The criterion · The triad
Market, idea and team: the triad that decides.
We take problems from growing markets, we solve them with an idea that wins there and that can be defended, and we do it with a team that is up to it. From that comes a protected position, not just one more.
10 min read
It is not a formula of ours. It was formulated by Andy Rachleff, co-founder of Benchmark Capital, and popularised by Marc Andreessen in 2007 in the same text where he coined the term product-market fit. We change one word, because we work before a product exists: where they say product, we say a good idea: the one that wins in that specific market.
The law
When a great team meets a lousy market, the market wins.
The formulation is Andy Rachleff's and admits little nuance: when a great team meets a bad market, the market wins; when a mediocre team meets a great market, the market wins; and when a great team meets a great market, something special happens. Andreessen summed it up even shorter: the number one company-killer is lack of market.
There is a second piece of evidence pointing the same way. Bill Gross, founder of Idealab, compared two hundred companies (a hundred of his own and a hundred others, with successes such as Airbnb, Uber or LinkedIn and failures such as Webvan or Pets.com) across five factors: timing, team and execution, uniqueness of the idea, business model and funding. The factor that best explained the difference between success and failure was timing, with 42% of the total; then team and execution, and in third place the uniqueness of the idea. Business model and funding came behind. And timing is, at bottom, a market variable: it measures whether the market is already ready.
We quote the 42% because it is the figure Gross gives explicitly; the order of the other factors is his, but their percentages vary by source and we do not reproduce them.
Try it with your own project
Move the three controls: the orange dot places itself in your zoneThe seven zones of market, idea and team
Market only. It is growing, and nobody yet has a solution that wins in it. The opportunity exists, but it is not yours.
Idea only. An idea that would win, in a market that is not asking for it. It is the good idea in the drawer.
Team only. People able to build anything, looking for what to build.
Market and idea, with a team that is not up to it. The most underestimated case: the idea does not build itself, and whoever executes it better takes the market.
Market and team, without an idea that wins. You build well something indistinguishable from what already exists: you compete on price from day one.
Idea and team, without a market. The classic: an excellent product, made by excellent people, that nobody needs. This is where most of them die.
All three · the protected position. A big problem in a growing market, solved with an idea that wins there, by a team that has done it before. It is the only zone that produces margin, and for far longer, because nobody is competing on the same ground yet. For it to stay that way, that idea has to be defensible: that is why the patent is filed early, before building. It is the zone every project we open aims at, by design: how, below.
All three · the protected position
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The threshold is set high on purpose: on this you should be demanding with yourself, because the market will be. And the three do not weigh the same even if the controls make it look so: without a market, the other two are not enough. Nothing is sent anywhere: the calculation happens in your browser.
The reading
Seven zones, and only one sustains a company.
The drawing is the classic one, and deliberately so: whoever knows the framework recognises it at once, because it is not an invention of ours. The three circles are equal and when they cross they form seven zones, marked from A to G. Six are different ways of not making it, and each fails in its own way. G, the central one, is the only one that holds.
The circles are the same size because the drawing describes combinations, not weights. The weight we state here: the market decides before the other two. With a market that is not growing, neither the best idea nor the best team is enough, and that is the conclusion shared by Rachleff, Andreessen and Gross's data.
It works as a lens for assessing any project, not only ours. If you are deciding where to put capital, these are the three questions worth asking before any other: is this market growing? does this idea win in it? is this team up to it?
Column 01
Growing markets, big problems.
We do not start from an idea looking for somewhere to apply it. We start from the problem, and we look for it where the market is already moving: a growing market forgives errors of execution, a contracting one does not forgive even excellence. Within those markets we choose the big problems, because the bigger the problem a solution solves, the better rewarded that solution is. The size and the margins of the market are two of the eight controls in the map of risk and reward, and you can see there how they change the reward.
Factor 02
A good idea is the one that wins in that market.
Good does not mean clever: it means it wins there, against what already exists and against what the customer does today to manage without it. An idea that is brilliant in the abstract and in that specific market is indistinguishable from the rest is not a good idea: it is a draw, and a draw is settled by lowering the price.
And there is a second condition, the one that turns a victory into a position: the idea has to be defensible. If it wins and cannot be protected, it wins for a short time. That is why the patent is filed early, before the prototype, not after the product. And that is why we prefer disruptive innovation to incremental: the incremental makes modest multiples more reachable but caps the reward and competition arrives soon, while the disruptive concentrates the value in few winners and leaves margin for far longer.
Factor 03
A team up to it means two teams, and only one do we already have.
Gross's evidence on the team is not about talent but about execution: the ability to adapt when the customer contradicts you. That is not deduced from a CV, it is deduced from having done it before. But «the team» of a Volcano project is in fact two distinct layers, and it is best not to confuse them.
The first is Volcano's core, which covers the initial phase: research and development, and with it the corporate, legal, tax and administrative side. That core is not recruited per project, it already exists and every startup rests on it: it is the structural advantage of a venture builder over whoever assembles a new team each time.
Of that core, character matters more than the org chart, because the initial phase is not overcome with skills but with temperament. It is a curious team, with interests in different areas, that quickly becomes passionate about a problem and does not let go until it has built an innovation concept. It takes courage, because it tackles something nobody has tackled and there is no one to copy. It takes perseverance, because the path is not straight. And it takes, above all, withstanding frustration: in research and development it is not an accident but part of the job. You try, it does not work, you understand why, you try again. You have to have faith and simply give your best. That appears on no CV, and it is what separates a project that arrives from one abandoned right where it stopped being interesting and started being difficult.
The second is the team that will run the startup once the product exists: the professionals who know that market and that product and know how to manage it. Each startup hires its own, and that layer does not come as standard. Hence the criterion, which is more demanding than it seems: if we have no idea who those people are, the team is not enough, however good the core. Volcano takes a project as far as the product; from there on somebody has to run a company.
The people of the core are in the team; how it is shared between startups, in the model.
The fit
Every project we open is built to land in G.
It is not a vague aspiration: it is what the first two phases of the path do. The capture of the problem asks whether the market is growing. The analysis asks whether the idea wins there and whether it can be defended. And there is a third question, the one that stops the most projects: whether we have an idea of who will run that company once the product exists. If any of the three answers is no, the project is not born.
The asymmetry, said precisely: of the three factors, one we have solved halfway. Volcano's core of capabilities exists beforehand and covers the initial phase, but the team that will run the startup does not come as standard and has to be foreseeable. Market, idea and that second layer of the team are exactly the object of the selection.
Being designed for G is not being in G. Aiming well does not guarantee arriving: what the method does is leave you in the part of the distribution where G is reachable. What nobody controls, and no method eliminates, is drawn in the map of risk and reward. And from here the configuration of the money comes in: private capital, tax capital, public funds, or all three.
«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.»
That is why the order matters: first the market, then the idea that can be defended within it, and always on a team that has done it before. Tell us your problem.
Is your problem in a growing market?
The IP strategy: what gets protected, and how.
Protecting does not always mean patenting. The operating rule is simple to state: you patent what a competitor could reconstruct by examining the product (the patent trades visibility for a temporary monopoly); you keep as an industrial secret what lives inside the process and cannot be read from outside (the know-how, the data, the manufacturing parameters). And there is a third category haste tends to forget: what is better not protected at all, because patenting it would reveal more than it shields.
On the path, protected IP is a marker, not a phase: it arrives when the mechanism deserves it, normally with the proof of concept, and before building. And it is an asset in the full sense. Whoever brings an idea keeps the licence to their intellectual property. For the project, IP is part of the valuation with which the startup is born with value. And if the project pivots, the IP can be licensed on its own: that is why, in this model, not even projects that stop die entirely.
John F. Kennedy, 1962