Guide to creating startups, part 4: the most important thing for a startup
Part 3
An article about what is most important for a startup. For a start - a little theory.
If you look at a large enough selection of startups, 30-40 pieces, so that you can highlight general trends - two things immediately catch your eye. First of all, there is a wide variation in the scale of success. Some are incredibly successful, some are middling, and some fail completely. Secondly, one can see a very large variety of caliber and quality of the three key elements - the team, the product and the market. Teams range from outstanding to poor, a product from an engineering masterpiece to a barely functioning model, a market condition from blooming to a comatose.
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You start to think about what influences success more - a team, a product or a market? Or, more simply, what is the recipe for success? Or, on the contrary, what is the most dangerous - a bad team, a weak product or a dead market?
The caliber of a team can be determined by whether the leader, leaders, engineers, and other key people are appropriate for their task. We look at a startup and ask ourselves, is this team able to work optimally and effectively? I’m pushing for efficiency instead of experience, since the history of start-ups is filled with cases where people who “have never done this before” achieved success.
The quality of a product can be determined by how it makes an impression on a customer or user who has used it. How easy is it to use? Does it have many functions? How fast does it work? Are we expanding? Is it sanded? How many (or few) bugs it contains?
Market volume - the number and rate of growth in the number of customers or users.
Suppose your startup is profitable - the cost of enticing a client is less than the income from it. Many object to my classification: “Can a product be great if nobody needs it?” In other words, isn't the quality of a product determined by its attractiveness to customers?
Not. Product quality and market size are two different things . Here is a classic example: the best of its kind program that runs under an unpopular OS. Ask any developer for BeOS, Amiga, OS / 2 or NEXT what the difference is between a great product and a big market.
So, if you ask entrepreneurs or investors, what is more important - a product, team or market, many will answer: "team". The obvious answer is, in particular, because at the beginning of the activity, much more is known about the team than about a product that has not yet been made, or about a market that has not yet been explored.
Plus, we are nurtured with slogans like “people are our most important resource” (at least in the States) - so the answer seems to be correct. And who wants to take a position that says that people do not matter?
On the other hand, many engineers will respond with a “product”. The whole business revolves around the product - startups make the product, customers pay for it and use it. Apple and Google are the best in their industry because their products are the best. Without a product there is no company. Imagine a great team without a product, or a big market without a product. What, isn't it? Now leave me alone, I have to continue working on the product.
Personally, I hold the third position - I would say that the market is the most important component of the success or failure of a startup . Why? In a large market, where there are many potential customers, the market simply pulls the product out of a startup. The market needs to be filled, and the market will be filled with the first suitable product. The product does not have to be excellent, it should just work. The market doesn’t care how good the team is, as long as it produces the right product.
In short, customers are knocking on your door for a product. The main goal is to answer calls and on the letter of people who want to buy it. If you have a beautiful market, the team is very easy to upgrade on the fly. It happened with contextual advertising, online auctions and TCP / IP routers.
On the contrary, on the fig market you can throw away the best product in the world, while being a dream team - and this will not mean anything, since you will fail. You will break your pickaxe, for years digging into the non-existent users of your wonderful product, and your wonderful team will eventually be demoralized and disintegrate, and your startup will die. It happened with video conferencing, micropayments and software that facilitates the workflow.
In honor of Andy Racklef, a former employee of Benchmark Capital who formulated this law, let me introduce you to Racklef Law for the success of startups :
Killer startups number 1 - the lack of a market.
Andy formulates it like this:
- a great team, faced with a fucking market, loses;
- a crap team, faced with a great market, loses;
- a great team, faced with a great market, gives something special.
You can screw up on a great market, it happened and this is not so rare - but if we assume that the team is competent enough and the product is acceptable, a great market usually leads to victory, whereas a bad market - to defeat. The market means the most. No star team or fantastic product will compensate for the fucking market.
The first question is: since you have the most control over the team, and everyone wants to create a great team, what can this great team lead you to? One can hope for good, and ideally for a great product. However, I can give you a bunch of examples of excellent teams that have completely spoiled the product. Great product is very, very difficult to make.
You can also hope that a great team will lead you to a great market - but here, too, I can name a bunch of examples of great teams that fought well against bad markets - and lost. Nonexistent market does not care how smart you are.
In my experience, the most frequent case of meeting a great team with a bad product and / or a bad market is the second or third time for an entrepreneur who has had success for the first time. People start to nose and stumble . Now I have an example of a very successful entrepreneur who has already spent about $ 80 million on his last startup, and he has nothing but a good press and a couple of test clients - because there is no market for his startup.
Conversely, I can list a lot of weak teams, whose startups have succeeded thanks to explosive markets.
Finally, quoting Tim Shepard: “A great team is one that always wins an average team in the same market with the same product .”
The second question is: can great products create huge new markets? Of course. But it is at best. A fresh example is VMWare . Their product turned out to be so transformative that it was the reason for the emergence of the movement towards virtualization, which gave rise to a huge market. But in this case, it doesn’t matter how good your team is - as long as it’s good enough to develop a product that the market needs and can bring it to the market.
Note that I do not urge you to give a damn about the team, and do not say that the VMWare team was weak - it was and remains very strong. I contend - give birth to the same transformative product as VMWare, and you will have great success. Otherwise, no need to count on the fact that the product will generate the market.
The third question: and what should I, as a founder, do with all this?
The consequence of Rackleef for the success of a startup : the only thing that matters is a good product entry into the market. This is when the market is big and the product satisfies it.
It is always felt when the exit fails. Customers do not benefit from the product, word of mouth does not work, the number of users does not grow, press reviews are full of water, the sales cycle is too long, and a lot of deals are not made.
And always felt when the exit was a success. Clients are buying a product like cakes, or the use of a service grows as fast as you can add a server. Money from customers accumulate on the account. You hire vendors and customer service as quickly as you can. Reporters break their phones to talk about your breakthrough. You get a diploma of "entrepreneur of the year" at Harvard. Investors are on duty at your doorstep.
Many startups fail even before a product enters the market. And in fact, because their product could not enter the market. In general, the life of any startup is divided into two parts: before the product enters the market, and after. Being in the first part, be obsessed with the issue of successful product entry into the market. Do everything to ensure that the product hit the market. Change staff, rewrite the product, move to another market, deny customers when you do not want, or agree with customers when you don’t want to, go to investors for the fourth portion of infusions — anything you like. By doing this, you can ignore almost everything else.
I do not propose to ignore everything else at all — only that which can be ignored. Watching a successful startup entering the market, you can see how they screwed up in other places - sales channels, development strategies, advertising campaigns, relations with the press, intimate relations between the founder and the investor ... And the startup still took off.
On the contrary, there is an amazing number of well-known startups who have everything on the ointment - HR policy, an excellent sales model, thoughtful marketing, fully thought out interviews at the reception, great food for employees, 30 "monitors for programmers, an investor from the first hundred - and all that happily flies off a cliff, as it does not enter the market.
What is funny, if you ask the founders of a successful startup, what is the secret - they will talk about different things that have nothing to do with this. People generally have little understanding of causes and effects. But in almost any case, it will be - a good hit in the market. Well, because what else could it be?
Of course, the article raises more questions than answers. How exactly should the product be adapted to the market, if it did not work out right away? How to estimate the size and quality of the markets, especially not yet formed? What exactly contributes to the product getting into the market? What role does timeliness play? When to change strategy and run on a new market, or redo a product? When to change part, or the whole team? Why can not expect that a great team will make a great product and find a suitable market? All this we will discuss in the following articles.
Part 5
An article about what is most important for a startup. For a start - a little theory.
If you look at a large enough selection of startups, 30-40 pieces, so that you can highlight general trends - two things immediately catch your eye. First of all, there is a wide variation in the scale of success. Some are incredibly successful, some are middling, and some fail completely. Secondly, one can see a very large variety of caliber and quality of the three key elements - the team, the product and the market. Teams range from outstanding to poor, a product from an engineering masterpiece to a barely functioning model, a market condition from blooming to a comatose.
')
You start to think about what influences success more - a team, a product or a market? Or, more simply, what is the recipe for success? Or, on the contrary, what is the most dangerous - a bad team, a weak product or a dead market?
Let's start with the definitions
The caliber of a team can be determined by whether the leader, leaders, engineers, and other key people are appropriate for their task. We look at a startup and ask ourselves, is this team able to work optimally and effectively? I’m pushing for efficiency instead of experience, since the history of start-ups is filled with cases where people who “have never done this before” achieved success.
The quality of a product can be determined by how it makes an impression on a customer or user who has used it. How easy is it to use? Does it have many functions? How fast does it work? Are we expanding? Is it sanded? How many (or few) bugs it contains?
Market volume - the number and rate of growth in the number of customers or users.
Suppose your startup is profitable - the cost of enticing a client is less than the income from it. Many object to my classification: “Can a product be great if nobody needs it?” In other words, isn't the quality of a product determined by its attractiveness to customers?
Not. Product quality and market size are two different things . Here is a classic example: the best of its kind program that runs under an unpopular OS. Ask any developer for BeOS, Amiga, OS / 2 or NEXT what the difference is between a great product and a big market.
So, if you ask entrepreneurs or investors, what is more important - a product, team or market, many will answer: "team". The obvious answer is, in particular, because at the beginning of the activity, much more is known about the team than about a product that has not yet been made, or about a market that has not yet been explored.
Plus, we are nurtured with slogans like “people are our most important resource” (at least in the States) - so the answer seems to be correct. And who wants to take a position that says that people do not matter?
On the other hand, many engineers will respond with a “product”. The whole business revolves around the product - startups make the product, customers pay for it and use it. Apple and Google are the best in their industry because their products are the best. Without a product there is no company. Imagine a great team without a product, or a big market without a product. What, isn't it? Now leave me alone, I have to continue working on the product.
Personally, I hold the third position - I would say that the market is the most important component of the success or failure of a startup . Why? In a large market, where there are many potential customers, the market simply pulls the product out of a startup. The market needs to be filled, and the market will be filled with the first suitable product. The product does not have to be excellent, it should just work. The market doesn’t care how good the team is, as long as it produces the right product.
In short, customers are knocking on your door for a product. The main goal is to answer calls and on the letter of people who want to buy it. If you have a beautiful market, the team is very easy to upgrade on the fly. It happened with contextual advertising, online auctions and TCP / IP routers.
On the contrary, on the fig market you can throw away the best product in the world, while being a dream team - and this will not mean anything, since you will fail. You will break your pickaxe, for years digging into the non-existent users of your wonderful product, and your wonderful team will eventually be demoralized and disintegrate, and your startup will die. It happened with video conferencing, micropayments and software that facilitates the workflow.
In honor of Andy Racklef, a former employee of Benchmark Capital who formulated this law, let me introduce you to Racklef Law for the success of startups :
Killer startups number 1 - the lack of a market.
Andy formulates it like this:
- a great team, faced with a fucking market, loses;
- a crap team, faced with a great market, loses;
- a great team, faced with a great market, gives something special.
You can screw up on a great market, it happened and this is not so rare - but if we assume that the team is competent enough and the product is acceptable, a great market usually leads to victory, whereas a bad market - to defeat. The market means the most. No star team or fantastic product will compensate for the fucking market.
So what?
The first question is: since you have the most control over the team, and everyone wants to create a great team, what can this great team lead you to? One can hope for good, and ideally for a great product. However, I can give you a bunch of examples of excellent teams that have completely spoiled the product. Great product is very, very difficult to make.
You can also hope that a great team will lead you to a great market - but here, too, I can name a bunch of examples of great teams that fought well against bad markets - and lost. Nonexistent market does not care how smart you are.
In my experience, the most frequent case of meeting a great team with a bad product and / or a bad market is the second or third time for an entrepreneur who has had success for the first time. People start to nose and stumble . Now I have an example of a very successful entrepreneur who has already spent about $ 80 million on his last startup, and he has nothing but a good press and a couple of test clients - because there is no market for his startup.
Conversely, I can list a lot of weak teams, whose startups have succeeded thanks to explosive markets.
Finally, quoting Tim Shepard: “A great team is one that always wins an average team in the same market with the same product .”
The second question is: can great products create huge new markets? Of course. But it is at best. A fresh example is VMWare . Their product turned out to be so transformative that it was the reason for the emergence of the movement towards virtualization, which gave rise to a huge market. But in this case, it doesn’t matter how good your team is - as long as it’s good enough to develop a product that the market needs and can bring it to the market.
Note that I do not urge you to give a damn about the team, and do not say that the VMWare team was weak - it was and remains very strong. I contend - give birth to the same transformative product as VMWare, and you will have great success. Otherwise, no need to count on the fact that the product will generate the market.
The third question: and what should I, as a founder, do with all this?
The consequence of Rackleef for the success of a startup : the only thing that matters is a good product entry into the market. This is when the market is big and the product satisfies it.
It is always felt when the exit fails. Customers do not benefit from the product, word of mouth does not work, the number of users does not grow, press reviews are full of water, the sales cycle is too long, and a lot of deals are not made.
And always felt when the exit was a success. Clients are buying a product like cakes, or the use of a service grows as fast as you can add a server. Money from customers accumulate on the account. You hire vendors and customer service as quickly as you can. Reporters break their phones to talk about your breakthrough. You get a diploma of "entrepreneur of the year" at Harvard. Investors are on duty at your doorstep.
Many startups fail even before a product enters the market. And in fact, because their product could not enter the market. In general, the life of any startup is divided into two parts: before the product enters the market, and after. Being in the first part, be obsessed with the issue of successful product entry into the market. Do everything to ensure that the product hit the market. Change staff, rewrite the product, move to another market, deny customers when you do not want, or agree with customers when you don’t want to, go to investors for the fourth portion of infusions — anything you like. By doing this, you can ignore almost everything else.
I do not propose to ignore everything else at all — only that which can be ignored. Watching a successful startup entering the market, you can see how they screwed up in other places - sales channels, development strategies, advertising campaigns, relations with the press, intimate relations between the founder and the investor ... And the startup still took off.
On the contrary, there is an amazing number of well-known startups who have everything on the ointment - HR policy, an excellent sales model, thoughtful marketing, fully thought out interviews at the reception, great food for employees, 30 "monitors for programmers, an investor from the first hundred - and all that happily flies off a cliff, as it does not enter the market.
What is funny, if you ask the founders of a successful startup, what is the secret - they will talk about different things that have nothing to do with this. People generally have little understanding of causes and effects. But in almost any case, it will be - a good hit in the market. Well, because what else could it be?
Of course, the article raises more questions than answers. How exactly should the product be adapted to the market, if it did not work out right away? How to estimate the size and quality of the markets, especially not yet formed? What exactly contributes to the product getting into the market? What role does timeliness play? When to change strategy and run on a new market, or redo a product? When to change part, or the whole team? Why can not expect that a great team will make a great product and find a suitable market? All this we will discuss in the following articles.
Part 5
Source: https://habr.com/ru/post/237881/
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