What he refers to as "market" is a lot of what I think of as "product".
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 agree. I think Marc is using "product" in a strange way. Maybe he means quality of implementation or something. What he's basically saying is that the only thing that matters is to make something people want. This wanting he calls the "market." Which is also a bit confusing, because most VCs use that word to describe the total number of users your product could serve. "Market" in the usual sense is not so much a determiner of whether you succeed as an upper bound on the size of the success if you do.
I'm not sure I'm being that strange :-). At a certain point it just becomes a semantic debate, but let's try:
- 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.
The startup world is riddled with well built products that nobody wants and highly capable teams building those products.
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 :-).
what if I think that the market will balloon after my software is introduced? Or that my product will become the Microsoft of its market?
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).
Okay it might be hard for me to prove it had fans. I'm basing that statement off my lossy memory of various interviews with the founders. It's possible it was almost no one but them, but I think it was at least a small number of genuine users.
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.
There're lots more examples from the histories of many of the fortune 500:
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."
I think we would have actually funded them. I realize that's a lot to claim; certainly most investors wouldn't have; but YC was created explicitly to fix that problem.
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 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.
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.
