What is the single biggest factor that determines a startup’s success?
Some say it is product-market fit (Marc Andreesen), others hold that it’s timing (Bill
Gross) and yet more believe it is the team. Asked another way, what do you think is essentially
different about successful startups?
The team. I think a lot about this because I teach a class at the UW school of business and we ask our students about it. You can make a case for any of the factors but it really truly is the team that makes a difference.
If I had to pick one, I’d pick timing. But again, it could be explained as foresight or genius of the founder to launch the startup at a great moment in time. The most successful companies have a confluence of factors aligning to work in their favor. Take Facebook, for example. Mark Zuckerberg founded it at a time when everyone was getting online and broadband was becoming pervasive. More people had camera phones, were taking pictures and creating lots of user generated content, making the platform more engaging—by the way, this was the case for Instagram as well (smartphones had high quality cameras and people enjoyed sharing their pics on FB). If you are swept by a rising tide, you have no option but to swim up! In contrast, some really talented and hardworking founders just happen to work on the wrong things and don’t attain the same level of success. Some even tried Zuck’s idea but were too early. It often isn’t their fault. The timing just wasn’t right
opportunity is the most important. I often meet talented entrepreneurs who put an incredible amount of time and effort into solving problems that ultimately lack real market opportunity.
It's a waste of their talents. I'd roll back on the team that's doing something unproductive because it's an awesome team. I will bet on an exceptional team if they're doing something productive. By that hierarchy, the opportunity is first, people the second.
Timing. I think people underestimate how much market timing and luck matter. I have an old saying, if you walk around in the rain a lot it doesn’t mean you’ll get hit by lightning. But if you stay home, you definitely won’t be. A lot of it is being agile enough to take advantage of the luck when it happens. Classic investor questions we ask are
“What’s changed? Why do this now? Why did it fail five years ago?”
While some might explain it as the founder’s genius in building kind of company that takes advantage of the emergent trends, often the founder is doing something and the real opportunity is five degrees away. Something small has changed and it turns out giving software away for free and making money selling insurance is a genius idea, where last week selling software was the right idea.
It’s about launching your product and then finding the right combination of things that the market is ready for. How many mobile app companies were doing WAP and WHTML in the late 90’s? They thought mobile would be big and they were right, but were just off by ten years!
If I were to pick one thing, it would definitely be culture because companies are compilations of individual people who wake up every day and decide I am going to work for company X versus not. Why do they do that? Compensation plays a part but at the end of the day if you are going to spend 10 to 12 hours a day at a place of work you’ve gotta be inspired by what the company is about, the values and so on.
Remitly (one of my portfolio companies) the people feel that in some small way they are changing the world and feel good about it.
Oh gosh, I actually don’t think there is one. Marc Andreessen comes from a product background so he sees it from a product lens. And what does Bill Gross do? He is in the timing business. Other VCs may say it is about the team because they are very social or connected to people. It is literally the filter of the glasses you are wearing. It isn’t just one thing. Every single thing counts. If it was just one thing, this would be an easy business!