Teams and markets

“When a great team meets a lousy market, market wins.

When a lousy team meets a great market, market wins.

When a great team meets a great market, something special happens.”

This quote is by Andy Rachleff, a co-founder of Benchmark Capital in 1995 and Wealthfront in 2008. Basically, Andy takes a contrarian stance to common startup wisdom by claiming that a startup’s market is a more important predictor of success than a startup’s team.

Let’s look at Andy’s claims one by one.

I agree with Andy’s first claim. If you’re not attacking an attractive market in the right way, or trying to create a new market for something that people actually want, it doesn’t matter how good your team is. Even the best team won’t be able to pull it off.

However, while the development of some markets is difficult to predict in advance, most markets are easier to evaluate. Great teams therefore usually find great markets, so this case doesn’t occur that often. But when it does, Andy is right that market wins.

To evaluate the second claim, we need to define what a lousy team is. If we define lousy teams as the bottom third, average teams as the middle third, good teams as in the top third but below the top 10%, and great teams as the top 10% of all teams, I believe that you need to be at least a good team in order to have any chance of success. I’ve seen many good teams perform very well in a great market. However, lousy, or even average teams just don’t cut it. Maybe Andy’s definition of lousy is different but this claim seems a bit too extreme.

The last claim is less debatable. Most people will agree that great teams attacking great markets are necessary to create something special (or win a market) ahead of the less great teams attacking the same market.

Since great teams usually don’t go after lousy markets, and since lousy teams just don’t cut it, I think that Andy’s emphasis on great markets is a bit extreme. However, Andy’s excellent track record at Benchmark and Wealthfront suggests that he didn’t pay attention to the first two claims anyways. He simply looked for great teams going after great markets. Rather than debate about which matters more, why not take both?

Originally published at Thoughts of a VC.