Market Opportunity or Management Team

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At lunch today I was talking with an entrepreneur who was lamenting that the company he was recently with has disjointed, inefficient technology powering their web services. He also talked about management turnover at the C-level as well as board of directors. I then casually asked how the company was doing financially and he said it was growing like crazy with substantial revenues and profitability.

This conversation got me thinking about the old debate as to whether the market opportunity or the management team is more important in a startup. Some people, like Marc Andreessen, the Netscape and Ning co-founder, believe that market opportunity and size is more important. Others, like Mark Peter Davis (a classmate of mine at Duke), believe that the management team is critical.

Personally, I’m starting to put more stock in the market opportunity and timing over the management team.

Now, of course, there has to be a modicum of competency on the management. But, beyond that, I think the market, product, timing, and product to market fit are the real drivers for phenomenal success.

What do you think?

Comments

10 responses to “Market Opportunity or Management Team”

February 12, 2010

Paul Freet

Great question!

Great post by Jeff Atwood on the subject: http://www.codinghorror.com/blog/archives/001320.html

He links to a wonderful presentation by Ed Catmull of Pixar who argues passionately in favor of teams:

“If you give a good idea to a mediocre group, they’ll screw it up. If you give a mediocre idea to a good group, they’ll fix it. Or they’ll throw it away and come up with something else.”

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February 12, 2010

Adam Wexler

i definitely think the market opportunity/time/size is “more important.” if you’re asking “which is more likely to ensure success?” than i’d probably change my answer.

as for the market opportunity, you can attract a great management team at a below-market rate if you have an idea that they can buy into.

i’m not the biggest fan of all-star teams that get together and figure it out from there. IMO, the idea should be in place before the people so you can figure out the “right people” to bring on board 🙂

-adam w

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1. February 12, 2010
  
  Brian Fitzpatrick
  
  In my opinion, they both carry equal weight. Great people and no market opportunity? Probably doomed because they’ll run out of capital before they (a) figure it out and (b) shift gears to something new.
  
  Great market opportunity and the wrong people — disaster as well. My *guess* regarding the start-up in your post is that at the C level there is chaos.. but somewhere down the chain there is a leader driving the growth — even if he or she doesn’t carry a fancy title.
  
  Reply
February 12, 2010

Raghu Kakarala

Market Opportunity is the primary driver – the better the market opportunity is the more freedom it gives the management team to be wrong, then fix itself, be wrong again, fix itself again, and finally get its legs somewhat – all while still maintaining or growing its revenue – insert classic Buffett quote about rising tides here. Narrower market opportunity windows demand being right early and quickly – necessitating great execution by the management team.

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February 12, 2010

davidcummings

Paul, Adam, Brian, and Raghu — thanks for the great comments. I think there’s likely another clarifying factor which would be “what is considered very successful.” Is it $10M revs, $100M revs, or $1B revs? I’m guessing great teams in a poor market can get to $10M or higher but aren’t likely to breakthrough the bigger levels without an awesome market opportunity.

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February 12, 2010

Paul Freet

I guess my belief is that great teams will go find a market opportunity if need be. Poor teams can only hope to get lucky with one.

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February 12, 2010

Saurabh Srivastava

I would say it depends on what stage the company is in.

If it is in seed stage, the idea/opportunity should take a precedence. Because it would be unfair to expect a credible complete team that stage.

If the product is getting launched in the market. At this stage the team takes a precedence. As it should have the capability to pull it through.

If the company gets past the 10 million mark (as mentioned in David’s post) I would say the opportunity becomes more important again. As the company/board would have the capability to get the right team in place.

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February 13, 2010

Mark Davis

David – thanks for the shout out.

In my own experience, the weighting that I have applied to prioritizing the three high-level dimensions of a business (market, team and barriers) has evolved over time (and probably will continue to change). What’s interesting is that market, team and barrier/tech investors have all been successful in the past – so you probably can’t go wrong so long as each dimension is good enough to make the company viable.

-Mark

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1. February 13, 2010
  
  davidcummings
  
  Thanks Mark. I agree with your analysis and I’m sure my opinion will change over time as well.
  
  Reply
December 11, 2011

Angel Investors that Don’t Meet the Entrepreneurs « 10,000 Startup Hours – David Cummings

[…] When you ask investors, especially venture capitalists, about what they most look for in an investment they almost always say the team. Yes, the product and market opportunity have to be great, but the team has to be awesome (my view is that the team has to be great but the market has to be awesome). […]

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