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Market beats team every time
In theory, the startup team is the first reason for success, even before the product or the market.
But what I’ve seen over the last 7 years at The Family is that an excellent founding team on a bad market will likely not go far. Conversely, an average team can be lifted up by a market that’s ready to be eaten by software. So let’s say it: it’s the market that underlies most of a startup’s success.
How should you look at markets?
Size doesn't really matter 😉
A small market today can become huge tomorrow. I often quote this figure from early 2015:
According to Uber CEO Travis Kalanick, the on-demand ride service has annual revenue of $500 million in San Francisco, its home city. That's three times larger than the city's taxi market.
In other words, Uber and Lyft’s market is way larger than that of the legacy taxi industry. The reasons why are obvious, if only in retrospect: the platform approach makes it possible to broaden geographic coverage while reducing driver downtime; riders find that the service is now so convenient that they use their personal car less—to the point where some of them don’t even own one anymore.
Market timing does matter.
You see, the shift to the Entrepreneurial Age is not a linear flow. Rather it’s something, to quote Hemingway’s famous words, that happens “gradually, then suddenly”:
One day, the market is dominated by incumbents and there are no startups in sight.
The next day, there are startups raising seed and Series A rounds everywhere.
Then one startup races ahead. Also, incumbents start repositioning, seeking to rebound.
The largest incumbents manage to survive—and even to thrive (think Walmart, Disney).
The industry reaches a new equilibrium, with one or two tech giants dominating it.
When is the right time to launch?
Ideally at some point during stage 2, when incumbents haven’t yet awakened to the threat, and there’s still no clear winner on the startup side.
As a founder, you’re pursuing a goal that inspires you.
You’re trying to solve a problem with which you’re obsessed. But valuable interlocutors will ask you the question: Is it the right time to launch a company on that market?
You need a clear insight as to what software eating the world means in your industry. And pay attention to the geographic fragmentation: Is your business ‘default local’ or ‘default global’?
The Family has worked with hundreds of tech entrepreneurs over the years.
Some came too early, but they paved the way—educating the market.
Others came too late and now have to fight very hard to gain market share.
A few lucky ones came at just the right time, worked hard to catch the wave, and are surfing on a fast-growing market.
All of them have valuable insights for you.
Let’s have that conversation! 🤗
This continues our series to finish 2020 on a high note, with one Director from The Family sending you a startup lesson each day all the way through Xmas!