Venture Capital – An Idea by Mick Jagger?

By: Marc Halpin

If you’ve been in the startup world for more than a month you’ve most certainly heard of the concept ‘Product Market Fit’. The term was first coined by Don Valentine, The Grandfather of Silicon Valley venture capital. Don founded Sequoia Capital in the early 1970s.

Google ‘Product Market Fit’ and you are faced with pages of definitions and perspective on the subject, quite often (read: always) by people way smarter than me!

The definition I love is based reputedly on what Don said,“I’m looking to invest in companies that can screw everything up and still succeed because the customer pulls the product out of their hands.” 

Is your customer pulling your product out of your hands? Are you struggling to keep up with demand? Are your customers referral machines? 

If your answers are yes to these questions, then you have Product Market Fit. If you’re also working in a big market then you probably have a fundable business. VC’s today will go out of their way to meet you and invest in your company.

Now here’s the funny thing, when you get Product Market Fit you may feel that you do not want to raise capital because it’s entirely possible that you are cash flow positive. You may want to hang on to that hard earned equity you have. Tempting, right?

Here’s the rub though; Product Market Fit can be fickle. It can come, and it can go. Markets change, competition adapts, and the world changes (COVID-19). You can lose Product Market Fit. Get it and you invest, you hire, you expand your business. Lose it and finding an interested investor may be a challenge. They learned from the Don Valentine playbook! 

Here’s a strong suggestion for you – Raise venture capital when you can. Raise venture capital when you have Product Market Fit. 

This is the way a VC will look at it; When you have Product Market Fit you need Venture Capital when you don’t have Product Market Fit you want ‘Survival Capital’. It’s very easy to look at the other way round if you’re the Founder.

Which brings me onto the biggest question of all. In the early 70’s was Don Valentine’s thesis about Product Market Fit and his drive to build Sequoia Capital influenced by Mick? Thoughts on a postcard please! 

‘You can’t always get what you want but if you try sometimes you just might find you get what you need.’

Oh yeah!