Jeff Pulver on what makes a good startup

Jeff has been around tech investing for as long as I can remember, so when I saw a post from him on Techmeme entitled What I look for in Startups I clicked through straight away.

He says:

These days when I’m making a decision about a startup opportunity to invest in, I put the people first, I consider their vision and then weigh-in on my take on their ability to be a disruptive force in their chosen market space. As someone who believes that we are living in an industrial revolution that our parents and grandparents never experienced, I’m looking for people (and teams) who look to leverage “the Internet” and are building software/application/services that do something different and something that wasn’t either practical or possible to do before. Having the vision is one thing, but vision without market timing is a recipe for failure. That said, some of the most interesting companies I’ve met with were with people who were early in one market segment and were inspired to use their experiences to morph themselves into something else.

I agree with everything he says, but I’m going to break it down a little, because when you do that it starts to sound a bit different.

First, some background.

I think most people would agree that the three drivers of startup success are market, product and people. VCs like to debate endlessly whether it is more important to get the market right or the people right, and people is definitely the more fashionable answer.

This is where Jeff has come out – but he says ‘I put the people first, I consider their vision’. For me a vision is a statement of what market you are going after and the product you will build to win. So despite the heavy lead on people, Jeff also stresses the importance of market and product. Note also that he is looking for people leveraging the internet. A market statement.

I would also bet that it is pretty hard to get a conversation with him about a market he isn’t already excited about, whoever you are.

Ideally of course we want everything – to invest in great people with an awesome market and product story, but in reality there is always compromise on these objectives and as you may have gathered by now I think the honest answer to the question of which is most important is ‘market’. The most valuable startups are always leaders in large markets – look at Google in search advertising or Microsoft in operating systems. I would say you almost can’t think too much about market.

The other piece I wanted to pull out of Jeff’s post is:

When meeting with an early-stage startup looking for funding, if I am interested in the company, I look to connect with the founders and find out the inspiration behind the company they are creating. I try to understand the problem they are solving and the opportunity they are seeing. I also look to see how as a team they get along, work off each other and I try to get a feel of their creative energies. I look for teams where each member is watching each other’s back and a core team whom I feel will be together for the long term. I look for people who are both smart and creative who can be focused when necessary and whose personality allow themselves to be open to change directions and re-map themselves when needed.

Couldn’t agree more. The one thing you know for sure is that there will be huge stresses and strains in every startup and getting on well with the team and having a team that gets on well with itself is the best recipe for weathering the storm.

  • Innosonic is a start-up working in three countries, Finland, Slovakia and China, and we have found out that there are also very big differences in VCs… Therefore I feel that there is not actually much point in arguing whether people, market or product is most important. It is a question which is connected to the perspective of the investor.
    For instance, we have discussed with some VC investors operating in China, and they see us as a technology company (= product), because they are working on an environment where technology is the issue.
    And the very same company is seen through the market or people aspect when I talk with investors in Europe.
    So, I suggest that when you stress one or another core issue, please, also remember the context.

  • Innosonic is a start-up working in three countries, Finland, Slovakia and China, and we have found out that there are also very big differences in VCs… Therefore I feel that there is not actually much point in arguing whether people, market or product is most important. It is a question which is connected to the perspective of the investor.
    For instance, we have discussed with some VC investors operating in China, and they see us as a technology company (= product), because they are working on an environment where technology is the issue.
    And the very same company is seen through the market or people aspect when I talk with investors in Europe.
    So, I suggest that when you stress one or another core issue, please, also remember the context.