Team, product, or market? The X factor of growth

There is this continuous debate on what matters the most. The right team, the product, or the market. Until recently, I would have argued the team before the product. 

If you ask entrepreneurs or VCs which is most important, the most likely answer would be the team, partly because in the beginning of a startup, you know a lot more about the team than you do the product, which hasn’t been built yet, or the market, which hasn’t been explored yet. And who wants to take the position that people do not matter?

Then recently the CEO of an early stage company I advised suggested that people above 40 or so could not qualify as entrepreneurs to invest in. Obviously, being 40+ years I objected – I even felt slightly offended. But it made me think and ask the question ‘why’?

We have seen customers knocking down your door to get the product; despite the team was not a killer team. Experience isn’t everything and effectiveness can beat experience (growth companies is full of successful examples with teams who had never ‘done it before’). Yet, there are a bunch of stories of great teams that totally screwed up – and great teams that executed brilliantly against diminishing markets and failed. Markets do not care how smart you are. No matter if you are Nokia or the best of breed in the early stage world. And many successful growth companies screw up along the way with anything from channel model to pipeline development strategy to marketing plan to press relations to compensation policies.

I started challenging the bet on the team and was inspired by one of our VC gurus that suggested the market is the most important determinant of success or failure: In a great market with lots of real potential customers the market pulls product out of the company. The market needs to be fulfilled and the market will be fulfilled, by the first viable product that comes along. The product doesn’t need to be great; it just has to basically work. The no. 1 growth accelerator is the market, because the numbers talk for themselves – a market of millions of customers will at any time beat the smartest team of executives. IBM, Intel, Unilever – they have all experienced massive failures despite superior intellectual capacity among their executives.

To quote Andy Rachleff and Marc Andreesen:

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.

The one thing that matters the most is getting to product/market fit in the best market. It is all back to the customer discovery and customer validation thinking. And you know, if you are there: Either you see that customers do not value your product, word of mouth is not spreading, usage is not growing, sales cycles takes too long, and deals never close – or …  customers are buying the product as fast as you can make it, usage is growing, from customers is piling up in your bank account, you are hiring sales staff, the media wants you …

Thanks to the CEO of the early stage company who offended me I have changed my bets to the market.