Discover more from seeking disruption
Founders vs Markets: Does AI Give An Answer?
A test of Don Valentine's legendary startup framework
What's more important for startup success, founders or markets?
Sequoia Capital founder & industry legend Don Valentine famously said it's all about the markets. His talk to the Stanford GSB in 2010 is a must-watch for anyone interested in venture capital.
Starting around minute 4, Valentine says:
…many or most of the people in the venture business historically would tell you they finance the best and brightest, the greatest managers, and all that stuff…we do not...we have always focused on the market…if you don't attack a big market, it's highly unlikely you're ever going to build a big company.
To be clear, Sequoia had invested in and continues to invest in many of the best and brightest. But his point is clear - it’s a “market-centric” view of early stage investing.
Does the AI market’s rapid, recent growth validate Valentine’s market-centric view?
Looking at the surging growth of many AI startups today, the answer seems to be “yes.” If you were working on a vector database 12-24 months ago, it was a grind. Now, the AI market has catapulted startups in this market like Pinecone, Weaviate, and Chroma into hyper-growth & escalating valuations.
Markets 1, Founders 0.
On the other hand, OpenAI's success seems an argument for a more founder-centric & team-centric view. Between their start in 2016 and today, 100’s if not 1000’s of AI startups were founded and funded. Nobody else comes close to OpenAI’s stunning growth.
It was probably inevitable that LLMs were going to cross the chasm at some point, but OpenAI single-handedly pulled this moment forward. The OpenAI founders & team have been extraordinary, going above and beyond their AI startup peers. For that achievement, OpenAI is the most valuable startup in the space, by an order of magnitude.
Markets 1, Founders 1.
Which side will win? Good question!
It’s going to be a lot of fun watching the answer play out over the next few years.
Oh, and can AI answer the question?
I asked ChatGPT, “what's more important for startup success, founders or markets?”
Not surprisingly, GPT4 nails it:
It's difficult to definitively say whether founders or markets are more important for startup success, as both factors are crucial and interdependent. However, each plays a significant role in a startup's performance.
Founders: Strong founders possess the necessary leadership skills, vision, and perseverance to drive a startup forward. They must be able to adapt to changing market conditions, attract and retain top talent, and make smart decisions under pressure. Additionally, founders with deep domain expertise or industry connections can help a startup navigate complex challenges and secure crucial resources.
Markets: A growing, attractive market is essential for a startup's success. Even the most skilled founders will struggle to succeed in a stagnant or overcrowded market. A promising market presents opportunities for growth, innovation, and customer adoption, which can ultimately lead to a startup's success.
In summary, both founders and markets play a significant role in determining the success of a startup. Founders need to possess the right skills and attributes to navigate and capitalize on favorable market conditions. At the same time, a strong market can help propel a startup forward, even if its founders are not perfect. It's the combination of exceptional founders and promising markets that often leads to startup success.
Well done, AI.
Thanks for reading seeking disruption! Subscribe for free to receive new posts and support my work.