Marc Andreessen on the 3 things he looks for when investing in a startup

The first thing Marc Andreesen looks for is a big market:

“Is there a big existing market that you think you can go after and displace incumbents? Or do you believe there will be a new market that will be big?”

The second thing he looks for is a 10x better product:

“Is there a fundamental technology or economic change that justifies a new company? And the way I always think about that is: Is there a 10x change happening in the technology landscape? Is something 10x faster, 10x cheaper, or 10x better? If it’s not 10x, we as both VCs and entrepreneurs have to ask ourselves if it’s really worth doing because it’s really hard to start new companies . . . Existing companies are usually pretty good at what they do. So for a new company to exist, it has to bring a product to market that’s so much better than what exists that it punches through the status quo.”

The third is the team:

“Is the team outstanding? . . . You want to have a founding team of complementary skillsets. You want to have at least one super strong technologist — quite possibly more than one. Some of the best startups are actually more than one founding technologist. And then it often helps to have someone who is a marketing or salesperson who has a really good understanding of business.”

Marc believes that you need all three of these, but if you’re going to compromise on one of those as an investor, it should be the product:

“A great market is a lot easier to make up for with iterative product execution. The problem with a poor or small market is that even if you do a good job on the product, there just aren’t that many customers so it’s hard to ever get big and people get demoralized . . . And then we evaluate the team of a startup by its ability to get into a big market with a good product.”

Full video: Entrepreneurship.org “Marc Andreessen-A Panorama of Venture Capital and Beyond“ (May 2010)