When starting a new business, you want to be sure that you are addressing a business problem that you are the single best person on the planet to solve. One way that VCs like to express this concept is with the term founder market fit. It’s one of my personal favorite things to look for when I consider investing in a startup. When I think about this term, I am generally evaluating the founder on a few critical questions. First, are they deeply passionate about the problem they are trying to solve? Second, do they have a market insight that is unique? Third, do they have contacts and relationships in that market to help them win? When a founder ticks all of these boxes, then they usually have founder market fit and a great chance to breakout.
On the first point around passion, I’ll share a story from my own experience. When I started my high school sports startup Sportal, it was after spending 10 years as a youth sports dad, coach, assistant coach, and team manager. I hated the way everything in that space worked, and I wanted to make it better for future sports parents. That is passion. I can also illustrate this idea with a story that demonstrates the opposite. We met with a founder last year that was an ace social media marketer. The founder said that he saw that D2C retail subscription customers were easily acquired through social posts and then went about trying to figure out a market that he thought would make for a good subscription product. To him, it was a science experiment not a passion. His business actually went well, but it was not a good founding story.
Moving to the second point around having a market insight, some people talk about a founder knowing a “secret”. This might be a big technological change that is starting to take hold that most people don’t realize is going to shock a market. It might be a change in customer behavior that will make it hard on incumbent leaders. This could be a change to the regulatory environment. When a founder understands a market so deeply that they know about a shift before everyone else, that is a big check mark in the “yes” column.
The last point is around contacts in the industry. In a prior post, I shared that we generally look for founders that have lived in the markets they want to disrupt. This allows them to have access to key decision makers at potential partners and customers and influencers within that industry. This access can jump start a fledgling startup and allow them to punch above their weight while trying to gain traction and grow. It can be a huge help.
When all three of these things come together for a founder, I would say you have achieved founder market fit. Don’t have this for your startup? Then my guess is that either you are chasing the wrong idea or at the very least you need to bring on a co-founder that fills the holes.