Before “Product-Market Fit”, start with “Team-Idea Fit”

On June 9, 2012 by murat

I’ve been thinking a lot recently about how the “team-idea fit” really defines a startup’s success.

After making some investments through ERA (more than 30) and being fortunate enough to see and work together with more than 250 startups that pitched at ER events over the past 5 years, I feel like I can try to be helpful to teams in search of ideas by the following tips.

(By the way, Entrepreneurs Roundtable 48 is coming up later this month, ERA Summer 2012 just launched and the next ERA program is coming up in January 2013)

Over my learning experiences, I’ve seen that when the background of the team matches the problem at hand, miracles happen.

The Lost Team

We all know someone or some team that constantly ponders the question “What shall we work on?”. They want to start a company but they just don’t know what idea to work on. They are a great team, capable and hard-working but they just cannot seem to find that one idea that will propel them right into an IPO (not that one ). They constantly brainstorm, go to hackathons, talk to everyone, ask around about which of their 10 ideas is a good one, etc.

What I’ve seen doesn’t work:

Copy-paste: When teams pick ideas by cloning other startup-du-jour’s without considering their own backgrounds. Example:
* “Words with Friends” but with a minor little twist.

When teams pick ideas that assume the distribution power of Google or Facebook, again without thinking about their backgrounds. Example:
*A “new” social network where everybody enters their wishlist, and friends vote on the wishes and you get pink unicorns when you make the most-voted wish happen.

Mismatches: The team picks an idea in a very specialized area that needs vertical expertise and they don’t have it. Example:
* We will change the home services industry by aggregating all user demand and supply and charging a commission on both sides. Go to market strategy? SEO/SEM.

Intractable behemoths: The team picks an idea that assumes large amounts of movement on supply and demand without a clear way to get there, again in an area that doesn’t match their backgrounds. Example:
* Local businesses list all their inventory online and users sign up to receive alerts when the products they want go on sale or in stock.

What I’ve seen works:

Solve an existing industry problem: The team “recalls” a problem they have seen before in an industry. They personally had this problem and that they are intimately familiar with it. They build an MVP around it and work towards product market fit easily.
Example: See problems with credit card loyalty programs while at large company, leave to start a loyalty rewards startup that addresses these problems.

Spot a new opportunity in an industry: The team “identifies” a new or emerging problem in an industry they are familiary with and builds the company around it.
Example: Recognize that social bookmarking is sending more click-throughs to e-commerce websites than anything else and apply adtech industry expertise to build a company around this.

Apply expertise to new problem: The team sees a new opportunity in a new market where they can apply their existing expertise to solve it.
Example: Use previous experience in logistics to launch a wildly successful e-commerce company with a new subscription model.

Of course, there are infinite ways to come up with a great idea for a given team, I’ve just seen that the above examples work wonders and wanted to pass it along hoping it might help a team out there.

(Thanks to Jon Axelrod and Charlie Kemper for ideas and reading early versions of this.)

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