Every startup has to deal with the trinity. None can escape it. Not knowing how to properly handle the trinity will lead to a dead idea. Most startups might get one or two right. These ideas end up dying on the vine. The successful funded ideas hit all three out of the park.
Having all three is no guarantee of success but having half-backed, unclear thinking on any one is a receipt for failure. Every venture capitalist uses them as part of their funding criteria. They will never fund a company that is not outstanding in Market, Technology and Team.
Market
The market for what you will be selling is the most important of the three. Without a market, it does not matter how cool your new gadget is or how great a team you have. Most technology professionals completely miss the mark on the market. They figure that if they build it, the customers will come. That rarely happens. Rather, it is important to find a real need that customers are willing to pay for. Preferably, it’s a need that you and only you can fill.
Finding a need usually involves understanding the market place so well that someone on your team is considered a market expert. Picking a market where you are less than an expert will be a challenge since you will have to obtain market expertise. That will take time and add to the market risk. Never good when trying to raise money.
Market size is also an important factor. The preferred size is one with billions after the number: billions of users, tens of billions of dollars, etc. Markets without billions are not as interesting to venture capitalist. The mental math has to work out to be a hundreds of million dollar business in three to five years. You can only get there with markets with billions after the number.
Technology
Once you find a need, the next step is to figure out how to address it. The technology piece of the trinity is where most Silicon Valley startups focus their time. It’s best to protect your great idea up front before things get moving. This mitigates the potential for others to steal your idea and gains you some credibility. It also shows that you have thought about how to build your technology.
The technology piece also needs a credible expert on the team that understands how to build it. Not having a creditable technology guru will be a big red flag for an investor. Not having a rational plan for technology implementation sets the red flag on fire.
Team
Your team needs to be rock stars. Their sole job is to convince investors that they are the only ones in the world that can pull off this off. Investors need to understand the teams strengths and weakness as well as how team members complement each other. An initially large executive is another red flag. No early stage startup needs more than a CEO, VP of Sales/Marketing and VP of Engineering. Once things get going, additional executives may be required. In the end, the investor needs to trust the team. If they don’t, the deal will never get done – no matter how good it is.
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Startup’s are risky. It takes a dedicated group of people to pull it off. Most will fail, others will limp, while others will soar. Understanding the startup trinity will ensure that any idea you might have is vetted before wasting your time. Remember, it takes all three being perfect in order to have a shot at getting funded and being successful.
[…] a previous post, we talked about the startup trinity and how everything needs to be perfect in order to raise money. The vehicle to bring those three […]