The problem with righteous entrepreneurship

Recently, there have been a lot of press on the troubles of VC firm Kleiner Perkins. They were once legendary in their pick of tech companies, as early investors in Amazon, AOL, EA, Google, Intuit, Netscape, Sun Microsystems, Tandem, etc. More recently, they went all-in with cleantech, and did not come out smelling so great.

Linked to the article from Gigaom is another good article this, and on the problem with righteous investing. VCs play a large role in innovation by picking and choosing the right startups to fund. However, this choice is critical. VCs can’t just pick a lofty mission, and dump money into it. As I’ve been learning (and wrote about in a prior post), the market always wins. Lofty visions are great, but there must be a market, and the market must want your product.

However, VCs are only one side of the story. The other side is the entrepreneurs. And the same law applies: lofty visions are awesome, but at some point the vision meets reality, and the reality of the market wins.

This is critical for entrepreneurs to think about. Passion matters in entrepreneurship. Most people don’t leave perfectly good jobs (with perfectly good paychecks) unless they have a passion for something. The most passionate are often driven by the largest missions, and there are many great missions out there: world peace, feeding the poor, educating the world, etc. Clean tech may be one of these (although I’d bet that timing was the real issue). These missions sound great, but can be huge traps. Maybe they would be great as a non-profit, but as a startup? Tread lightly.

This has been one of my biggest lessons so far in my time as an entrepreneur. Look at yourself and make sure you aren’t being a righteous entrepreneur. Passion is great, but the market always wins.

P.S. This is post number #79 in a 100 day blogging challenge. See you tomorrow!

Follow me on Twitter @alexshye.

Or, check out my current project Soulmix.

The importance of the market when building a startup

This 100-day blogging challenge is getting difficult. Now, one or two days a week, I hit a writer’s block and just can’t come up with a topic to write about. This is a big reason why I have begun publishing notes on other content. I figure if I share notes on some of the best content I have found, it may be useful to others.

Well today I’m having writers block again. I’ve been thinking about the importance of the market in building a startup, but frankly, I don’t have anything original or interesting to add to prior blog posts that I have read.

So, I’ll just leave you with the best blog post I have ever come across on this topic by Marc Andreeson of Andreeson Horowitz. Some of the best parts paraphrase Andy Rachleff, formerly of Benchmark Capital.

When discussing startups, people tend to argue about the relative importance of the team, product, and market. Marc makes a strong case that the most important factor is the market. He then describes product-market fit (PMF), which is arguably the most important step a startup can take on the road to success.

IMHO, the most important bit is here:

The #1 company-killer is lack of market.

Andy puts it this way:

 

– 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.

 

You can obviously screw up a great market — and that has been done, and not infrequently — but assuming the team is baseline competent and the product is fundamentally acceptable, a great market will tend to equal success and a poor market will tend to equal failure. Market matters most.

And neither a stellar team nor a fantastic product will redeem a bad market.

And here:

The only thing that matters is getting to product/market fit.

Product/market fit means being in a good market with a product that can satisfy that market.

 

You can always feel when product/market fit isn’t happening. The customers aren’t quite getting value out of the product, word of mouth isn’t spreading, usage isn’t growing that fast, press reviews are kind of “blah”, the sales cycle takes too long, and lots of deals never close.

 

And you can always feel product/market fit when it’s happening. The customers are buying the product just as fast as you can make it — or usage is growing just as fast as you can add more servers. Money from customers is piling up in your company checking account. You’re hiring sales and customer support staff as fast as you can. Reporters are calling because they’ve heard about your hot new thing and they want to talk to you about it. You start getting entrepreneur of the year awards from Harvard Business School. Investment bankers are staking out your house. You could eat free for a year at Buck’s.

Again, you can find the entire article here, and I highly recommend it. If you have even more time, the Pmarchive contain a bunch of old posts from Marc Andreeson. They are some of the best reading you can find on building startups.

P.S. This is post number #73 in a 100 day blogging challenge. See you tomorrow!

Follow me on Twitter @alexshye.

Or, check out my current project Soulmix.