Posts Tagged 'startup'

Team/Market Fit is more important than Product/Market Fit

This New Year’s Eve, I’m resolving to work on the most important part of my own startup, the team. Specifically, I’m going to try as hard as possible to deserve to work with my co-founders, who are both more experienced and have a better understanding of technology than I can aspire to. But although I’ve heard a lot of common sense arguments about the importance of a good team, I find that a good deal of literature on the subject is easily misunderstood. I’m sure many people have read and agree with the most famous example of this. Marc Andreessen’s blog post is a fantastic discussion on the importance of a good market to the success of a startup. Marc correctly posits that a good team with a good product in a bad market will fail. He goes on to say explicitly that:

* 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.

I certainly don’t want to disagree with someone who is both smarter and more successful in business than I am. However, I would like to point out thought that this is not an excuse to hire poorly or devote anything less than 100% of your attention in the early months into developing a great team. After all, Marc’s analysis is based upon his definition of a team:

The caliber of a startup team can be defined as the suitability of the CEO, senior staff, engineers, and other key staff relative to the opportunity in front of them.

In other words, you can have a team well qualified to exploit pet robotic whales in the US, but still fail because the market for robo-pets is fairly poor in the US and robo-whales just aren’t that fun to play with. Marc is essentially arguing that the caliber of the team is context sensitive. A great team for a new electric car company is not the same as a great team for a media company. The skills sets are largely, if not entirely, distinct form one another. However, there is one skill that is necessary for every founding team, regardless of what industry they are in: HR. That is to say, every team needs to be able to strategically hire individuals well suited to the market opportunities and when the market opportunity is unclear, hire individuals well suited to discovering market opportunity.

Strategic Market Choice

There are entrepreneurs out there that hatch a genius idea fully formed like Aphrodite stepping out of her shell or Athena springing from Zeus’ head whole. Sadly, I’m not one of them and like many entrepreneurs out there, I work in a process of continual improvement and refinement. This might include subtle pivots or radically different strategies / products. Either way, I rely heavily on my co-founders to note when something isn’t working if I fail to realize it myself.

When I was a musician, I was always impressed by the number of go-it-alone musicians who managed to pack up their instruments and head out on the road by themselves with a beat up hatchback and no support whatsoever. They’d play coffee shops, clubs, and street corners equally. Never passing up a chance to pick up a fan at a subway stop. To go it alone is an admirable aspiration, and some greats like Ani DiFranco can take this path to success. I certainly can not. I’m more like the other 99.99% of people who need a helping hand of a bass player, drummer, or even just someone offering a place to crash every night. Those are the people who will be able to see int your own blind spot and point out when you’re wasting your time in glam rock when grunge is taking off. Other people are a critical part to every business, and even in the extreme go-it-alone movement you need to know who you can count on for a quick reality check and who you can’t.

In business, I’m similarly limited by the scope of my experience and learning, and in that, it’s rare for me to be in a position where I can explore a market opportunity single handed. I’m much more likely to get to the point of product / market fit if I have a small team of entrepreneurs with complimentary skill sets than if I just pick an opportunity and blindly try and build a team around it. I’d call this market / team fit.

Drafting the Market

Marc Andreesson has a significant advantage over the rest of us when it comes to his strategy. He is famous enough to attract the right people for whatever market he chooses to enter and he is wealthy enough to pay them. To anyone with such an advantage, it’s easy to see why market would trump team in importance. It’s also easy to see that a bad team in a good market ought to be able to use some of the market growth to start hiring a better team. Even more to the point, you could simply adopt a market drafter position, let someone else develop the market, and simple coast along with them. I should emphasize that in any of these cases, having a market as your primary driver is a very good strategy. It’s only when your resources are constrained that this strategy will fail every time.

It doesn’t matter one bit that the market for solar cells or innovative battery technology is booming in terms of my success in that market. I simply don’t have the resources to enter that market, no matter how good the market is or how prescient my market forecasts are. So here is one of Marc’s examples again:

* When a lousy team meets a great market, market wins.

Does this ring true? If what you mean by “lousy” is “barely competent” than it probably is true. Barely competent is enough to get a product out the door and a barely competent product is worth 1% of the market. If you’ve got a trillion dollar market, you can retire on 1% or even 0.01%. But if by “lousy” you mean “can’t tie their shoelaces incompetent,” well… the market can’t win when the team fails.

As an entrepreneur he has a vast amount of experience in this and his opinion should be taken very seriously. However, Marc’s personal experience gives him a sample of startups which succeeded enough to be noticed by him. That is to say, they got out of the door and to the races. His perception of lousy teams is skewed to exclude those teams which were incapable of entering the market in the first place. In other words, his “lousy” team is still pretty decent. In the big world of 750,000 entrepreneurial ventures started each year in the US, a great number of them fail before they’re able to even get to market due to an inability to put together a sufficient team.

Build a Team of Explorers

I would argue that having a great team of entrepreneurs is a necessary, but not sufficient, condition for success. Furthermore, a great team will actively explore market opportunities and self select themselves out of the wrong market. Put another way, the right team in the wrong market will change markets. The wrong team in the right market may just bludgeon itself with a bad strategy and be dominated by a stronger competitor.

As someone who needs teammates with complimentary skills sets, I can only tell you that I have to build or join a great team to find success. I simply have no other option. I try and find other entrepreneurs who I can learn from, respect, and support. Given a team of those individuals, I feel assured of success. Perhaps not success in the same market I originally planned on, but a success I can be proud to be a part of.

So I’m left with the final editors comment from Marc’s post:

why can’t you count on on a great team to build the right product and find the right market?

I’m still waiting for the answer to this question. I haven’t read everything out there so it may very well be in another of Marc’s posts, or perhaps another blog, but I think it’s a valuable question to pursue.

Happy New Year!
Tristan

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Merry Xmas!…now shut up and start coding.

Just about every entrepreneur I’ve met in Silicon Valley knows how to write more than a few lines of code. The ones that don’t are constantly looking for a partner to build their dream product. You know, the one that will make them a billion dollars. I’d guess you’d have to count me among them. But waiting around for a dream co-founder doesn’t cut it around here. That’s why this Christmas I’m writing code.

I haven’t written a line since high school when the two languages I knew were Pascal and MACOS. In case your wondering, MACOS wasn’t even a proper language, only worked on my Apple II series, and stood for More of A Crappy Operating System. I don’t even know what it was, but it sure wasn’t Mac OS X. I used it for my bulletin board system (BBS for those that remember pre-www). I never saw an instruction book, not sure there was one, but I was able to understand the basic syntax easily enough and hack code from different available sources into something vaguely resembling what I wanted. But that was over 16 years ago. I have no business writing code professionally, but sometimes business requires you to do something unprofessional.

The lack of a critical skills is something that we all have to deal with at some point. Whether it’s the ability to program, an understanding of supply chain flow, or just market knowledge. The difference between a successful entrepreneur and one who goes from one idea to the next is more than likely a function of how they deal with those missing resources. In the startup world, you’re always out of resources, so it makes sense to develop some coping strategies.

No Excuses – Do It Yourself

The biggest problem I usually have in getting things done is usually myself. There’s a ton of things I’d rather be doing than writing code. (Hell, there’s a lot of things I’d rather be doing than writing this blog.) Among them? Cookies, guitar, and Avatar came out this weekend. None of those things can be an excuse, but motivation is an easier hurdle to overcome.  Even worse is the excuse of “I don’t know how.” As in, “I don’t know HTML, CSS, Javascript, Java, or PHP.” Worse still is “That’s not my job.”

When I started my last job at Secude, I didn’t know a thing about IT security and couldn’t for the life of me understand cryptography, let alone what a Diffie-Hellman was supposed to be. It was daunting beyond belief, especially when asked to go and learn about a new P2P encryption technology and report back to our engineering staff on the technical details. I cannot imagine a job I was less qualified to do. The fact that my technical partner for the assignment spoke halting English to match my halting German was no help. Could I have given up? Sure. Could I have assigned the work to someone else? Probably. But I wouldn’t have gotten the information and perspective I needed to do my job for the next four years.

Learn or Die

The business of business is learning. If you’re not learning, you’re probably losing money. Knowing how your business works from the bottom to the top is the only way you’re going to understand your value chain. Do you have to sweep the floors on the factory to be a good CEO? Well, maybe not. But you do need to know how important it is that the factory floors are clean, something that a lot of big-shot CEOs probably don’t know. When machines get dirty, they break. When the floor gets slick, your company loses big in workers comp. Even five minutes sweeping the floor in the factory could give a lot of CEOs a bit more appreciation for the janitor and make them realize that cutting the janitor’s salary and having a disgruntled employee doing a half-assed job is probably more expensive in the long run than paying a decent wage for decent work.

Little gears push the big gears and every aspect of the value chain can be critical. That thinking and the drive to reduce muda (waste) came out of lean production thinking when Toyota discover that they could improve productivity radically by just shifting some machines around. Chihiro Nakao, the great lean production thought leader, was no stranger to getting his hands dirty. In Lean Thinking, Womack and Jones related how Nakao and Takenaka worked over the lunch hour with crowbars to move Wiremold’s massive machines into the proper sequence for single-piece flow while the local engineers, workers, and managers just stared at them with their mouths wide open. That’s no excuse thinking.

Knowing isn’t Understanding

For those that think you can learn something without doing it yourself, good luck. There are a lot of people far smarter than I that can, but I can’t. I need to learn by getting my hands dirty, and I learn up to three times as fast when I’m actively engaged in a task than when I observe someone else doing it from afar. Observation will lead you to know facts, doing will lead you to understand processes. I need to know processes. Even if we bring on two more engineers tomorrow, I’ll greatly benefit from the experience.

Why not outsource?

Why go through this exercise? Surely it would be better to just outsource a task like front end coding and it’s probably more cost effective than me doing it. Well, sometimes, and in fact we’re exploring several outsourcing options for our front end web development for startupSQUARE.com. But sometimes managing outsourcing can be just as time consuming as doing it yourself. The ability to communicate effectively with outsourcers and reduce communication overhead is directly related to your own understanding of the process.

An example: a new CEO outsources his fabulous idea for a new website to a team of four engineers but development falls behind schedule. Solution? Of course! Add more engineers! This would be laughable if it didn’t happen so often. I’m sure every engineer in the world by now has had to explain patiently to their boss that nine women cannot have a baby in one month. If the CEO had spent a decent weekend locked in a room pouring over source code, that would be well understood. You can’t have four people editing the same line of code.

My Just Deserts

So here’s what I hope to get out of this exercise:

  1. Comparative Advantage – I won’t go into the economic theory of this, but in a nutshell: it’s better for my skilled engineers to work on the important back-end stuff. I can waste my time with the “Follow me” button you see on the side of the screen.
  2. Understanding – Knowing the rough difficulty level of a task allows me to plan resources and our hiring strategy better. It also allows me to set more realistic expectations and goals.
  3. Sympathy – You’ll never catch me yelling at someone for being late on a technical issue again. Instead, I’ll roll up my sleeves and try to help by doing research and finding sample code.
  4. Respect – Aside from a better understanding of the tasks my technical co-founders suffer through, I we also develop some respect for each other with the fact that I’m willing to dig into things if necessary. After all, I started a company at least partly because I didn’t like the environment of my last job. Mutual respect among co-workers is the only environment I really want to work in.
  5. Get things done – At the end of the day…our product needs to get out of alpha and it’s going to take no excuses hands on deck to do it.

So this Christmas, send me a link to your favorite PHP resource or your resume if you’re an engineer. But in the meantime, I’ll keep coding. Merry Christmas, Happy Holidays, Seasons Greetings and all that! Hope it’s a good one, and I hope I’ll be able to post about a snazzy new startupSQUARE.com website in the coming New Year.

Best regards,
Tristan

Introduction

This is the first blog post for startupSQUARE!

Over the next days, weeks, and months we’ll be building up the site, testing our assumptions and launching. While we’re doing that, I’ve started this blog where I’ll be posting our lessons learned and updates about how the site is going. If you’re interested in seeing what we’re up to, please subscribe, follow us on Twitter, or otherwise get involved by visiting startupSQUARE.com and checking it out.

Thank you,

Tristan


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Author

Tristan Kromer's Profile Pic

Tristan is an entrepreneur that loves solving problems and getting his hands dirty. He manages the primary business functions of startupSQUARE.com and is strongly committed to the customer development process. An entrepreneur at heart, he has been involved in a variety of ventures for the past 13 years including IT security, music, real estate, and marketing. His most recent position was working as the General Manager of SECUDE International LLC in Ho Chi Minh City, Vietnam. Tristan will gladly play you a game of chess.