Market > Team?

A really smart investor I know named Tom Huntington (who blogs at On Strategy & Execution) likes to make the point that, in a lot of ways, Market ends up being more important than Team in determining the success of a start-up. It’s a variation of the old jockey vs. horse question (for a lot of interesting takes on that, see my video interview series in which I talk to a variety of investors on that point). But instead of looking at product vs. team, Tom is trying to make the point that a poor market is a fatal flaw from which no team can recover.  In his words:

I agree that team is critical, but it is less critical than market.  Great markets can compensate for lackluster teams, but not the reverse.  A non-existent market doesn’t care how smart you are, to paraphrase Andy Rachleff and Marc Andreesen.

I think Tom has a very valid point. (He also makes some great points about the crucial importance of a learning orientation, but I digress.)

But while I essentially agree with Tom, I think of it I don’t think it is as simple as he formulates it: “Market>Team.” Part of my reasoning is based on the knowledge that mediocre teams can find a way screw up even a great market opportunity – every race has DNFs. Or as I sometimes like to observe: “start-ups are always inventing new ways to fail.” Great market conditions can compensate up to a point, but keep in mind, what is a great market for  you, is also a great market for your competitors, and soon those competitors will be exposing any underlying incompetence.

The more important part is that I don’t see it as a question of great teams triumphing in an impossible market. What great teams do is get the heck out of bad markets and find a better way to repurpose the company’s tech or skills or insight in a fast and resource-efficient way.

So while Tom and I are in violent agreement that a crappy market is a fatal blow to any company that is stupid enough to try and stay in it, I feel that it is not a fatal blow to a team smart enough to get the heck out of such a market.  Even if they start out pointed squarely at what turns out to be a bad market, great teams chisel away at their plan until they are pointing at a better one. (Which goes squarely to Tom’s learning orientation point, but that is a story for another day.

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If you enjoyed this post, you might enjoy: Start-Up Marketing Series, Delusional Economics, That Vision Thing, The Power of An Advisory Board, Loch Ness, Unicorns & The First-Mover Advantage, Does This Slide Deck Make Me Look Fat?,  The Long Road to Instant Success, Entrepreneur at Work: Caine’s Arcade, Getting Off The Ground; Early Formation Economics, Are Entrepreneurs Wild Risk-Takers?, What I Look For In An Entrepreneur, The Overture, Pick Your Founder/Co-Investors Carefully & Reflections on the Nature of Entrepreneurs, and Should I Wait For A Technical Co-Founder?
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