Prominent investors like Chris Dixon and Brad Feld highlighted the importance of founder/market fit. Andy Rachleff and Marc Andreessen postulated that the ‘market always wins’, asserting that a market trumps the team. And to amplify the different outcomes, Rachleff labeled teams and markets either ‘great’ or ‘lousy’. If a team stumbles onto a great market, good things will happen.
Predicting a great market is difficult, if not impossible. Value creation and new market segments arise from external shocks such as changes in demand, regulation and technology. The magnitude and the timing of these shocks are what makes the difference between ‘lousy’ and ‘great’.
This leaves early stage investors with the age old conundrum of what to invest in: Founders? Ideas? Markets?
It is a long way from a founding team to a business and to market success. Founders have to go through multiple iterations before hitting upon the best idea. An idea that can’t get to a minimum viable product (MVP) is worthless. An MVP that doesn’t scale to a business remains a hobby. And businesses which don’t disrupt markets will not be very valuable.
Investors cannot fund markets, but they can back great founders and their ideas. And a great team will abandon a business in a lousy market to reset and move into a great market - that’s what makes them truly distinctive. So the main job of the investor is to go out and find that extraordinary team. And be patient until they find that disruptive idea with great market potential.