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Market is the most important factor in a startup's success or failure (2007)
- deadcoder0904 5y ago> One highly successful software entrepreneur is burning through something like $80 million in venture funding in his latest startup and has practically nothing to show for it except for some great press clippings and a couple of beta customers — because there is virtually no market for what he is building. Who was he talking about? Anyone has any clues?
- codemac 5y agoThe number of possible startups this could be is... incredible.
- vishnugupta 5y agoWild guess, Magic Leap?
- ilaksh 5y agoAugmented reality has a potential market as large as that of cell phones. Magic Leap raised not tens of millions but more than a billion dollars if I recall correctly. I believe the issue is that their product is expensive and therefore did not become popular and therefore has relatively few applications and so does not become popular.
- ghaff 5y agoWearable augmented reality will probably be very big some day. (The probably being mostly a hedge against essentially the Glasshole factor--i.e. never becoming socially acceptable for day to day casual use, as opposed to commercial applications.) But the when is anyone's guess and could easily be a decade or three out.
- ilaksh 5y ago"Easily three decades" is a short-sighted prediction in my opinion. Some of the optical waveguide prototypes are quite similar to normal glasses especially with power and compute on a tether in a pocket or something. I will be very surprised if it really takes ten years.
- ghaff 5y agoIt's mostly the observation that VR and AR have been right around the corner for a long time. (And, yes, I'm aware that are VR products in the market but also that it's not really mainstream.) So I wouldn't be shocked if there were mainstream consumer AR glasses before the end of the decade. I also wouldn't be shocked if 10 years from now they were still at the "real soon now" stage.
- gumby 5y agoRemember “color” for example? This happens more than you’d think.
- gjvc 5y agoWhat does the "p" in "pmarca" stand for / signify? "public"? "private"?
- gerikson 5y agoIIRC it's been his handle for a long time.
- nowherebeen 5y agoOn a side note, marketing is also hugely important for success. If you don’t know how to reach your market, it doesn’t matter how big your market or good your product is. No one will know about it.
- going_to_800 5y agoNot really. I can give countless examples of mediocre products with no marketing doing super well because the market really needed that product.
- sokoloff 5y agoI really don’t want this to sound snarky, but I think listing 3-5 of the best examples would be quite enlightening to readers.
- nowherebeen 5y agoI would like to know also. Also note just because some companies aren't flashy with their marketing, doesn't mean they aren't doing any.
- ghaff 5y agoMarketing != advertising. There are a ton of things companies do with respect to marketing that are mostly pretty invisible to the average consumer.
- unishark 5y agoIf the technology itself is hot and there's a big unmet demand, other companies are doing most of the marketing already and you just need to inform customers you have it to sell also.
- nowherebeen 5y agoThat really isn’t not doing marketing though. That’s just piggy backing off your competitors but the product itself is still being marketed by your competitor.
- jvanderbot 5y agoI like how they started laying out definitions and "theory", and then just repeated the title for 5-6 paragraphs. I'm sure this wisdom is coming from ages of experience, and everyone respects this guy, but an outsider would have zero reason to adopt this other than "huh, that's sensible". I think it's intuitively obvious and needs reinforcing, but obviously market isn't the "only" thing that matters. You do need a reasonably competent team and a reasonably workable product and all that requires a huge non-zero effort and a lot of wins.
- alisonkisk 5y agoThe important lesson here is that all success requires being successful. If your project does not succeed, then it's doomed.
- djmips 5y agoWiser words were never spoken.
- maxwell 5y agoMarket timing. https://www.nfx.com/post/why-startup-timing-is-everything https://www.nfx.com/post/why-startup-timing-is-everything https://www.ted.com/talks/bill_gross_the_single_biggest_reason_why_start_ups_succeed https://www.ted.com/talks/bill_gross_the_single_biggest_reas... etc.
- deleted 5y ago[deleted]
- jcfrei 5y agoYup, or put a bit differently: Timing is (almost) everything. There's usually only a short window in time where successful new tech companies can be started (maybe 1-3 years). Too early and nobody cares / buys your product, too late and you won't be able to raise enough capital to ever catch up.
- arbuge 5y agoCounterpoint: lots of money can be made if you're late to the party but have a great new spin on it. Assuming the party's big enough to accomodate multiple players, and not a natural winner-takes-all situation.
- ghaff 5y agoNot necessarily the same thing, but "fast follower" is absolutely a valid business strategy. Let someone else establish there's a market, make some mistakes, increase awareness--then you can swoop in with a more refined, better targeted product. Apple arguably did this with the iPod.
- dstick 5y agoOr personal computer, for that matter.
- ghaff 5y agoThe way the PC market developed is complicated. IBM targeted a business market that hadn't really been seriously targeted by the "hobbyist" systems. The Compaq was really at the spearhead of the clones. (And IBM subsequently whiffed with the PS/2 and OS/2.) And then Dell revolutionized distribution. And even that is a gross over-simplification.
- Frost1x 5y agoApple has done this with a lot of devices throughout their history. They often don't create a tech, they refine something that's promising into something consumers like, usually with appropriate timing (ignoring the brand loyalty and following effects they also have). The Tile clone, whatever Apple branded it, is yet another recent example of this. The one ingredient missing is that you often also need a pile of capital to strong-arm yourself into the market and become a viable competitor. There's definitely an optimal point to do this as someone else pointed out: too early and you suffer the market exploration costs and failure risks, too late and you may never catch up. I personally don't think these sorts of strategies should exist from a perspective of principals (it encourages capital to copy, not innovative, and further punishes those who take on the real risks who are disproportionately awarded) but they do. This why IP protections like patents came about in the first place, but these systems too have been gamed so far they often make little sense anymore either (e.g. slight derivations of existing patents that mimic the same functional outcomes but are allowed just to name one perverse abuse of the patent system--still allows a high degree of copying). I think the latter (joining late) can often be overcome with more capital though. The issue often isn't that you can't catch up, it's that it's often not worth the investment and risk perceived by investors with sufficient capital to try and split any existing market and innovative over what exists, especially if it's capital intensive. There are usually other lower barrier to entry markets to muscle into and get money out of.
- deleted 5y ago[deleted]
- marban 5y agoI've sold three businesses to Idealab and the single biggest lesson I learned from Bill Gross was timing and having the means to buy yourself into the market in a short amount of time. https://ted2srt.org/talks/bill_gross_the_single_biggest_reason_why_startups_succeed https://ted2srt.org/talks/bill_gross_the_single_biggest_reas...
- highfrequency 5y agoWhat do you mean by buy yourself into the market in a short amount of time? Can you give an example? Don’t see this mentioned in the link.
- johnnycerberus 5y agoI think the main factor is luck. It's like a sword in an online game. You can add critical chance to it by maximizing stats but it's always capped. If you have good team stats, good product stats and good markets stats, you just improve your chances. By how much? Impossible to compute in real life, in a game that would be +15%, so every few hits (products in our case) you will blow a critical. So let's just call it luck in the end.
- nthj 5y agoIf this were true, humanity would have stopped inventing new games to play the day that dice were discovered.
- lordnacho 5y agoIt's luck, but when rolling what though? Article says you want to luck into a massive market rather than be lucky with the right people or product.
- onion2k 5y agoI don't believe luck is a significant factor. The number of entrepreneurs who have second and third companies with successful exits effectively demonstrates that someone can consistently do the right things to win, react to challenges in the right ways, and repeat their success. If luck was a significant factor that would not happen.
- noofen 5y agoIt could be both. Some people are better at others at identifying market currents. From the outside, we call it "luck," because how else would you explain it? I'd imagine a lot of it is based on gut-feeling after months of research / interaction with the market.
- johnnycerberus 5y agoThe more you win, the more you are going to win. The more you lose, the more you are going to lose. If you win one time people will treat you differently than if you lose. Easier to get capital. Psychologically it will affect you and others around you. Win twice, and this will escalate, people will literally be in awe over you. People will literally do whatever you will tweet. There is also an extremely low chance that you are always going to win in your lifetime, many books will be written about you while a huge graveyard of entrepereneurs that were more capable than you have written on their tombstones: "But what have I done wrong?". But it wasn't their fault, they actually did whatever it was in their power. They were fooled and led to ruin by randomness.
- hn_throwaway_99 5y agoYes, as others have pointed out, market timing matters, but these days any market that is obviously a good one will get flooded with a ton of competitors, and with many of these markets consolidating to "winner takes all" status, most of those competitors will fail (or, perhaps more optimistically, get acquired). I think the winner-take-all nature of many of these hot markets is something more apparent now than it was in 2007.
- dang 5y agoAt least one past thread - maybe others? The Pmarca Guide to Startups, part 4: The only thing that matters (2007) - https://news.ycombinator.com/item?id=14412463 https://news.ycombinator.com/item?id=14412463 - May 2017 (17 comments)
- p-sharma 5y agoI think the main factor is being already rich or being born into a rich/influential family. A lot of problems startups have suddenly disappear when you can ask your dad for a small loan of 1 million dollars or ask your mum for a meeting with the chairman of IBM. Not saying this is the only factor but this "Great Filter" that weeds out those who don't have money or contacts helps others to develop their business with less competition.
- ttul 5y agoMoney solves the problem of having enough kicks at the can. Getting product market fit will eventually happen. You’ll just run out of money before then, in most cases.
- nowherebeen 5y ago> Money solves the problem of having enough kicks at the can Lots of people don't realize learning to read the market is also a separate skill that can't be learned through working for a company. It takes time and a few failures to wise up.
- throwaway_goog 5y agoIt doesn't. I semi-retired at 33 and then spent the time since then doing 20+ different startup ideas. Still no success. Bank account is bigger now than when I retired, but startup dreams are effectively dead. Bottleneck is that the market moves on in the time you spend pivoting, and eventually your inside information about what's hot and what's worth building gets stale, along with your technical skills. I know a number of other entrepreneur/retirees in the same boat - 5+ years working on various ideas, often after having a previous exit - and it never seems to result in a big company.
- latenightcoding 5y agoThe startup scene has changed significantly the last 10 years. Thalmic labs/north failed as a startup but they still managed to get acquired and celebrated as a success story.
- ilaksh 5y agoOne aspect of markets for relatively new technologies is that there is a dynamic related to the practicality and affordability of products and social momentum for new product categories. I suspect that things like patents sometimes play a role there also. For example, e-ink displays. Personally I think the idea of having a photo or framed image on a wall that can display an effectively infinite number of different pictures, another one every day, is an extremely attractive proposition compared to the low-tech standard of leaving the same image there for years. But it looks to me that the pricing for the display modules is holding that market back. Maybe because of a patent or something and not enough competition. But also, it COULD become a big thing at any time for a wealthy demographic, especially for the smaller ones say the size of a normal sheet of paper. But that depends on whether it becomes trendy. Which is partially about luck and what individual people do and how many friends they have.
- robinsoh 5y ago> But it looks to me that the pricing for the display modules is holding that market back. Maybe because of a patent or something and not enough competition. Nope. It is volume. In the display industry, if you're selling less than a million panels a month, then you're a niche exotic industry. E Ink is probably not even reaching 50% of that. Think about this way. E Ink in the display market is unfortunately the equivalent of a sports car in the car market. It'll only become cheap if it can defeat or be competitive with LCD/OLED displays and step up to reasonable volumes, and that's unlikely to happen just due to the physics of electrophoretics.
- ilaksh 5y agoJust consider the batting average for the mass of people who predicted over the decades that technology X or technology Y would never be affordable.
- robinsoh 5y agoTheir batting average is much better than you may think. Most technologies fail out. Remember the tonnes of people who fell prey to OLPC'S Jepsen claims about transflective being the next big thing. There's this funny thing called survivorship bias that causes people to misunderstand "batting average". https://en.wikipedia.org/wiki/Survivorship_bias https://en.wikipedia.org/wiki/Survivorship_bias
- spiritplumber 5y agoI could tell a couple of stories but they'd be boring.
- chiefalchemist 5y agoTwo contrarian thoughts: - He uses team (i.e., a balanced and cohesive unit), when he really means "team" (i.e., a collection individuals on the same payroll). Put another way, talent is not synonymous with team. - This differentiation is important because Team is far more likely to find p/m fit than "team". Put another way, unless the market is new / created then it's there...sitting...waiting. Then the question is: Who finds it first? Answer: The most able team.
- throw14082020 5y agoDid anyone learn from that post or the comments on this page? I'm struggling to extract any value, everything is sensible, but a lot of it is opinions, open to interpretation and high level "its a judgement calls". I don't think any of it is useful in practice. Not much was backed by evidence or science. My perspective: Always just do it. If you're good enough to succeed you'll succeed, and if you're not good enough, you never were gonna succeed anyway. Of course, you need to be scientific in your approach, but nothing on this page is scientific. Apart from my perspective ;)
- sk5t 5y ago> If you're good enough to succeed you'll succeed Luck and connections, too, friend.
- fairity 5y agoI did. As a founder, the idea I'm currently working on has required a decade of hard work to turn into a moderate success. It's a hunch of mine that the reason it's a moderate success and not a huge success is primarily due to market -- and, this article supports that hypothesis. Although Marc doesn't present the evidence that his claims are based on, I'm sure his thesis is based on the thousands of companies he's witnessed succeed and fail. Needless to say, next time (if there is a next), I'll spend a lot more time analyzing market before diving in head first.
- pototo666 5y agoMy two cents. The first time I read this post was two years ago. I was working a problem: how to practice Japanese. I had users and revenue, but no growth. Simple maths told me my product would never grow as a startup, and I had no way out of the niche. This post helped me confirm my worry: my market is too small. What I learned: add a filter to the problem I want to solve. Is the problem big, or is it going to be big? This is expecially important when I am working on something I am passionate about. There is confirmation bias and wishful thinking when it comes to what I love. Now I am working on a problem I care about, and the problem is big. This post expresses an idea that I can easily relate to, given my experience. In this sense, it is useful.
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- xyzzy21 5y agoYeah, really? Economic conditions are important for an economic activity that depends on making money from its market?! I would hope so.
- woeirua 5y agoThis is so true. One of the startups I was involved in had the best team imaginable, and their product was vastly superior to the existing alternatives, but the market was already saturated so they had to grind out their sales for over a decade. The next startup had a few really horrible people on the team, and they succeeded in spite of that fact. Eventually though larger macroeconomic conditions soured for them (ie the market evaporated) and the company failed.
- s17n 5y ago"When a lousy team meets a great market, market wins." I think this is wrong, should be: "When a lousy team meets a great market, a competitor wins."
- jhugo 5y agoUntil the lousy team succeeds, “the market” is 100% made up of competitors. You’re saying the same thing.