Market Always Wins
Finding Strong Product-Market Fit for Your Startup
Early-stage investors often boil startup success down to three factors – team, market, and product. These are like three legs of a stool, all important for stability. There’s long been debate about which leg matters most. Some VCs, like early Silicon Valley pioneer Arthur Rock, argue that backing an exceptional team is paramount. After all, a smart team can pivot and adapt. But others, like Sequoia Capital founder Don Valentine, firmly believe “the marketplace comes first, because you can’t change that, but you can change the people”. In other words, even an A+ team will struggle in a bad market, whereas a B-level team can ride a great market to success.
So, which is truly most important? Let’s explore why many experienced founders and investors say market always wins.
Why the Market Matters More Than Anything
A popular theory in startup land (championed by Marc Andreessen and others) is that product-market fit – and specifically the market – is the biggest determinant of success. The reasoning is straightforward: in a great market, customers are hungry for a solution, any viable solution. Demand is high, almost pulling the product out of the startup’s hands. As Andreessen famously put it, “In a great market… the market pulls product out of the startup. The product doesn’t need to be great; it just has to basically work”. In such a scenario, the market’s momentum will forgive imperfections – “the market doesn’t care how good the team is, as long as the team can produce that viable product”. In other words, if you’re selling something people desperately want, you can screw up many other things and still win. As VC Andy Rachleff quips, “If the dogs are eating the dog food, then you can screw up almost everything… and you will succeed”.
Contrast this with a terrible market: you might have the flashiest product and a world-class team, but no one wants what you’re offering. Andreessen didn’t mince words here either: “In a terrible market, you can have the best product in the world and an absolutely killer team, and it doesn’t matter – you’re going to fail”. You’ll spend years trying to lure customers that just don’t exist, and even a great team will get demoralized and quit. Rachleff’s Law of Startup Success captures it well: “When a great team meets a lousy market, market wins… When a lousy team meets a great market, market wins… When a great team meets a great market, something special happens.” Lack of market demand is the #1 startup killer.
Empirical data backs up the primacy of market. Investor Jeremy Liew cites a McKinsey study analyzing 100 companies: overall market growth explained 43% of the variance in growth rates, whereas differences in execution (market share gained) explained only 22%. Simply put, being in a fast-growing market had roughly twice the impact of superior execution. Or as Liew summarizes, “riding market growth in a fast growing market is a lot easier than trying to take market share in a slow growth market.” Even a mediocre product/team in a booming sector benefits from a “rising tide lifting all boats” effect. On the flip side, if you’re fighting uphill in a stagnant market – trying to sell something people don’t really feel a need for – it’s nearly impossible to win.
I’ve witnessed this dynamic in my own startup journey. A friend of mine, an excellent founder, built a venture (Kyte) with a strong team. But they were battling in a tough market, and despite their talent, product-market fit remained elusive. Similarly, my previous startup Midlane was in the HR software space – a crowded sector that wasn’t rapidly growing. We had a great team and worked hard, but without strong market tailwinds, gaining traction felt like pushing a boulder uphill. In contrast, my first startup Passbase entered the online ID verification (KYC) space at a time when that market was exploding. Cryptocurrency exchanges and fintech companies urgently needed KYC solutions, and we rode that wave. The market demand was so huge that our product adoption naturally grew with minimal marketing – a case of being in the right place at the right time. Our team certainly had to execute well, but the market’s growth did a lot of the heavy lifting.
💡 Lesson learned: A great team is invaluable, but even a stellar team cannot easily overcome a fundamentally bad market, whereas even an average team can prosper in a booming market.
The Product Comes Last (Iterate Until It Fits)
Where does the product itself rank in this hierarchy? Counterintuitively, it’s often third. This isn’t to say you can peddle a terrible product and succeed – you eventually need a great solution – but in early startup stages the product is malleable. If you have a capable team working in a fertile market, they’ll iterate the product until it finds the demand. In a hot market, customers will tell you exactly what they need, and you can adjust accordingly. That’s why investors often claim a great market + great team will inevitably find product-market fit if they keep tinkering. The core product idea might pivot two or three times before locking into what the market wants (many founding teams go through false starts and painful pivots before finally unlocking growth ). But as long as you’re in a high-potential market, those iterations are heading in the right direction.
By contrast, a beautifully crafted product in a market with no appetite is just art – it won’t become a business. As one founder/investor mantra goes, “If you address a market that really wants your product, you can mess up lots of things and still succeed. On the other side, if customers don’t want what you’re selling, you have no chance.” In practice, this means it’s often wiser to launch a “good enough” MVP quickly and see if there’s a real market pull, rather than spending years perfecting a product in isolation. You can improve your product, you can even swap out team members, but you can’t swap out a stagnant market for a vibrant one. As Ameet Ranadive concluded in his Market Always Wins essay, “If you choose the wrong market, no matter how great a product you build or how smart your team is, you won’t be able to iterate your way to a big success. An exceptional market will pull product out of the team. A terrible market will inevitably kill the startup.” In short, nail the market selection first, then adapt the product to fit that market’s needs.
How to Find a Great Market: Look for the Shifts
If market selection is so critical, how do you find a great market for your startup idea? Often, breakthrough markets emerge from major shifts – moments of change that create new problems and opportunities. Here are three big types of market shifts to watch for:
Regulatory Changes: Laws and regulations can overnight create a new market or expand an existing one. For example, when Germany deregulated long-distance bus travel in 2013, it opened a huge opportunity that was previously blocked. Startup founders at FlixBus seized this chance – launching as soon as intercity buses were allowed – and quickly scaled to dominate a brand new market. Similarly, changes like new financial regulations or data privacy laws (think GDPR) often spur a wave of startups addressing the needs or loopholes created by those rules.
Technological Shifts: New tech breakthroughs enable products that were not feasible before. A current example is the explosion in artificial intelligence. Advances in AI (especially generative AI) have unlocked use cases from AI coding assistants to AI-generated content. Whenever a technology hits an inflection point (e.g. smartphones in 2007, cloud computing, blockchain, now AI), it’s like new “fast-moving water” enters the river. Founders who jump into those rapids – solving problems with the new tech – can ride that accelerating current. If you suspect a technology is at an exponential takeoff, alarm bells should go off in your head that “something big is happening”.
Black Swan Events: Major unexpected events can dramatically reshape markets. The COVID-19 pandemic, for instance, instantly created massive demand for things like remote collaboration tools, telehealth, delivery services, and yes, nasal swabs and test kits. Companies that pivoted or launched to meet these needs often experienced hyper-growth. Likewise, geopolitical upheavals can spawn new markets. A stark example: Russia’s invasion of Ukraine in 2022 spurred many countries to boost defense spending to record levels, “fueling a new generation of startups” in areas like drones, cybersecurity, and defense tech. In fact, European defense startups attracted 50% more VC funding in 2025 than the year before as governments opened their checkbooks. When the world changes overnight, pain points appear that nobody was addressing – fertile ground for entrepreneurial problem-solvers.
Beyond these, there are other shifts and trends to keep on your radar. Demographic or cultural changes (e.g. aging populations, Gen Z consumer behaviors) can gradually open up enormous needs. Macroeconomic shifts or industry disruptions (like a big incumbent failing or a supply chain breakdown) can leave gaps eager to be filled. The key is to continually “read the river” of technology and society – identify where currents are starting to rush. Ask yourself: What’s newly possible that wasn’t before? What sizable problem is suddenly becoming urgent? A great market often starts as a small trickle that turns into a fast-moving stream.
Conclusion: Team + Market = Inevitable PMF?
When evaluating startup ideas, remember that market is the wind in your sails. A capable crew (team) and a sturdy ship (product) are of course needed – but it’s the wind that determines how fast you go. As the saying goes, “a rising tide lifts all boats.” A huge, growing market can carry even an imperfect product to success, whereas in a shrinking market you might not get anywhere despite flawless execution. So put market analysis front and center: hunt for that fast-moving water where demand is strong and accelerating.
This doesn’t mean team and product don’t matter – they do. A great team in a great market is an unstoppable combination, and ultimately you need to craft a product that satisfies customers. But if you start with a fertile market, everything else becomes so much easier. Your users will be more excited, sales cycles shorter, marketing cheaper, investors more willing – you’ll feel momentum rather than constant friction. As NFX’s James Currier advises founders, if you realize you’re “in an eddy” (slow water), have the courage to steer your company into faster currents – even if it means a pivot. No startup ever succeeds without some degree of product-market fit; your job is to increase the odds of finding it by choosing a winning arena to play in.
In summary, market always wins. So when brainstorming your next venture, ask first: Is this market big, growing, and driven by a real change? If yes, you’re already halfway to product-market fit. Get yourself into a market that’s pulling you forward, then iterate like mad. With a bit of persistence (and yes, a bit of luck), a great market will reveal the product you need to build. And when a great team finally meets a great market – well, “something special happens.” 🚀
Sources: The insights above are informed by lessons from successful investors and founders: Andreessen’s guide to product/market fit, Andy Rachleff’s famous startup laws, Jeremy Liew’s data on market vs. execution, James Currier’s “fast-moving water” metaphor and my own startup experiences. Each reinforces the core idea that choosing the right market is the foundation of finding strong PMF. Remember: choose wisely, and may the market be ever in your favor.