Market, Team, Product

I get asked frequently whether it is better to back the team or the product (the “jockey or the horse”).

It is not that simple in my view.

When I think about the big wins we have had over the years, they almost all exhibited a combination of a large market, a great product, and a talented founding team.

Some investors feel that the team doesn’t matter. They believe that you can replace the team if everything else works out. But I don’t think everything else works out if you don’t have a talented founding team.

Some investors feel that product doesn’t matter. They believe that you can pivot into something else if you have a talented founding team. While that is certainly the case, pivots are expensive in terms of capital, time, and focus. I would not choose to go through one given the choice.

And large market is critical. You can build a nice business in a small market, but you can’t build a big business in a small market.

My point is you really need all three, market, product, and team, to get the big wins that the venture capital model requires.

And in terms of finding the best opportunities, I would start with large markets, go searching for teams working in them, and writing checks only when you find talented teams working in large markets who have built excellent products.

#VC & Technology

Comments (Archived):

  1. karen_e

    All your jockey, horse, course questions answered in one brief blog post. This is why thousands of readers keep coming back.

  2. jason wright

    There’s always the fourth dimension. Invent a new market. You alluded to that yesterday.

    1. Matt A. Myers

      Blue Ocean.

    2. Anne Libby

      Another dimension I’ve read about here is luck…

      1. jason wright


  3. Vivek Kumar

    I tend to focus on the team. While product and markets are important – its hard to evaluate the market in early stages, specially when they are being created/disrupted (eg Uber). The product is important, but unless I am the target demographic team its hard to judge.

  4. William Mougayar

    But a large market isn’t always large at the beginning. Who knew how large the Twitter or Facebook markets were going to be? They each carved that market out of a small initial niche. I think the word “potentially” large market is appropriate, no?

    1. awaldstein

      possible is I think the right word at least for software. more complex for hard goods.

    2. jason wright

      Zero to One’s main point.

    3. falicon

      Related: Super fascinating (but long) read ->…(orig. found via Ben Evan’s newsletter yesterday — so apologies if you’ve already seen it).

      1. William Mougayar

        Wow, amazing post and I didn’t know about this blog. Thanks so much for mentioning it. I’m going to read it regularly.

      2. JamesHRH

        I am not one to give up, but man, that is like 40,000 words.

        1. falicon

          …but they are 40,000 good words 😉

          1. Matt A. Myers

            I skimmed through and read parts of it. There doesn’t seem to be any thought or analysis of whether social capital – status – and the gamification of it is positive or negative for society. The trend seems to be going toward that it’s bad – to get off of Facebook, delete social media, etc. It’s clear that algorithms do put people and ideas on a podium by showing posts with higher engagement to more and more people – which makes it also an “amazing” propaganda engine and for spreading unchecked ideologies – and quickly allowing people to gang up on others, exposing others to content that will be most engaging for them – that supports their bubble of indoctrination without critical thinking or deepening understanding/compassion.

      3. Gayatri Sarkar

        Thanks for sharing. Loved it.

        1. falicon


    4. JamesHRH

      I am surprised there is not a long thread here about Twitter & ‘great product’.

    5. Peter J. Mills

      “Great product” and “talented team” are also not obvious at the start. These descriptions are conferred (and weighed in importance) after looking back from a position of success. By definition, they can’t be used if the venture failed.

    6. cavepainting

      Agree.. Instead of large markets, we should say markets where customer spend is changing from old to new at a very high growth rate.For example, marketing as a % of revenue has stayed consistent for a very long time. Just that what it is spent on is very fluid and has changed substantially in the last two decades unlocking massive growth in companies that absorbed the redirected spend. (search, social, etc.)Large markets are really the end result of “seeds” that created inflection points for customer spend to migrate en masse from old to new.Understand what these seeds might be (investment themes) and then find the best teams who are obsessed with nurturing plants from these seeds. A few of them might become really big redwood trees.Get the seeds wrong and who nurtures them does not matter.

  5. sigmaalgebra

    Yea, I decided to go for a big market, maybe a hour or so a week from nearly everyone in the world with access to the Internet.A seemingly obvious problem with this approach is that, sure, right away are confronting everyone else that sees so many billion connection hours a week and even if successful can’t hide out of sight as might in a small market.So, how could there possibly be any chances in such a large market? Well, the opportunity is there until someone takes it, and all the candidate people “put their pants on just one leg at a time”, that is, even if the opportunity is super, that doesn’t mean that some superman will do well attacking it.Or, really, maybe in many respects, going for a big market is no harder than going for a small one — have to have an idea and write some code either way.But in such a large market still I’m guessing that should have more defenses than in a small market. I know; I know; what the heck has Bezos done that Wal-Mart, K-Mart, or Sears could not do as well or better? Bezos has a great Web site, but there little or no secret sauce in that. For K-Mart and Sears we do know why not — they are determined to go out of business!!! For Wal-Mart, well they might wake up in time. In the meanwhile Bezos is doing very well. Frankly, I’m shocked; I would have wanted a stronger Buffett moat.In my case, I stirred up secret sauce that is the crucial core enabling technology. Then I appraise what I know about the eagerness, propensity, ability, etc. of others to duplicate or equal such secret sauce: My guess is that, due to various heavily cultural factors, next to no one will try and, of those who try, one could gather in an airplane washroom all the ones who would be successful. Or, the secret sauce I stirred up has some important advanced academic connections, so for appraising competition we have to consider (i) people without the academic background (essentially hopeless) and (ii) people with the background: For (ii), bluntly, for people, actually surprisingly few, with the background, they mostly don’t think about applications of any kind and much less about business startups. All that, too, is surprising, but it’s a heck of a lot better Buffett moat than there is much evidence that Bezos has.Yup, if don’t have to be terrified by the competition, current or potential, then a big market seems like a good idea, maybe in some important ways, surprisingly, no more difficult than a small market.

  6. Mark Gavagan

    I think a great founder or team can seem easy to identify, but it’s in fact very easy to fall prey to false positives and negatives, filtering in and out the wrong people.What really matters about a person (integrity, passion, kindness, courage, vision, ambition, leadership, etc.) is extremely difficult to measure, so we often look to easily-measured-but-often-wrong indicators, like Ivy League schools, blue chip resumes, and personal referrals.For example, Theranos’ Elizabeth Holmes would likely have passed almost any vetting process, for most of her career.

    1. Adam Sher

      That’s also why hiring people is hard. We think we’re looking at the right person for a job but aren’t.

      1. Mark Gavagan


  7. Marcio Trigueiro

    Perhaps equally as important as those topics is the business model. Sometimes great teams develop great products in large markets but get the business model wrong (Apple MUsic vs Spotify for example).

  8. falicon

    I disagree about the “find large markets” bit…I think you need to find people who are either creating large markets, changing large markets, or in the lead at the birth of very large markets.Subtle but different.

  9. Guy Lepage

    As someone who has built product with many teams and has seen talented teams in play… Give me a great team over anything anyday. Great teams make pivoting a 1 week process so that removes the “it’s costly to pivot” argument.

    1. sigmaalgebra

      Yes, for nearly everything Sand Hill Road has any hope of pursuing, what you say necessarily has to be true: Your team is like the staff of a general contractor: They are putting up a shopping mall, and the customer goes bust. So, they “pivot” and put up a 50 story office building. They encounter some zoning politics so pivot to putting up 2000 apartments out at the edge of the city. It’s all much the same to them — architecture, foundations, frames, utilities, interiors, etc.So, of COURSE you can pivot.Obvious. Trivial. Dirt simple. What’s the confusion?

  10. TeddyBeingTeddy

    VCs often say it’s the jockey. The research/data, however, says it’s the horse:http://faculty.chicagobooth

    1. JamesHRH

      All time best ( on Mt. Rushmore at least) VC firm Sequoia tells founders they will absolutely be replaced if they are not getting it done.

      1. sigmaalgebra

        I got a note back from Moritz — he liked that I mentioned the role of math, surprising for a former newsie! Soon he went quiet: It was clear, no way could he evaluate my work. NOT a chance.So, on “getting it done”, until the accountants tell him, he won’t know. So, he will have zero ability to see the future of the business right in front of his face.So, at some BoD meeting, I’ll mention a new budget item, team, and R&D project and outline the project. I’ll put up in slides outlines of the crucial core rationality of the project supporting its importance. That material will be outlines of some pure/applied math. Too soon the BoD will have stomach pains from their mass confusion — there is little so painful to listen to than math where hardly even a single word is understood. Their fiduciary responsibility will be at risk. They will will become afraid and maybe soil the furniture and the carpet rushing to the rest rooms.So, that’s a problem with Moritz and Sequoia: On “getting it done”, absolutely, positively, flatly, totally they just will NOT know if it is getting done or not. They would smile, try to be patient, give me about six feet of rope, to them just as a gift, and with contempt, and then CUT ME OFF and FIRE me.No way, not a chance, could I be successful reporting to Moritz or Sequoia. To me they are grotesquely, outrageously, flatly, sitting on their thumbs INCOMPETENT at anything at all important or significant about my work or anything significantly technical.This situation is somewhat to be expected: My work is supposed to be new, out in front, original, disruptive, from some pure/applied research, unusual, and, especially, technically and financially wildly EXCEPTIONAL, and Sequoia has no, none, nichts, nil, nada, zip, zilch, zero ability to evaluate such work. To heck with Sequoia.Evaluating such work? Several areas of our civilization with lots of people can do that. For significant parts of my work, there are competent people at NSF and DARPA, editors of many technical journals, Ph.D. committees at world class research universities, etc., just not the Queen of Sand Hill Road and no better for the rest of Sand Hill Road. Another HotMail? They could do fine.”Getting it done”? HA!!! They wouldn’t know more than some blind drunk. Sorry ’bout that but (1) with what I’m SUPPOSED to do as an entrepreneur and (2) with their next to totally useless backgrounds in technology, covering essentially ALL of Sand Hill Road, it’s just what has to be the case. I’ve done a lot of college teaching and know about the capabilities of people with the educations of Sand Hill Road — in evaluating crucial, powerful, valuable technology, they are like blind drunks. Literally.

  11. dineshn72

    Andy Rachleff formerly of Benchmark was known for this succinct summary ““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.”

  12. Girish Mehta

    While nothing is low-risk in a startup, when evaluating between (1) – Market risk, (2) – Technical risk and (3) – People risk, VCs tend to look for relatively lower market risk (i.e. large potential market), and solve for the other two.I think there are two issues:1. The pendulum has swung too far to the “large potential market” requirement from startups, driven by the VC industry.VCs are saying we fund small businesses that will one day become very, very big businesses. This is a mathematical outcome of the ( 2% mgt fee —— larger fund size —— larger investment ticket sizes ——Required Return from larger investments —— Large /Gigantic private valuation ) chain of relationships.And you don’t get Large valuation businesses in medium size markets, you get those Large valuations in Large markets. Ergo, when you start – The large potential market filter goes in first.The pernicious aspect of this is that it is self-fulfilling. An investor takes a stake in a business with the expectation that it can grow very big, then drives the team to get big fast (spending their funding) so that they can justify the latter rounds of valuation and investment (and their return). The next round investor comes in with the next level of growth expectations and the cycle gets repeated.VCs will respond that many startups do not require venture funding, and the VC model is for a specific subset of startups. That is true. And that is the part that also requires further examination. Somewhere between the small cash-flow businesses (we agreed not to say “lifestyle” here), and the next Uber-level market opportunities, there are medium sized market opportunities. But the economics of the venture business (partly self-created by the incentive structure and fund sizes) do not lend themselves to that.2. Secondly, a large potential market does not mean a profitable business model. In other words, a large market may not be a great market. (But it is good for valuations :-)).Uber has a large market. What is their profitability model ? I continue to maintain that while their organizational culture issues were very serious, a big issue was and remains the question of how they would make money. $865 million net loss in just the last quarter.These two issues are related.Maybe VCs who look, in addition to larger markets, at (medium sized markets + profitable business models) ignored by others now will have a better report card to show their LPs a decade from now…

    1. Amar

      well said. I tend to think in terms of frameworks and risk mitigation.1. mitigating market risk -> finding an adjacent market or a plan to create a market (market pivot) or strengthening the business model to give yourself few years of runaway with existing market2. mitigating people risk -> dealing with toxic, poor fit, hit_the_ceiling leadership. This is hard if they are also founders and have a lot of emotional cache with the rest of the team3. technical risk -> can be viewed as a subset of the other two … it is a valid risk but often time subsumed by the other twoFrom that perspective. People risk is messy since people are messy but tractable if the other two risks are containable. On the other hand -> market risk is the hardest to solve even if the other two risks are well containedSo I would say -> investors and founders should keep their eyes on all 3 but be more paranoid about #1 than 2 or 3.

      1. Girish Mehta

        Relatively lower market risk is the right way to look at an opportunity for both the entrepreneur and the investor. Begin with the end in mind.I don’t think that (relatively) lower market risk is equivalent to large potential market only. That equivalence is created by VC fund economics and I think the pendulum has swung too far toward that end missing market opportunities in the middle and creating unhealthy dynamics focusing on size.

    2. sigmaalgebra

      There are a LOT of taxi cabs in the world! HUGE market!!! Uh, how many cab drivers are making good money? Hmm ….But, but, but, smartphones change EVERYTHING!!! Okay, a taxi driver needs a smartphone. Or maybe his wife does.But, but, but, with Uber, the taxis can share rides!!! Not without a lot of lawyers!!!

  13. TeddyBeingTeddy

    Per Steven Kaplan’s “Should investors bet on jockeys or horses”:“Only 72% of the CEOs at the IPO were CEOs at the business plan [seed stage]; only 44% of the CEOs at the annual report were CEOs at the business plan. The analogous percentages are lower for founders. Similarly, only about50% of the next four top executives at the IPO were top executives at the business plan; only about 25% at the annual report were top executives at the business plan.Our results inform the VC debate about the relative importance of the business (horse) and the management team (jockey). The results call into question the claim Quindlen (2000) attributes to Arthur Rock that “a great management team can find a good opportunity even if they have to make a huge leap from the market they currently occupy”.The results for both of our samples indicate that firms that go public rarely change or make a huge leap from their initial business idea or line of business.This suggests that it is extremely important that a VC picks a good business.At the same time, firms commonly replace their initial managers with new ones and see their founders depart, yet still are able to go public, suggesting that VCs are regularly able to find management replacements or improvements for good businesses.”Source: http://faculty.chicagobooth

  14. Pointsandfigures

    sometimes the firm creates its own market as it matures too. because the team is good, they discover new opportunities and attack. I would say @aaronklein at Riskalyze has done a good job of this.

  15. Lee Blaylock

    My (now deceased) mentor, Vin Prothro, co-founder of Mostek with LJ Sevin and Ben Rosen and later a VC fund called Southwest Enterprise Assoc w Dick Kramlich of NEA (Dick’s wife went to HS w Vin) and later founded Dallas Semiconductor (sold to Maxim when Vin died) gave me very similar advice as Fred posted:31% market30% team20% productthe rest is valuation, location, cycle of the fund, etc…His belief is you can take formulas of variables (like weak/strong/neutral) of Market, Team, Product and ultimately come up with a rationalization of what he believes comes down to a gut feel on the deal.As he shared with me:Market is hardest to changeTeam’s 2nd Product changes are hard, but usually the easiest of the three.There are no absolute, but Fred’s views codify Vin’s even more from my perspective, or vice versa. Thank you Fred for your blog. It is a great community and I have learned a lot from it.

    1. JamesHRH

      Focusing on what you can change is a great lens.

  16. sdso234

    I understand it is useful to have a framework. But at the end of the day, most of these decisions really seem to boil down to a gut reaction to a limited, imperfect set of signals.What is an attractive market? One that exists today, or one that will be huge in the future? What tells you that a market will be huge in the future? What tells you that a founder will be great- past success? Adversity in their past? How they conduct themself in a pitch? What is a good product- one that is getting traction, or one that seems to address needs that are currently latent & unmet?My point is not to judge, but rather to say that Decisions are probably a lot less structured and formalized than rationalists want to acknowledge.

    1. sigmaalgebra

      Right.> What is an attractive market? One that exists today, or one that will be huge in the future?Yes, that one gets me, for the successes of both Plenty of Fish and Amazon: Heck, before Plenty of Fish, and before the Internet and Web got going well, there was romantic matchmaking, and I saw the need for something better and got started. Heck, before Amazon got very far, I guessed that they were going for books, CD/DVDs, and a few more but not much beyond that.I was wrong on both because I didn’t see that in a few years so many people would have (i) Windows PCs with processors several times faster then before and main memory and disk several times larger, (ii) a good TCP/IP stack and Web browsers, (iii) via cable modem connections much faster Internet access speeds, and (iv) okay ability to pay over the Internet. So, net, suddenly, Plenty of Fish and Amazon could send LOTS of good, 600 x 800 pixel or so color JPG files, and Amazon could get PAID.Maybe there were ways to see (i)-(iv) coming so soon, but I didn’t see it.Uh, there SHOULD have been ways:For (i), the hardware, people were doing hard work there, and they knew what they were going for and about when people would have it. So, just have some chats with Intel, Microsoft, Western Digital, Dell, etc. From those 4, could have pulled together the picture.For (ii), the TCP/IP stack, lots of people at Microsoft and Sun had to work for some years to make that real and knew years before what they were going for. There were lots of initially good enough Web browsers, if only Internet Explorer and Firefox.For (iii), for the cable modems: Chat with Scientific Atlanta or whomever and the big cable operators and pull that together — they both knew some years before the common man in the street what they were working on and what was coming. E.g., the cable operators had to put up big capex and opex bucks years in advance to make those speeds go from 300 bps, 9600 bps, 56 Kbps, to 20 Mbps.For (iv), for the payments, lots of people in banking had to work hard to make that happen, and they knew what was coming.Then the last link was just the JPG standard.So, all the pieces were nearly out in plain sight if one just chatted with the right people. Maybe Bezos actually did that — would be interesting to ask him.So, that was a case when with some essentially just journalist level research could have seen the future coming.

      1. sdso234

        For every person like us who may have missed signals, there are one or more who over-read the signals we missed. These are ultimately human decisions, guided by beliefs about the world that are rationalized post-facto.The older I get, the more I become convinced that these beliefs are essentially fixed-positions…change is rare but possible given the right context. I think a lot of the human condition is about our struggle to change.

        1. sigmaalgebra

          Sometimes some people can design, engineer, see, etc. change and be just right and for just the right reasons:When Intel quit fooling around with the 80xx chips and got serious, e.g. 386 and 486, they went, non-stop, direct flight, to the then classic high end versions of general purpose computer architecture, e.g., as done by Multics, …, IBM, and Microsoft followed with the corresponding operating system software. No question; no doubt. They were both right, right away, for just the right reasons.Similarly for reducing microelectronic line widths, what Cisco and Juniper did in routers, what Bell Labs had done in tiny solid state lasers lighting long haul optical fibers, and … for the biggie, what Bell Labs did with transistors. Can also throw in RISC, SQL, RSA, etc.They saw the important change, made it happen, and were right just for the right reasons.

  17. sigmaalgebra

    ForWhen I think about the big wins we have had over the years, they almost all exhibited a combination of a large market, a great product, and a talented founding team.Those three may not be the appropriate, useful, means of prediction for the future and, instead, at times one should concentrate on deeper fundamentals that, yes, won’t fundamentally conflict with that history and might in part explain it, but will be much more useful to crucial for doing well in the future.I know; I know; jockey, horse, course are partly just a joke, but, just clever wording aside, they neglect a LOT. The neglect is not just in the three words but, also in practice, reality. Need more, deeper, better, more fundamental, that is more meaningful and hopefully, credibly causal. As an entrepreneur, I, too, have t bet. It’s a little like bacon and eggs for breakfast: The chicken is involved, and the pig is totally committed. Any entrepreneur is closer to the pig than the chicken.E.g., in 1940 Bell Telephone found that their big wins were based on lots of copper wire, vacuum tubes, and women with plug boards. They were not yet thinking about transistors, solid state lasers, optical fibers, computer controlled switching, digital transmission, wireless with cells, etc. The differences were HUGE.In 1940 the US Army found that their big wins were based on horse drawn artillery, bolt action rifles, and gun powder. They were not thinking about jet engines, guided missiles, radar, the proximity fuse, uranium, or plutonium. The differences were HUGE.In 1970 or so, the US car industry found that their big wins in engines were based on float bowl carbruators, temperature controlled chokes, exhaust pipe heat riser valves, distributor caps, and breaker points. They were not yet thinking about mass air flow sensors, oxygen sensors, and computer controlled fuel, ignition, and transmissions. The differences were HUGE.In 1980, IBM was still thinking about central mainframe computers for big organizations. They were not yet thinking enough about microprocessors, several per person, now for $100 with 8 cores and 4.0 GHz clocks. The differences were HUGE.Quite broadly, in all business, especially in parts where there might be rapid change, it’s dangerous to follow simplistic patterns seen in from the past. Instead, need to look for stronger, more important, more fundamental causes and possibilities.

    1. Lawrence Brass

      Some people say don’t focus too much on the past because it drags you back. I think that the past is full of useful patterns. I divide the set of patterns in two main categories: The ones about yourself interacting with life and those of historic nature.We are here, at this moment in time, as a consequence of innumerable personal and historic events chained together in the most unexpected ways. People we knew and that left a mark in our lives, people we didn’t knew but that we supported or voted for, people who supported us, people we loved and the ones we still love.All the mostly anonymous and dedicated workers of each of the quantum steps involved in the stories you mention represents a dot in the line, a contribution. We usually admire the ones at the top the led these processes, some of them shining and hard drivers that won the moment many times stealing it from others. We forget the smaller contributors which probably were more opaque and perhaps also more rightful and that connected two dots without which this version of the future we call present would happen. I say that one of the most important “fundamental causes” is us, humans, and our endless curiosity.I am an advocate of the Jobsian “connect the dots” philosophy. Work hard, but don’t expect the outcomes to come right out of where you think they will come. Maybe it is an energetic thing. Increase the energy levels and something will happen.Apparently there is so much chance in a big win but I think there isn’t. It’s hard work of many people, persistence and hard playing sometimes. Luck plays its part on the hand you get at each turn but the outcome has more to do with deeply understanding the patterns, deeply understanding how this machine works and learning to play the game as a team.

      1. sigmaalgebra

        My comment tried to be in the context of Fred’s; I was trying to understand better, call it, pre-seed project evaluation and look for something in some ways better than what Fred described. What he described has worked at least for him, likely for most in VC that were successful, but as an entrepreneur I want better chances and, for that, better means of project evaluation.But we can expand the context and ask, at least something like you seem to be, if we can see where human projects or those of nature have some predictability?The range of predictability, from (A) nearly none to (B) shockingly good, is astounding:For (A) each fall we could pick a leaf, watch it until it falls and know that we don’t know with much accuracy when it will fall, where it will land, or which side will be up!For (B) it now appears that there was no doubt: The naughty guy in his room with his computer clicks on Big Bang and right away some big clouds of dark matter collapse into black holes of several billion solar masses, generate the architecture of galaxies, then stars, then supernova stars that throw out all the elements of the periodic table, that condense, form planets, start life, filter to astounding genetic precision in step by step development, in two ways, ontogeny recapitulates phylogeny, to intelligence that understands all that. I believe — for that whole sequence, no darned doubt, for the whole 13.8 billion years! And all the while, at the low level it is all the chaos of quantum mechanics which, somehow, didn’t mess up the big picture at all.And there’s a lot between (A) and (B): For (A), how many people who worked early on on the TCP/IP stack envisioned Google, Facebook, and Amazon and, more important, the billions of Web pages? How many people who worked on 9 track tape drives saw a little box for $100 with 4 TB and USB at 6 Gbps? How many people who did see transistors saw an 8 core processor with 64 bit addressing, a very complicated instruction set, with a 4.0 GHz clock in a package about the size of that for a Tiffany wedding ring for $100? Heck, to get to a meeting last week, I relented and had my steep driveway plowed — that cost $50!!!! What an astounding incongruous juxtaposition! Likely for many purposes, embedded systems, IOT, we will have ARM, or some RISC, processors going for well under $10 each, maybe lots of 1000 for $100?More toward (B) in project evaluation, but still nothing like what appears to be the railroad track certainty from the Big Bang to us, we predicted with excellent accuracy the atom bomb, the H-bomb, jet engines, high bypass jet engines, transistors, optical fiber communications, the SSBN submarines, the SR-71, the Keyhole satellite and the civilian version Hubble, CAT scans, installing a stent in a coronary artery with less pain and bother than a tooth filling or even just a manicure, and, for the amazing moment of this year, LIGO.So, we have a wide range of what is predictable!Why? Ah, I’m still working on that one! I’m working on it because last week I had some unpredictable exogenous interruptions (UEI) in the work of my startup and need to do something, e.g., LIGO, predictability, go back to my old not very good E&M physics course and give a very critical review, WITH the connections with quantum field theory, of Maxwell’s equations, watch a few more segments of Adams at MIT on quantum mechanics, can only pay attention intuitively because his math is so awful, and see a few old movies. Then back to work until the next UEI.Without such UEI, it’ll be alpha test time after just some more data gathering, and there I might find a way to make that go quickly, modulo UEI. The Big Bang button was predictable and right on track for 13.8 billion years, but I’m struggling with just UEI!!!!

  18. OurielOhayon

    not sure the jockey/horse analogy works. the horse existence is not caused by the jockey. the jockey inherited from an animal. all he did is train and products are one and the same. it s like a work of art and an artist. or music and a band. it s all going together.i don t think there is a distinction. The relevance of the team for the product/idea is fundamental. You can have fantastic entrepreneurs for an idea that is not supposed to be theirs (in that sense some jockeys might not be the right one for the same horse to win)

  19. awaldstein

    It’s real but i think you can address it head on. And push it aside in your case.

  20. conlinm1

    When posting thoughts on age bias… which usually means the founders are relatively young… don’t forget that age bias can also occur when the founders are older! If you decide to address this topic, some of your audience would love to hear your thoughts about age bias for older founders too. But, regardless of the age of the founders, the same formula should apply for market size, product fit, and team.

  21. JamesHRH

    I believe your response is something like ‘Ray Kroc, a$$hole.’

  22. BillMcNeely

    Mutual respect. I just joined where I am 14 to 20 years older than everyone. You have to be open to your own bias, strengths and weaknesses to make things work.

  23. awaldstein

    I don’t want to get into this now but of course understand.Just wait, it gets harder and you get to the point where you have to build teams where you are not the CEO to get it done.

  24. awaldstein

    Putting criteria behind feeling good about something is a skewed intersection of subjective intuitions and arbitrary baselines.Just like most things in life itself.

  25. JLM

    .Bad news, amigo. At 51, you are not even fully baked yet. Fully marinated, not fully baked.Youth understands youth, but has no inkling of the wisdom of age.Age was once youthful, understands youth, and has a complete knowledge of the wisdom of age.I have been a founder, entrepreneur, CEO of private and public companies for 33 years. Two of them flirted with 500-1,000 employees.I know stuff. I know stuff that one has to buy at full retail over years and years of practicum.There are people who are old at 30; and there are people who are youthful at 95.I know of a situation in ATX wherein a 94 year old inventor/scientist/entrepreneur is doing fabulous work on what will become the answer to battery life for electric cars and other applications.John Goodenough invented the lithium-ion battery. Now, he is making a much better mousetrap.…Guy is 94.The question is not how old are you measured in passages around the sun. It is how old is your heart and brain?You are an adolescent, amigo.JLMwww.themusingsofthebigredca…

  26. TeddyBeingTeddy

    I like the cut of your jib, JLM. I’d like to offer you 5x for your next business once it reaches that point where the key man is no longer key. I’ll throw in a closing dinner at Margaritaville in Montego Bay…

  27. sigmaalgebra


  28. sigmaalgebra

    Maybe that’s why a lot of people say they bet on the jockey — they knew a lot less about the potential of the horse and still less about the course. Net, the jockey is about all they had much information about.

  29. cavepainting

    the problem i see is the following: to get to a $35m cash flow business in tech and say at 15% net margins (which is reasonably healthy at steady state), we are looking at ~$230m revenue — assuming net margin is a proxy for cash flow which is not always true.Getting there at least in high tech (say a SaaS type business) without external capital is generally hard. It is surely possible in a services business over a longer period of time or if you are self funding the business from past exits.Also, how do you derive a 2X premium for every 10% in CAGR? Is it linear? As in if CAGR is 40%, do you apply a 8X? I wonder if you have considered adding net margin % and CAGR% and apply a blended valuation multiple. That might be more appropriate because it also reflects the trade-off and tension between the two.

  30. sigmaalgebra

    How ’bout Plenty of Fish — long just one guy, owned 100%, two old Dell servers, Microsoft software with ASP.NET for the Web pages and ADO.NET and SQL Server for the database, ads just via Google, and $10 million a year in revenue, likely over $9 million pre-tax earnings.Grew to 70 people and sold out for $500+ million.Slam, bam, thank you ma’am.I tried that but gave up too soon: IBM claimed that their OS/2 was good for such multi-media. It wasn’t, and I gave up. A few years later, Microsoft, Firefox, the cable modems, JPG, .NET, ASP.NET, ADO.NET, SQL Server WERE ready.Uh, the 100,000 lines of typing and 24,000 programming language statements for the production ready code for my startup are based on, right (before I knew that Plenty of Fish used the same foundation) Microsoft, .NET, ASP.NET for the Web pages, and ADO.NET and SQL Server for the database.By the way, I just typed into my favorite programmable text editor KEdit and never touched an IDE (integrated development environment), e.g., Visual Studio. Worked find. Debugging? No biggie.Also I wrote the code — sit down for this one — in Visual Basic. So, lots of people will laugh at that! The laugh is on them, their ignorance! Yes, there have been various versions of Basic, back to Kemeny and Kurtz, Dartmouth, and GE. And Microsoft had Visual Basic, intended for beginners.But Visual Basic .NET, what I used, is essentially all there is on Windows, that is, a perfectly good or nearly so way to get to all the rest in the CLR (Common Language Runtime) and .NET Framework and its hundreds or thousands of software objects, many thousands of Microsoft Web pages of documentation, etc.And for the crucial, core essentially scientific, engineering software, more Visual Basic. Works fine.The main alternative is C# which borrows syntax from the deliberately idiosyncratic C, a toy, designed to run on an 8 KB early DEC computer and C++, early on just a Bell Labs style preprocessor (Bell was big on preprocessors, e.g., RATFOR, Rational Fortran so could do, say, if-then-else in Fortran, a NIT if there ever was one) to C.The Visual Basic I used was the .NET version and, compared with C#, is easier to teach, learn, read, and write, is less error prone and easier to debug.A LOT of programmers grew up with C/C++ if only because that was the expected way to use the early Microsoft foundation software System32 (now largely replaced by or covered over by .NET) and paid the price in pain and agony, and are proud of it, to try to do big software with toy tools, farming 4000 acres with the tools of a flower box.A lot of people believe that C/C++ is high performance — no it’s not. Fortran beats it badly in array handling, especially across subroutine calls (C can’t compile arrays and Fortran does and is much faster), and PL/I beats it badly there, for data structures (a LOT less indirection and a LOT of use of fast, standard array indexing), and especially for string handling (C can’t compile strings; PL/I does; C is too slow; PL/I is MUCH faster; the PL/I team discovered early on that boxes of subroutines for string handling, which C and Fortran had to do, were TOO DARNED SLOW and PL/I’s compiling is MUCH faster; some people in computer science are a bit slow to see this), and even Visual Basic has a shot at beating it for applications software. C/C++ is painful to learn and awkward and inefficient to write and especially tough to debug. Lots of people with lots of experience for lots of good reasons have concluded and explained that no serious, large applications project should use C/C++.The people who got devoted, by pain, to C/C++ should grow up: C/C++ were big steps backward in programming languages the first day they were thought of — Fortran, Algol, and especially PL/I were already far ahead in design, features, and rock solid production software.C++ is in its details is tough to understand: There’s at least one person who clearly really doesn’t understand it, Stroustrup. I’ve written some C code when I had to, but I never had to write C++ code and gave up on that.Net, the people who laughed at my using Visual Basic .NET are showing (i) their ignorance and (ii) how easy it is to best them in making decisions on software development!!!!Ah, so far I own 100% of nothing, am a sole, solo founder! But I can’t be fired and waste no time mud wrestling with Boards of Directors, and the first $1 of revenue will be 100% pre-tax MINE. And the first $100,000 will be well over $80,000 pre-tax earnings!!!!! And if like Plenty of Fish I grow to revenue of $10 million a year, then well over $9 million will be pre-tax earnings. We’re talking small, tiny, OVERHEAD, capex, and opex, and JUICY, delicious margins! And, on market size, if initially people like my work, then nearly everyone on the Internet, 2+ billion people, should like my work. If I’m getting $9+ million a year in pre-tax earnings, what the heck do I need or want with a term sheet, equity check, vesting schedule, and BoD? With the vesting schedule, I will suddenly go from owning 100% to owning 0% with some chance, if the BoD doesn’t fire me first, which it is in their fiduciary responsibility to do, to get back over some years to what, maybe 30%? Looks like a bummer to me. Or as already in the comments here today, equity funding is not for all businesses!

  31. TeddyBeingTeddy

    Deal. Will be 100% financed via earn out paid by the company’s cash flow of course. But knowing you always hit your projections, I look forward to the closing dinner

  32. Mark Essel

    Had no idea about Goodenough and his name is cracking me up a little. The battery is never Good enough John ;)I don’t know about you folks, but I have less spontaneous energy than I had in my twenties. What I have instead is more finely honed pattern matching to avoid dead ends, and a couple of decades of thoughtful walking 60 miles a week.Also, I’m having more fun now than I have ever had working before. I should have went into business for myself sooner!

  33. awaldstein

    Relevance is a topic universally impacting everyone every day.That is the undertheme in this post about Beginners Mind.Beginner’s Mind—a tool for calibrating relevance in daily life