Filed by Anmol Khandeparkar

The Enigma of the Valley

What actually makes a startup succeed — and why most answers to this question are useless.

What makes a startup succeed?

Most answers are either too obvious to be useful or too abstract to act on. Here's my attempt at something more useful — built on a handful of principles that give any startup a real leg up.

It starts with something in shorter supply than capital, talent, or luck: truth.

Every great startup is built on one thing that will always be true about its customer

Call it an enduring truth — one thing about human behavior that won't change regardless of technology, market cycles, or who's in the White House. The best companies don't chase trends. They find this truth and build everything around it.

Take Amazon. It started as a bookstore and expanded into cloud, grocery, streaming, and a dozen other verticals. But its core has never shifted: a customer will always want to pay as little as possible and receive their order as fast as possible. Every Amazon innovation flows from that single constraint. That's not a mission statement. That's a forcing function.

Without an enduring truth at the core, you're building for a moment. Moments pass. Truths don't.

Market beats everything. Here's why.

"Great markets make great companies."

— Don Valentine, Founder, Sequoia Capital
A great market is forgiving. It gives you time to fix everything else.

Market is the hardest variable to recover from if you get it wrong. The economics are simple:

CLTV − CAC = Profit per customer
Bad markets crush both sides of this equation simultaneously. Good markets protect both.

"When an industry with a reputation for difficult economics meets a manager with a reputation for excellence, it is usually the industry that keeps its reputation intact."

— Warren Buffett
A bad market will defeat a good team almost every time. Don't fight the market. Pick a better one.

What you can recover from — and what you can't

MarketTeamProductVerdict
Bad Great Great Slow death. You can't manufacture demand that doesn't exist.
Great Great Bad Survivable. Instagram, Slack, Pinterest all started here.
Great Bad Great Fixable. Product-market fit is the rarest thing — if you have it, hire your way out.
Great Great Great Go build it. Now.

People: the one variable that compounds

"The only thing that matters is getting to product-market fit."

— Marc Andreessen, Co-founder, Andreessen Horowitz
True. And once you have it, the only thing that matters is having people smart enough not to lose it.

Experience is overrated. Intelligence and passion beat domain expertise in early-stage startups — because disruptive companies tackle problems that haven't been solved before. There's no expert playbook. You need people who can reason from first principles and won't quit when the obvious approaches fail.

Domain expertise can be hired. The other two cannot.

So — what makes a startup succeed?

Not luck. Not a genius founder. Not even a brilliant idea.

It's finding one thing that will always be true about people — and building a business around that truth, in a market that gives you room to breathe, with a team smart enough to know when they're wrong.

Get those three things right, and you haven't guaranteed success. But you've earned the right to find out.

Anmol Khandeparkar · 2023