BY aarrieta
Reading SiliconBaires, the personal blog of Maximiliano Guerra (very succesful entrepreneur, founder of Comunia in the dot com ages, ArchPartners and some other entrepreneurs), it called my attention an article called “The market is the “King”, where he answers an article “The matrix of the Angel Investor” from Damian Voltes. In both articles they are trying to answer the question “What is better, investing in a project that is not so good but with great management or in a star project but with a mediocre management? or as Max reformulate it: What is better, investing in a project with a “top team”, a spectacular “product” and a “low” level demand or on a project with “lower level” team, a not very developed “product” and a market with a really high “demand”?
My opinion in reference to this and without turning this into a sophistic argument, is that the team is more important than the market, since if the team is good it can redefine the market focusing on a new market, discovering the best way of applying the competent core of the company, regardless of the product they have.
Products have cycle and they die, companies can relive redefining each aspect of the product, market and team within their competent core.
When we founded together with Damian Voltes Digital Ventures, with the long term vision of setting up an incubator of projects related to the Internet, our first market target was free Internet users, we set up several free vertical Internet models based on donations, rebate, generic brands, franchises, plain vanilla and we explored more profitable markets such as UK or Chile. Even though we did well and all the businesses were highly profitable, we would be bankrupt today if we had tied up ourselves to that market, because the market downsized to almost disappearing (today 93% of households are connected through broad band according to Carrier and Asoc.). the team was the thing that help us take advantage of our competent core – to attract users-clients using online marketing, to incubate a performance agency, later turn it into a network and adding other online marketing disciplines such us Inzearch, afiliados, etc.
Another important side note is what I consider a “top team”, can differ a lot from the rest of the people. Personally I value more the “hunger” for success, than where the MBA comes from (without belittle it), to understand the degree of contribution that they give to the project and what is the cost of opportunity, the strength of the competent core versus general management issues domain (HR, finance, legal, administration, sales, purchase, general negotiation, leadership, etc.)
Even though when analyzing investment projects specially start-ups, it is necessary to analyze dozens of parameters not only the team, or the product, this methodology does not ensure success but allows you to have more elements when making a decision.
Some of the parameters to take into account when considering a project are: the team, the know how, industry experience, the amount of projects that went bankrupt, the chemistry between them, the degree of openness when listening to advise, the chemistry of the investors, how complex is the deal, the stringency attitude of the team (corporate vs. bootstrapers). The market, which should be at least extensive to Latam and to the rest of the world on a second stage, a growing market, that the product add value to this market, that the technological adoption has gone beyond Moore’s Chasm. The product, one that can escalate ideally without people to escalate it lineally, that has a valuable comparison (mercadolibre-ebay, olx-craigslist, sonico-facebook), that traffics bits and not atoms, that can provide all markets without physical presence on each one, that innovation wouldn’t be only technological. Competition, direct or indirect, potential of disruption. Other threats, players in other markets, technological, regulations, taxes, etc.
As a conclusion, market is very important may be more than other aspects that were mentioned before, but having a team that can redefine and reinvent itself, the market can be changed. If the market is the King the team must be God or at least believe so, since in its hands it has the capacity of creating a product that adapts to the market that the team chooses.
Even the king needs to follow God’s orders