’t spreading, usage isn’t growing very quickly, press reviews are a bit “boring,” sales cycles are too long, and many deals don’t close.
When you have product/market fit, customers are ordering as fast as you can build your product, and usage is growing as fast as you can add servers. Customer payments are piling up in your company account, and you’re hiring salespeople as fast as you can. Journalists are calling because they heard about your hot product and want to talk to you. You start getting Harvard Business School’s Entrepreneur of the Year award, and VCs are watching outside your house, wanting to invest in your company. But in reality, many startups fail before product/market fit, and they fail because they never achieve PMF.
Going a step further, I believe that the life of any startup can be divided into two parts: before product/market fit (call it “BPMF”) and after product/market fit (“APMF”). When you are BPMF, focus on achieving PMF and do whatever it takes to get product/market fit, including changing team members, reworking the product, entering different markets, trying to find users as much as possible, or raising more money - whatever you need.
When you’re really into the PMF process, you can ignore everything else. Every time you see a successful startup, you’ve seen it achieve product/market fit — and along the way, it may have screwed up everything else, like its marketing plan, media relations, compensation policy, etc. But that didn’t stop the startup from being successful.
On the contrary, you will see that many well-run startups are perfect in every aspect, with perfect HR policies, excellent sales models, thorough marketing plans, excellent interview processes, delicious catering, 30-inch monitors for all programmers, and top VCs on the board, but they fall directly off the cliff because they can't find the point of PMF.
The irony is that once a startup is successful, when you ask the founders what made the company successful, they will usually cite a variety of things that have nothing to do with success. People have a hard time understanding causality, but in almost all cases, the cause is actually PMF. What else could it be?
