Product/Market Fit (2007)

    There is one high-profile, highly successful software entrepreneur
    right now who is burning through something like $80 million in venture 
    funding in his latest startup and has practically nothing to show for it 
    except for some great press clippings and a couple of beta customers

I'm wondering who Marc is talking about? (it was in 2007). Any idea anybody?

Nice to be reminded of this piece. However, it sparked a thought when he mentioned micropayments as a market that was guaranteed to doom start-ups that were trying to launch product in that space. Is the current crop of mobile payments startups set for the same fate? For example, Square couldn't get Square Wallet to a winning position. And if it is the market that is the fault, is it specifically the market in the United States, e.g. will mobile payments succeed in Europe before it succeeds in the US because it's a more fertile market for this sort of stuff?

Marc A.'s firm has invested in bitcoin infrastructure companies which is in that direction.

I'd add Dropbox alongside VMWare as a company that unlocked a huge "sleeper" market.

Fundamentally I don't think those are counterexamples to the product-market fit thesis. These are cases where the huge market does exist, but it's a hard and finicky market. Nobody's quite managed to hit it yet. In many cases this is because nobody quite understands it, or everyone underestimates how hard it is.

Another good article on this from 2012:

http://www.mikekarnj.com/blog/2012/11/05/reaching-the-startu...

And Facebook and Google.

Actually, all 4 of those companies are very interesting because of the presence of previous incumbents who everybody assumed were playing in a small market. Before VMWare there was SoftPC (remember them?). Before DropBox there was YouSendIt and literally dozens of other competitors (many VC firms turned down DropBox because they claimed the space was too crowded). Before Google there was AltaVista, Lycos, Excite, Infoseek, etc. Before Facebook there was LiveJournal and clones, EZBoard, Xanga, etc.

I think this illustrates one of the complexities of Marc's "The product just has to basically work" thesis. Yes, but...you have no idea if dramatically improving the product quality will unlock a huge market that's been sitting on the sidelines because existing alternatives are too hard to use or don't actually solve the problem. It's like market size is a step function of product quality: most of the time, improving product quality has little effect on the number of people who use your product or how much money they pay you, but certain improvements unlock a whole new class of user. And the only way to figure out what those improvements are is to build them and see if a massive number of new users show up.