Where to Start: Product, Founder, or Market?
Lessons from 350 Startup Conversations and 20 Investments in 2024
Every early-stage investment comes down to three core elements: a market opportunity, a founding team, and their initial product. The challenge? As an angel investor, you're making big decisions with limited information. The market is often nebulous, the founders are largely unproven, and the product is typically raw.
This trilemma isn't new. Legendary VC firms & individual investors have built their entire investment theses around one of these elements. Sequoia's founder Don Valentine obsessed over market size. Y Combinator & Ron Conway bet heavily on founder quality. Kleiner Perkins made its name backing breakthrough technologies. Each approach has produced billion-dollar wins, yet each tells a different story about what matters most.
During a breakfast conversation in NEAR Protocol's early days, Marc Andreessen shared an interesting framework with us about founder traits. He suggested looking at the Big Five personality traits: successful founders often score high on openness to new experiences, high on disagreeableness, high on conscientiousness, show healthy neuroticism but not super low on it, and can vary between introversion and extroversion. What's particularly fascinating is how these traits often conflict with what's needed later - as companies scale, they typically bring in leaders with almost opposite characteristics.
My own data points are still accumulating. This year, I've evaluated about 350 startups and invested in 20 or so. While this gives me some pattern recognition, I'm humble about the limitations of early data - startups take years to play out, and patterns only emerge over long time horizons. Let me walk you through how I think about products, founders, and markets at this time.
Product quality is best understood as a trajectory, not a snapshot. When evaluating early-stage products, I care less about current features and more about the team's shipping velocity and learning speed.
I have a firm rule: no pre-product investments. Even if this means missing some opportunities, it's a necessary filter. Early-stage investing already involves enough uncertainty - why add more? That said, even post-launch products offer limited data since you're evaluating potential more than the current state.
The best teams show three key behaviors around the product:
They ship fast & regularly, often weekly or even daily
They have clear metrics for what's working
They balance user feedback with their own vision
I have several friends with exceptional product intuition who can spot winning products early. Despite my attempts to recruit them into investing, they've stuck to building. This has taught me a humbling lesson: great product judgment comes from years of hands-on building experience. A strong product alone rarely makes a successful investment. I've seen technically superior products lose to inferior ones that had better distribution. However, poor product execution can kill even well-positioned startups because most of these markets are highly competitive.
I've spent significant time analyzing founders because they're often your strongest signal in early-stage investing. My framework looks at three key areas: life story, team dynamics, and personal motivation.
First, life story. I look for founders who've built resilience through adversity. The startup journey is brutal, and founders who've never faced serious challenges often break when they hit their first crisis. This isn't about privileged versus unprivileged backgrounds - it's about whether they've developed resilience.
Team dynamics often kill startups - I learned this firsthand when my own startup died in 2014. Two brilliant co-founders who can't resolve conflicts will lose to a mediocre but cohesive team. I watch carefully how founding teams make decisions together during our interactions. Do they interrupt each other? Who defers to whom? How do they handle disagreement?
Finally, I assess how the startup fits into the founder's life arc. The best founders aren't just starting a company - they're scratching an itch they've had for years. Their startup is the natural next chapter in their story, not a random opportunity they stumbled upon.
Founder quality alone isn't enough: I've seen brilliant, resilient founders fail because they were fighting the wrong market.
The longer I invest, the more I'm starting to align with Andreessen and Elad Gil's market-first philosophy. Why? Because markets shape everything else. A great founder in a small & not growing market will fight gravity. A mediocre product in a massive market has room to improve. Market timing is equally crucial. Right now, I'm seeing AI startups generate impressive early revenue, but the real question is durability. Will these revenues compound over the 5-10-year horizon venture returns require? This is where market analysis becomes critical. You're not just betting on today's market, but on where it's heading. I'm improving my market analysis in two ways. First, I'm using AI models to spitball market research ideas and identify patterns. Second, I'm probing founders more deeply about their markets. The best founders don't just understand their current market - they have strong views about how it's evolving.
The reality is that the market-founder-product question isn't about finding the single "most important" factor. All three matter, but they matter differently in different contexts. My natural bias has been toward founder quality and traction, but I'm starting to believe that market need and timing might be the real kingmakers.
This matches what the most successful investors have discovered. When Andreessen and Elad Gil emphasize markets above all else, they're drawing from decades of pattern recognition. A great founder can pivot, and a mediocre product can improve, but a small non-growing market is usually just a small non-growing market.
So while I'll keep looking for exceptional founders and strong early traction, I'm spending more time in 2025 doing market analysis. Because ultimately, we're all surfing waves - and the size of the wave matters more than the skill of the surfer.