The Pmarca Guide to Startups, part 4: The only thing that matters
blog.pmarca.com
blog.pmarca.com
Really, how great is your product if nobody wants it? And how great is your team if they don't adapt whatever they are doing to build what people want?
I can imagine a lot of technology people falling into this trap though. They think that they've invented some great new technology and now they just need someone to make a product or license it or something (maybe they aren't sure, but they are certain that the technology is revolutionary).
I think that's sort of what Marc was getting at.
Another very similar example:
Wrigley's Chewing Gum used to sell soap, which people wanted, and he'd give customers some free gum as an extra. He realized that he could do a much bigger business in gum itself.
Apple Computer made something that few people wanted (the Apple I - hobbyists) to something that a few more people wanted (the Apple II - schools) to something that a nascent industry needed (Macintosh - desktop publishing) to finally something that every teen and 20-something has to have (IPod).
Microsoft made something that very few people wanted and that you generally can't sell today (programming languages) to something that one crucial customer wanted but didn't pay much money for (PC-DOS) to something many OEMS wanted (MS-DOS) to something many consumers wanted (Windows) to something every business in America needs to have (Office).
3M made something nobody wanted (anthracite) to something a few people wanted (sandpaper and other abrasives) to something a few more people wanted (waterproof sandpaper) to something many consumers wanted (scotch tape) to something almost every office uses (PostIt notes).
Hewlett Packard made something a niche market wanted (oscilloscopes) to something a somewhat broader niche market wanted (electronics testers) to something a rather more lucrative market wanted (workstations) to something a broad consumer market wanted (PC clones) to something that most every family and office has (inkjet printers).
I really wish we could see more about slower, incrementally-growing companies. Smash hits like Netscape and Google are rare - most of the companies that we hear of today got their foot in the door, then used that to expand upwards into bigger markets. I wonder if Microsoft would've gotten YC funding if YC had been around in 1975: I can see them getting back a little note with "Interesting idea, but most of your users can write their own BASIC interpreter. Also, you'll probably end up going back to Harvard at the end of the summer."
It would have worried us that Bill might go back to school. (In fact, he did go back to school that first fall, then changed his mind.) But we do fund undergrads if they have a take-over-the-world vibe, like Sam Altman and the Weeblies, and I think Bill would have had that.
It predates a lot of things, but says so much that makes sense, and that I recognized from other people's writings (PG included). It's worth buying. Of course, being from the 80ies, and talking about a garden tools business, it doesn't talk about high tech much, but I think a lot of the lessons are quite worthwhile.
BTW, raganwald also seems to like it:
http://weblog.raganwald.com/2007/04/venture-capitalist-passes-away.html
I'd add two things:
+ It doesn't necessarily take more effort to build a product that lots of people want vs a product that very few people want.
Again, sounds obvious, but I see lots of startups exercising huge effort to build complex products against very small markets.
+ We all suffer from hindsight bias -- for every Apple, Microsoft, 3M, and HP, there are thousands of companies that screwed up the progression you're talking about and failed that we've never heard of.
Only a very small number of people wanted Game Neverending.
A very large number of people wanted Flickr.
Huge difference.
Flickr much simpler product.
product = peg = something
market = hole = want (noun)
- Product -- the thing that gets built. Let's assume there is one customer/user of it who finds it relevant to his needs. That customer/user is evaluating it on how fast it is, how reliable it is, how many features it has, how extensible it is, what platform it runs on, how easy to use it is, how polished the UI is, etc. That's that customer's view of product quality.
- Market -- how many users/customers are there going to be like that? A dozen, a hundred, a thousand, a million, a billion? How hard is it going to be to get to those customers? How much will it cost to acquire them as users/customers? How long will it take them to use/buy? That's the market question.
Yes, you're right, the point is that you need to make something that people want (or, more precisely, that lots of people want, if you want leverage).
Yet the Valley and the industry is filled, and has been filled for 30 years, with very smart people building great products (as defined above) for very small markets.
The classic example is the huge universe of ISV's for marginal platforms. Ask anyone who tried to succeed as an ISV for the NeXT box, BeOS, the Amiga, etc. what the difference is between a high-quality product and a great market, and they'll certainly be able to tell you. Hell, most (not all, but most) Mac ISV's had this exact problem over the last 20 years.
I see this kind of thing all the time in this industry.
If you take it for granted that the primary definition of a great product is one that lots of people want, as opposed to one that it well built, then you're already ahead of the game :-).
I think most entrepreneurs make that assumption or have that hope. Nobody is that stupid to deliberately ignore the market, The Market.
If you can see this in foresight, then you are probably an ignored prophet. If you see it in hindsight, then you are a historian (or well-paid columnist/speaker/me-too).
I wonder who that is?
So does the advantage of working in a hot market outweigh the advantage of solving a problem you personally have? I'm thinking it probably does. If you can make it past the initial hurdle on your own steam your "hot market" users can probably carry you to victory.
If its hot, you probably have already missed it.
I'm not sure I'd agree that you've missed a market just because it's heavily hyped though. The blogging world still has sizable disruptions and is largely unexplored. Facebook is a late entry to social networking and it's doing okay.
Agree with second point also -- big markets often get a lot bigger, and provide a lot of opportunity to new entrants. And sometimes they're heavily hyped along the way.
At any given time in the startup world, there are "hot" markets as perceived by entrepreneurs and VCs that look like they'll be huge that won't be.
And there are markets that don't look "hot" at all that will ultimately be huge. Search keyword advertising was like this -- when Overture first came out, most people (including me) thought they were nuts.
Sometimes you get the "hot" market that turns out to be huge. That's a nice situation.
Then there's the fourth category -- un-hot markets that turn out to be tiny. There are a LOT of those :-).
A bad team is hopeless and will stay that way into perpetuity.
Cisco.
Edit: No, really. "Because, really, what else could it possibly be?"
"The #1 company-killer is lack of market." is a euphemism for "when nobody buys what sells, you go out of business."
What else does the "The only thing that matters is getting to product/market fit" mean much more beyond "The only thing that matters is making money?"