Marc Andreessen, Product/Market Fit

This is a discussion of Marc Andreessen's "The only thing that matters", also sometimes entitled "Product Market Fit." (June, 2007) It is part of a series of discussions of foundational texts on What is a startup business?

Marc Andreessen

Marc Andreessen co-authored Mosaic, the first web browser, founded Netscape, and Andreessen-Horowitz, the venture fund. He is outspoken and active on twitter.

Product/Market Fit

Andreessen opens by declaring that the post is about "the only thing that matters for a new startup." Towards the end of the essay he tells us:

The only thing that matters is getting to product/market fit. (Marc Andreessen, all bold in original)

He begins with some context. He divides the causes of startup success into three components: team, product and market, which he borrows from Andy Rachleff, and goes on to quote Andy:

• 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. (Andreessen quoting Andy Rachkeff)

This is a counterintuitive claim. Many people who discuss startups will claim that the founder, or the founding team, is the single most important thing and that "smart" people will figure out how to make something successful.

I just googled what to look for in a startup team and this is the first link that appeared: 5 things angel investors should look for in a startup Note that team shows up twice on this list (#1 all star team and #4 integrity).

Markets trump founders

Andy seems to be saying that the market is more important. Andreessen summarizes the logic in two key statements:

In a great market -- a market with lots of real potential customers -- the market pulls product out of the startup. (Marc Andreessen)

and

Conversely, in a terrible market, you can have the best product in the world and an absolutely killer team, and it doesn't matter -- you're going to fail. (Marc Andreessen)

I think the second statement is non-controversial, and the primary reason that people fail to start a business is that they don't make things people want. The first, though, is interesting. It suggests that if  you pick the right product or service, you might succeed in spite of a mediocre team. (Mediocre teams rejoice).

Contrast: This view contrasts with the view that the right founder will figure it out, but there is a subtle variation. Chris Dixon has proposed that you need the right founder for a particular market, and that not all founders are suited to all markets. I don't think of this as an opposing view, so much as an interesting addition.

Q: Although I think that many people have said picking the right founder is key, I cannot recall a single key text where this is clearly laid out. Can the reader recall such a text?

Advice

The essay culminates in a piece of advice though:

When you are BPMF [before product/market fit] , focus obsessively on getting to product/market fit.

Do whatever is required to get to product/market fit. Including changing out people, rewriting your product, moving into a different market, telling customers no when you don't want to, telling customers yes when you don't want to, raising that fourth round of highly dilutive venture capital -- whatever is required.

When you get right down to it, you can ignore almost everything else. (Marc Andreessen)

The best part of this is the singular goal he proposes.

Q: I wonder to what extent this contradicts the advice of others. I think this is compatible with Graham's advice to focus on growth. It is not compatible or incompatible with Thiel's advice to earn a monopoly by solving a unique problem. There is nothing that indicates the problem or solution has to be unique. That is more of an issue for Thiel who hasn't specified what he means by his uniqueness criterion. There is also nothing here about having a monopoly. 

What is a Startup Business?

Before we start to talk about what a startup business is, lets talk about why it is important to define it.

 

Define a startup

Definitions are tricky, because they often exclude examples one wishes to include, and they include examples that one wishes to include.

Relying on commonplace assumptions about a set of features will lead to absurd claims as to what constitutes a startup.

What isn't a startup?

The commonplace idea of a startup is a new business, but there is a myth around the startup. Eric Ries in What's a startup? describes the mythology of the startup in the following terms:

What all of these pictures have in common is a narrative that goes something like this: scrappy outsiders, possessed of a unique genius, took outrageous risks and worked incomprehensible hours to beat the odds. (Ries)

But a new business, even a risky one, and hard working founders fall short of the definition of startup. The great counter example here would be the restaurant. Restaurants are risky, and require people to work "incomprehensible hour", but there seems to be wide agreement that a restaurant is not what people mean by a startup. Paul Graham uses it in his essay Startup=Growth, as an example of what is not, in his terms, a startup:

Millions of companies are started every year in the US. Only a tiny fraction are startups. Most are service businesses—restaurants, barbershops, plumbers, and so on. These are not startups, except in a few unusual cases. (Graham)

Peter Thiel also uses the restaurant business as a counter-example in his essay Competition Is for Losers:

Imagine you're running one of those restaurants in Mountain View. You're not that different from dozens of your competitors, so you've got to fight hard to survive. If you offer affordable food with low margins, you can probably pay employees only minimum wage. And you'll need to squeeze out every efficiency: That is why small restaurants put Grandma to work at the register and make the kids wash dishes in the back. (Peter Thiel)

Note that Thiel isn't explicitly talking about the definition of a startup, but is rendering advice.
Definitions and advice

Implicit in the definition of a startup is a normative claim about what you ought to do as a startup. When Graham talks about growth as definitive of a startup, he follows up to tell us that you should do what you can to grow a startup. When Thiel advises startups to produce a large innovation that takes us from "0 to 1", he implies that a startup, as opposed to say a restaurant, is a company that engages in an attempt to go from "0 to 1."

There isn't one main definition of a startup, but there are some key practitioners and theorists in the field who have come up with influential definitions. They happen to be men but if a reader has women to suggest, I will gladly add them to this list. They are many important and influential women in the field, but I haven't come across a definition of startups from them.

Here are some of the people from the "Seminal Essays" section.

 Paul Graham

Paul Graham: A startup is a company designed to grow fast. Being newly founded does not in itself make a company a startup. Nor is it necessary for a startup to work on technology, or take venture funding, or have some sort of "exit". The only essential thing is growth. Everything else we associate with startups follows from growth. (Graham)

This is from Paul Graham's essay "Startup=Growth".

 

Marc Andreesen

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

This is from Marc Andreesen on the Product Market fit.

 

Peter Thiel

All happy companies are different: Each one earns a monopoly by solving a unique problem. All failed companies are the same: They failed to escape competition. (Thiel)

From Peter Thiel's Competition Is for Losers.

 

Steve Blank

Steve Blank: a startup is an organization formed to search for a repeatable and scalable business model. (Blank)

From Steve Blank on what's a startup.

 

Eric Reis

A startup is a human institution designed to deliver a new product or service under conditions of extreme uncertainty. (Reis)

from Eric Reis' on What is startup.