What Founders of a16z Say Is Most Essential for Startup Success?
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What Founders of a16z Say Is Most Essential for Startup Success?
The most important thing is not an excellent team or a solid product, but the market you're in and PMF.
Navigating Web3 tides with focused insightsAuthor: Marc Andreessen
Translation: Geek Translator
Summary: This article is part of a blog series written in 2007 by Marc Andreessen—co-founder of Netscape and partner at a16z—on topics related to entrepreneurs and venture capitalists. In this particular post, Marc Andreessen draws from his personal experience and observations to argue that for startup teams, the most critical factor for success is not the team or the product, but rather the market—or what's known as PMF (Product-Market Fit).
Given that Marc Andreessen is a highly successful serial entrepreneur with significant achievements in both the internet and venture capital industries, we find his insights particularly compelling. We have translated this blog post into Chinese in hopes of offering valuable inspiration to aspiring founders.
Main Text: This article is about the only thing that truly matters for a startup. But first, let’s establish some theoretical groundwork: if you observe a large group of startups—say, 30 to 40 or more—and try to eliminate randomness and identify patterns, you’ll notice two obvious facts:
The First Obvious Fact:
There is an enormous variation in startup outcomes—some companies achieve incredible success, others are highly successful, many barely get by, and a substantial number fail outright.
The Second Obvious Fact:
The three core elements of any startup—team, product, and market—vary greatly in quality and capability.
In any given startup, team members may range from exceptionally talented to clearly flawed; products can vary from engineering masterpieces to barely functional; and markets can be either rapidly growing or already declining.
This leads us to ask: What correlates most strongly with startup success—team, product, or market? Or more directly, what is the decisive factor? For those studying startup failure, what is the greatest danger: a weak team, a poor product, or an unsuitable market?
Let’s first define key terms:
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Team Quality: How well-suited the CEO, executives, engineers, and other core members are to seize the opportunity. When evaluating a team, I prioritize execution ability over experience, because tech history is full of inexperienced founders who built great teams and achieved massive success.
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Product Quality: How appealing the product is to real users. Is it easy to use? Feature-rich? Smoothly operating? Scalable? Polished? Does it have defects?
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Market Size: The number of potential customers/users for the product and how fast that base is growing (assuming profitability at scale is possible—that is, customer acquisition cost is less than lifetime value).
Some might challenge my categorization: “Can a product really be good if no one wants it?” In other words, isn’t product quality defined by its appeal to many customers?
The answer is no. Product quality and market size are entirely different concepts. A classic example: many software applications were developed for operating systems almost nobody used. Ask developers who built apps for BeOS, Amiga, OS/2, or NeXT what the difference is between a “great product” and a “large market.”
Ranking Team, Product, and Market
If you ask entrepreneurs or VCs which matters most for a startup—team, product, or market—many will say team. It’s an intuitive answer, partly because during the earliest stages of a company, you know far more about the team than about the product or market—since the product isn’t finished, and the market hasn’t been fully explored.
Besides, we’re culturally conditioned to believe “people are the most important asset.” At least in the U.S., this idea runs deep—from high school self-esteem programs to the Declaration of Independence’s “life, liberty, and pursuit of happiness.” So saying “the team matters most” just sounds “right.”
But if you ask engineers, they’ll often say the product is most important. In tech, the product is central—the mission of a startup is to invent something people buy and use. Apple and Google dominate today because they make the best products. Without a product, there’s no company. Imagine having a stellar team but no product, or a huge market but nothing to sell—what kind of business would that be?
Yet personally, I hold a third view—I believe the market is the single most important factor determining a startup’s success. Why? Because in a large market—one with abundant real demand—the market itself pulls the product out of the startup. Demand exists, and it will be satisfied as soon as the first viable product appears. That product doesn’t need to be excellent—it just needs to be basically usable. And the market doesn’t care how brilliant your team is, as long as they deliver something usable.
In other words, customers come to you asking to buy. Your main job is simply to handle demand and ship the product. In fact, in a strong market, even a mediocre team can improve organically over time. Examples include search engines, online auction platforms, and router markets.
Conversely, in a terrible market, even the best product and the strongest team will fail. You’ll waste years chasing non-existent customers, your great team will lose morale and quit, and your startup will collapse. Examples here include video conferencing, workflow software, and micropayments.
Rachleff’s Rule of Startup Success
Andy Rachleff (former partner at Benchmark Capital) once summarized it this way:
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When a great team meets a bad market, the market wins.
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When a bad team meets a great market, the market still wins.
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When a great team meets a great market, magic happens.
The market is the decisive factor in startup success. No amount of team brilliance or product excellence can save a failing market. You can mess up a great market—this has happened, and not infrequently—but assuming the team is minimally competent and the product is minimally acceptable, a great market usually means success, and a bad market usually means failure. Ultimately, the market trumps all—neither a great team nor a great product can rescue a bad market.
The real question is: What should founders actually do? First, since the team is the element you control most at the outset—and everyone wants a great team—what does having a great team actually get you? Perhaps a decent product, ideally an excellent one. Yet I can cite numerous examples of outstanding teams building terrible products. In reality, building a great product is extremely hard.
You might hope a great team ensures access to a great market—but I can also list many cases of stellar teams performing brilliantly in a bad market, only to fail. A non-existent market doesn’t care how smart you are.
In my experience, the most common scenario combining a strong team with a weak product or poor market occurs with second- or third-time founders whose first venture succeeded wildly, leading them to become overconfident and make repeated mistakes. Consider a celebrated, highly successful software entrepreneur now investing around $80 million into their latest startup—yet achieving little beyond press mentions and a few pilot customers—because there’s virtually no market for what they’re building.
On the flip side, many weaker teams have achieved tremendous success simply because they operated in an enormous market. Finally, quoting Tim Shephard: “Under identical market and product conditions, a great team will always beat a mediocre team.”
Now, the second question: Can a great product create a new, large market? In rare cases, yes—but it’s uncommon. VMware is a recent example—a product so transformative from day one that it catalyzed an entire movement around operating system virtualization, which ultimately became a massive market.
In such cases, it doesn’t matter much how great your team is, as long as they deliver a product that meets basic market needs and gets it to market. I’m not saying team quality is irrelevant, or that VMware’s team wasn’t strong—I’m saying that if you bring a revolutionary product like VMware’s to market, you will succeed, period. Beyond these rare exceptions, don’t expect your product to create a new market from scratch.
Third question: As a founder, what should you do? Enter Rachleff’s corollary: The only thing that matters is achieving Product-Market Fit (PMF). PMF means having a product that satisfies strong market demand in a large and growing market.
When there’s no Product-Market Fit, customers don’t derive enough value, word-of-mouth doesn’t spread, usage grows slowly, media coverage feels flat, sales cycles are too long, and many deals fall through.
When Product-Market Fit is achieved, customers order as fast as you can deliver, usage grows as fast as you can add servers, revenue piles up in your bank account, and you hire salespeople as quickly as possible. Journalists call you because they’ve heard about your hot product and want to feature it. You start getting awards like Harvard Business School’s Entrepreneur of the Year, and VCs camp outside your house begging to invest. Yet in reality, most startups fail before reaching PMF—and the reason they fail is precisely because they never achieve PMF.
Further, I believe every startup’s life can be divided into two phases: before PMF (“BPMF”) and after PMF (“APMF”). When you’re in BPMF mode, focus obsessively on achieving PMF—do whatever it takes: replace team members, rebuild the product, enter a new market, relentlessly hunt for users, raise more money—whatever it takes.
While pursuing PMF, you can ignore everything else. Every time you look at a successful startup, you’ll see that it achieved PMF—even if it messed up nearly everything else along the way: marketing plans, PR, compensation policies, etc. None of that prevented success.
Conversely, you’ll see many well-run startups with excellent HR policies, top-tier sales models, meticulous marketing strategies, superb interview processes, gourmet catering, 30-inch monitors for every engineer, and elite VCs on the board—yet they crash and burn simply because they never found PMF.
Ironically, once a startup succeeds, when you ask the founders what made them successful, they often list things completely unrelated to the actual cause. People struggle to understand causality—but in nearly every case, the real cause was PMF. What else could it possibly be?
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