Written by Adrian Li
You’ve probably heard about product-market fit and its importance to getting rapid market traction. But what about founder-market fit?
In the early stage of the market, each competitor is probably achieving similar rates of traction. Consequently, early-stage metrics will rarely predict who will be the eventual winner. Hence, for all early-stage ventures, we at Convergence Ventures (CV) believe that the most important ingredient to success is the team. For us, founder-market fit is a way to assess how one team may be better suited to a particular opportunity than another.
There can be many criteria for founder-market fit, but for our evaluation, the three most important are experience, passion, and purpose.
Experience is quite self-explanatory. Founders who have direct industry experience will have more knowledge and understanding compared to those who do not. They’ll have identified problems in the industry or may have a unique perspective, having spent many years in it.
Experience can be easily defined by how many years the founders have in an industry, what their significant achievements have been, and also how extensive their network within the industry is. If the founders do not have significant direct experience, we ask if they have built up a strong advisory board in this area or have gained other connections into this industry.
Generally, a team with more experience in the industry they are building in should be able to execute better—other things being equal.
Passion is harder to measure, but at CV, we define passion as a measure for how much the founders are in love with the business that they are starting. It is in some ways a proxy for resilience or the determination they will have in the business.
As the late Steve Jobs remarked, “The only way to do great work is to love what you do.” So, we believe that the only way for anyone to endure and go through the challenges and hardship of successfully starting a business is to be passionate about their work. This way, “work” is no longer work, but rather a part of life and what they wake up every morning excited to do.
Clearly, a team who is passionate about their industry will have more determination than one that is not. Passion is hard to define, but we can see it from the way a founder talks about their industry. What drives them? How detailed do they know their business? How much do they care about the product? Do they work late into the night to build their business? All of these are signals of someone who is passionate about their business.
Purpose is the answer to why the entrepreneur is starting the business. What got them started and what triggered them into taking this on as a mission?
We often ask entrepreneurs to tell us their “story;” what aspects of their life led them to build their company? Through powerful stories, we can sometimes learn the underlying purpose or motivation for the founders.
There’s no right answer to this, but while we’ve heard many interesting reasons for starting businesses, the one answer we don’t want to hear is “because it’s a huge market opportunity.” To us, this implies short-term thinking and a greater likelihood of money being a core motivator. When times get tough—and they inevitably will be—the temptation to quit and take a well-paying job will be too hard to resist.
So, when you’re meeting with us, don’t be surprised if we spend a good amount of time talking about you and the founding team. We want to know why you’ll be the best team in Indonesia to execute, why you collectively have the best experience, why out of all the things you could be doing, you have decided to pursue your startup, and how you came to start it.
Often times, great conversations which build our conviction in the founders are the ones that will lead us to the next step in our due diligence process.
Featured Image Copyright: 123RF