Over the last couple of weeks, I’ve been working with some truly spectacular founders. One guy was a three-star general at one point. Another is in the U.S. because his research is so far ahead of the AI learning curve that the U.S. State Department issued him an O-1 extraordinary ability visa. Another had a doctorate and a stack of patents in his name.
If you’re working at a VC firm, it isn’t unusual to meet such extraordinary people. You’ll see a steady stream of people waltzing in with pitch decks, prototypes and résumés. VCs are on a perpetual quest to discover and invest in extraordinary startups, those rare gems with the potential to disrupt markets, innovate industries, and disrupt the hell out of everything in sight. And if you’re an aspiring startup founder, you may wonder if you have what it takes to attract such investment and thrive in the competitive startup ecosystem.
Unfortunately, what I’m seeing out on the fundraising trail right now is that if you don’t have perfect founder-market fit, fundraising is getting hard.
Of course, that got me thinking about my own startups. If I map myself against the standards of fundraising today, none of my startups would’ve had a gnat’s shadow’s chance of raising money.
I didn’t have, and still don’t, the perfect founder-market fit for any of the companies I founded. Enthusiasm? Sure. A brain wired for operationalizing complex processes? Absolutely. A reckless disregard for what all of this would do to my mental health? I’ll show you the therapy bills.
Seriously, though, in a world where the majority of startups fail (at the earliest stages, a 3x return is a failure) and large, outsized returns is the name of the game, you need to take a good, hard look at yourself. Do you have the X factor? I sure didn’t.
You know what they say, “If you can’t hack it in the real world, become a columnist who opines about how everyone else should live their lives.” So here we go.
Passion and enthusiasm are the forces that drive every successful startup, but they aren’t enough. Investors are going to look to you to figure out whether you have a set of unfair advantages that makes your company likelier to succeed than the previous 20 variations of the same idea they’ve been pitched.
Founder-market fit is the alignment of a founder’s skills, experiences and passions with the market they are targeting. This fit is not just about having a great idea or being a competent entrepreneur; it’s about having the right founder tackling the right problem. A founder with a deep understanding of the market, either through personal experience or professional background, is more likely to anticipate the needs and challenges of that market.
This is distinct from the product-market fit metric Marc Andreessen describes, which is the stage where a product satisfies a strong market demand.
Product-market fit is about the relationship between what you’re offering and who’s willing to buy it. Founder-market fit is about the alignment between who’s creating the offering and the market they’re targeting.
If you can show product-market fit, the founder-market fit part doesn’t really matter anymore; one de-risks the other in the staged de-risking process that is a startup’s life.
Why does it matter and how do you know?
In the early days of a startup’s life, founders will have to manage a limited resource pool and make the correct strategic decisions. A founder with a strong market fit can navigate these early challenges more effectively because they know things that other founders don’t and so can make informed decisions about product development, marketing strategies and customer acquisition. Their deep market knowledge allows them to identify and capitalize on opportunities that others might miss, or anticipate and mitigate potential challenges.
As a founder, you’ve got to do a self-assessment of your founder-market fit before you start talking to investors. Various tools and frameworks can help in this process. I’ve had some success with the founder’s “Experience Map,” using which founders can chart their experiences, skills and knowledge against the needs and challenges of the market they aim to serve. This visual tool helps you identify gaps and strengths in your market fit.
It can also be useful to take the immersion approach. This involves engaging with your target market through customer interviews or industry research. While this hands-on approach helps enhance your understanding of the market, it also demonstrates your commitment and insight to investors.
The purpose of doing this is to learn, yes, but the very best founders are usually so deeply integrated into the market that they aren’t surprised by anything they learn: They are already the experts.
I often ask my pitch coaching clients a trick question: “Have you done any customer research?” If yes, did what they learn surprise them?
In a roundabout way, this is an almost perfect predictor of fundraising success: If a founder had multiple mind-blowing moments in customer interviews, it makes for a great story, but it means they don’t know their target market as well as they ought to. Ironically, that could be a red flag.
The hard thing about founder-market fit is that you can’t fake it — you either have it or you don’t. The good news is that if you’re really that passionate about the startup you’re going to build to solve a problem, you’ll gladly learn and research everything you know in order to become that expert. Take a job in the industry for a few years, join another startup, find some ways to soak up as much information as you can, and make a note of all the bright people you meet along the way. They’ll be at the top of your list once you start hiring for your own company.