What Matters Most in a Startup?

eople often ask me what I think is the key factor for a company to achieve its goals, given that I’ve created half a dozen startups—some of them quite successful.

I don’t think it’s just one thing. It’s actually a specific combination of elements—some under our control, others not. I focus on controllable or influenceable ones. The ones beyond our control, like a global pandemic, dramatic technological shifts, or unfair competition, I don’t factor in because they’re nearly impossible to predict.

Whenever I’ve acted as a business angel or project founder, I’ve always considered three fundamental points before deciding whether to get involved. Once these are resolved, I move on to the next level of detail. But if these three requirements aren’t met, I don't consider them.

The Market

The first factor I evaluate is the market. If you’re creating something to improve or solve a problem, the first thing to know is whether:

a) People are willing to pay for it.
b) How many people would.
c) Who else is selling in that market.
d) And how that market will evolve in the future (since companies are primarily focused on the future, not the present).

These are four simple questions, but they effectively illustrate the sales potential that might exist—if (and that’s a big “if”) the company executes as expected.

Because even if all these questions are answered correctly, the company might fail and not capture that value. That’s why I examine the second factor: the product.

The Product

By “product,” I mean any product or service, whether tangible or intangible.

I’ve created or invested in all kinds of companies—not just software or internet-based ones. Whether it’s a restaurant, a fund, or a big data firm, they all have a market to sell their product to.

If the market is large enough, with just the right amount of competition (if there’s none, that’s unusual…) and shows growth potential, you need to see if the product meets market demand—or will.

This is known as Product-Market Fit. Often, achieving that fit takes time, and I usually see companies before they’ve reached it. That’s why I tend to focus more on what’s theoretically created. I also aim to understand that theory and determine whether it will effectively meet market demand or improve upon what already exists.

Often, it’s an exercise in imagination, as I tend to get involved in projects at a very early stage. This is why, in many cases, the next step for the company isn’t selling but testing certain hypotheses and validating theories. Once that validation is achieved, it's time to sell like crazy.

These tasks—creating a product from scratch, validating the theories behind its design, and selling it—are incredibly complex. In fact, people often underestimate how challenging they are and how much effort they require.

The Founders

That’s why, for me, the third point is the most relevant of the three: the founders.

Companies are made up of people, ideas, and processes. But the most valuable component is people. Executing a business plan, developing a product, or selling it are challenging tasks. That’s why, for me, the most important thing—alongside the market and the product—is who’s behind the project.

At some point, we might misinterpret the data (market and product), but the founding team can steer the project back on track. Conversely, an excellent product in a large market can fail if the team isn’t up to the challenge.

I know that when I invest, I’m not putting money into a company; I’m entrusting it to a team of people—people with their own motivations, skills, strengths, and weaknesses. Everything depends on them, at least until the company reaches maturity where they’re not as critical.

I’m talking about founders because they’re the ones who carry the weight of the business from the start, so they’re inevitably involved. Some companies start with professional teams, which is great, but there’s no guarantee they’ll stick around, potentially harming the project.

An idea's foundation is its founders. If they’re not both solid and flexible, the project will be poorly executed or fail to grow properly.

The Importance of Founders in Unpredictable Situations

As I mentioned at the beginning, there are factors we can control to varying degrees and others we cannot. The importance of the founding team becomes especially evident in the latter—when the project faces unknown and unforeseen challenges (and every project eventually does). If the team is right, they’ll turn a crisis into an opportunity.

Final Thoughts

In the next post, I’ll share the elements I look for in a team—whether to start a project or investing in one. But for now, remember this: more often than not, it’s better to start by finding the right team before deciding what product to sell or which market to target.

The team comes first.

Where to find me

• Twitter: https://twitter.com/NachoLucea
• Instagram: https://www.instagram.com/nacholucea/
• YouTube: https://www.youtube.com/channel/UC6vRcumzUfp1vL55aUdlmtg
• Linkedin: www.linkedin.com/in/ignacio-lucea