by Lionesses of Africa Operations Department
“Market matters most; neither a stellar team nor fantastic product will redeem a bad market. Markets that don’t exist don’t care how smart you are.” - Marc Andreesen, founder of ‘a16z’ fund.
It is incredible just how many entrepreneurs forget this basic lesson. Invent a product that is the greatest, the most beautiful, most perfect, it solves every issue, so much so that it seems to have been touched by the gods, has been dipped into the river of eternal life, shines and sparkles like nothing seen before (think you get the idea)…yet has no market - it will simply remain a product with no market. That’s it. Dull as ditch water. The thing that will move? Your bank balance, and believe us when we say, not in the right direction!
Of course you could be too early to the market with your super-shiny ‘gift from the gods’. Then you need big pockets to allow you the patience to wait out the time while everyone works out what you are going on about (“The automobile will replace the horse…” kinda thing) - and even then there is certainly no guarantee of success - absolutely no guarantee. Perhaps far better to wait for the dust to settle from the battles of those who created the market and you can walk in over the bones of those who went before you…Martin Cooper (Motorola engineer) was the inventor of the first cell phone in April 1973 into which the Motorola pumped over $100 million (serious cash in those days) over the next 20 years before any revenues appeared, meanwhile, waiting in the wings…Steve Jobs and Apple entered with the iPhone on 9 January 2007. Yes, 34 years later. Compare 2023 market share in the smartphone market and one of those is nowhere to be seen (you can guess which!).
Market research is essential - this is the ‘look before you leap’ moment - you know, the advice our grandmothers always gave us? That one.
The odds against entrepreneurs quite frankly are stacked against us. Less than 1% of those who submit a business plan to VC or Angel investors are successful. Think that untrue? Sadly it’s not - and worse for Lionesses, 98% of that cash goes to those businesses with one or more males involved as founders (as we have written about constantly over the years - here’s just one such article - ‘Equality without Equity sucks!’).
Marc and his team at ‘a16z’ look at 3,000 of the 4,000 startups in the USA searching for VC funding each year in a16z’s sectors (Tech). Of those they only look at 200 in depth and of those they only invest in about 20 a year. Yes - 20!! These numbers are similar across the entire VC/PE world - this is how it is, as usual, once we know the rules, we know how to play the game…
So - what makes the difference?
When we work with Lionesses on their Pitch Decks we start by simply asking them to:
1. Demonstrate the problem that exists
2. Show how they solve that problem and importantly why it’s worth solving
3. Prove why they solve it better than anyone else
If investors cannot grasp in double quick time the ‘why’ behind your business - then perhaps it’s simply not a business - you have to go back to the drawing board. For a well spent 10 minutes, please watch Simon Sinek’s Ted Talk where he shows brilliantly that “People don’t buy what you do, they buy why you do it.” here
Can you tell anyone your Why / How / What (in that order)? Crack that and things become easier (easier, not easy).
Not yet ready to sit down with investors? This is not the point, the point is that if you are serious about bringing a new business/product to market, you need to think like a VC/PE investor, you need an external examination on ‘why’ - the need to ‘look before you leap’ is still there, is absolute and must be tested, not through friends and family, but out in the street with people who don’t know you, who won’t worry about hurting your feelings (this is business, far too important for that!).
As the excellent book ‘The New Business Road Test’ by John Mullins (here) shows: “Most opportunities are not what they appear to be, as the business failure statistics demonstrate. Most of them have at least one fatal flaw that renders them vulnerable to all sorts of difficulties that can send a precarious, cash-starved new venture to the scrapheap in a heartbeat…the vast majority of new ventures fail for opportunity-related reasons.
The first on every guru and VC’s list - the opportunity, the market. It is listed first in John’s book for a reason, as Marc Andreesen pointed out in his own blunt but brilliant style, markets really don’t care about you or the product (sorry, but it’s true).
So how can we review our market? Our new BFF John tells us to look at our Market (the buyers - ‘people or organizations and their needs’ - not products) at the Macro and Micro level.
Market size can be measured in many ways – the more the merrier. The number of customers in the market; the total money spent by these customers on these goods (such as the US$ amount of imports of a particular product into a country) and the number of units bought annually, are great places to start. Want to sell high quality safety boots to the local construction industry at an average of $80 each and imports suggested the average price (assuming a retail mark up) was close to $30, then you have a problem. Drill down that further and one might find that the workers themselves are responsible for purchasing their own boots (on their salaries and on their short term contracts, cheap, not quality often wins), this becomes a problem.
Yet round the corner there is a shop selling a lot of high end safety shoes - how do they do it and pay rent and salaries and… Perhaps they do a deal direct with the companies themselves, offering vouchers… however they do it, it is your role to find out why and how. Not to copy and compete, but to adapt your product and/or offering to slip into the market.
How fast has this market been growing? Is this a NFT Boom and Bust? (90% of NFT’s are now worthless, but only a year ago ‘everyone’ was getting in on the game - ouch!) Or is this a trend that will continue such as linked to Climate Change?
At the micro level, please remember this is not about you, this is not about your fabulous product - this is all about customers. “Successful entrepreneurial ventures are about serving customers and their needs and resolving their pain. Not just any customers. Target customers.” (John again)
For this you have to ask the following micro level questions:
"Is there a target market segment where we might enter the market in which we offer the customer clear and compelling benefits, or - better yet - resolve their pain, at a price [they] are willing to pay?
Are these benefits, in the customers’ minds, different from or superior in some way…to what’s currently offered by other solutions?
How large is this segment, and how fast is it growing?
Is it likely that our entry into this segment will provide us entry into other segments that we may wish to target in the future?”
Please note the language, this is not a ‘might’ or ‘maybe’, this is strong - ‘clear and compelling’; ‘resolve’ and actually ‘willing to pay’.
These are the issues, reasons and routes to success (or failure) that you have to review for your market. Drill deep. When you come up against a brick wall - ask why won’t this work. You may find a way around the problem…
…or, it may be an Achilles Heel.
Given the amount of businesses that go bust and products that fail, chances sadly are high that this will be the Achilles Heel. Your product is perfect, it has been touched by the gods and dipped into the river of eternal fortune, but your eyes so full of love and joy missed that one area, that one part, the one flaw that was forgotten as you held your product, your gift to the world, in the river of the gods. Just like Achilles’ mother you might miss this one area that makes your product mortal, but believe us, the market never will.
This is actually not all bad news - far better to abandon the product or business then, before serious money is spent and it drags you down. Unlike Achilles, you can then live to fight another day.
Stay safe.