Early Stage Markets Rarely Look Like Markets

This Week’s Big Ideas 💡

⏰ Applications for SR007 close this Sunday, May 17th, at 11:59pm PT! Apply now

🇺🇸 a16z speedrun GP Andrew Chen had a great conversation with Matt Perault about Little Tech on the a16z AI Policy Brief Podcast

🤖 Lejla Johnsen argues that in a world of infinite output, judgment about what to build is what matters

💼 Join our talent network for more opportunities. If we see a fit for you, we’ll intro you to relevant founders in the portfolio

Everybody loves a good market map. It’s seductive to think that you can compress the world into tidy grids with logos neatly sorted into categories, each square representing a company that has raised meaningful capital. For investors, these maps are useful tools to help think through investment opportunities.

They are also, unfortunately, dangerous for founders.

By the time a market is legible enough to be mapped, the most valuable entry points have already closed. The best founders are not waiting for a sector to mature enough that a VC can toss it on a 2x2 it. Generational companies are built by recognizing patterns of behavior that precede the sector map entirely. In my work at a16z speedrun, the most promising opportunities almost never arrive looking like opportunities. They arrive looking strange.

Behavior Comes Before Categories

Markets begin as behavioral shifts in small, overlooked communities. It may be a few hundred developers who can’t stop talking about a new tool. Or maybe there are a few thousand users engaging with an app in ways that seem totally indecipherable to outsiders. The usage numbers are modest, and if you were just glancing at the product, you would probably ignore it.

What matters is the intensity of the behavior. There is a meaningful difference between an app that people open often and an app that changes how people operate. A worldchanging company has to, by its very definition, induce structural new ways of working/being/creating/existing.

Consider OpenClaw. An open-source project built for developers, it required terminal knowledge and real technical fluency. It was not used by everyone. But for those who adopted it, OpenClaw became a fundamental part of their workflow. It reinvented the way they conducted work.

What also made OpenClaw significant was its downstream effects. At speedrun we have already started seeing a new generation of pitches built on the conceptual foundation it propagated. Founders now have proof that agents could be held towards outcomes, not merely tasks completed. Within a week or two of OpenClaws launch, we had pitches for making these systems accessible to non-engineers. Then as the ideas permeated, we started having companies proposing agents that could autonomously run entire business functions, from legal to HR. The agentic workforce thesis now discussed at every conference accelerated across a small developer community restructuring their work around a tool most of the industry had never heard of.

But as a founder, you don’t have to wait for something as popular as OpenClaw to come along.

How to Spot an Early Market

Working with really early-stage companies at speedrun, you start to get a gut sense for whether something is being pulled in by real demand or just pushed out, well before the usual metrics tell you much.

What we try to get founders to look for is simple: are there signs that demand exists even before the product is fully there? The specifics vary, but a few patterns show up a lot.

First is what happens before launch. It is not just about racking up signups. Plenty of subpar products with good marketing campaigns can do that. But is there real intent behind the interest? You can see this in everything that forms around the waitlist. People share it, talk about it, and bring others in without being asked. That energy is coming from the market.

Second is early community. Sometimes people start gathering around a product before it’s even live, and the conversation keeps going on its own. No one from the company is propping it up. People show up because it connects with something they’ve been looking for. Users start creating explainers, tutorials, or threads about the product before there’s any official documentation. They’re doing the company’s marketing without being asked, because they want others to find it.

Third is how intensely a small group uses it once they get access. You’ll see a handful of users spending a surprising amount of time with the product, not because they have to, but because they want to. From there, one of two things usually happens. Either it replaces tools they were already using, or they start bending it into new use cases the founders did not plan for.

Enough of these happen and you know you have something primordial and powerful on your hands.

Building for What You Cannot Yet See

One common failure mode I see from founders is when a team gets stuck building “one more feature” before showing their app to users.

The founders I have seen get this right do something that sounds limiting but is actually the opposite. They pick ten users, maybe fewer, and they go deep. They become almost unreasonably attentive to how those specific people work and what they actually need. And the insights that come out of that kind of closeness are usually generalizable. What ten power users care about tends to map, at least directionally, onto what ten thousand eventual users will care about. Narrowing your focus and shipping live features constantly It is how you earn the right to go broad.

The Map and the Territory

Market maps will keep getting published. They’re useful abstractions, but they’re definitionally lagging. By the time something is legible enough to map, the underlying behavior has already stabilized and the earliest forms of leverage have already been captured.

The next market worth building in is forming right now in a community, or a product, or a pre-order page that no one has yet thought to categorize. Whether you see it depends entirely on whether you are paying attention to behavior or waiting for a label.

For founders, that means building the habit before you need it. You have to haunt the weird corners before they’re legible, the Discord servers with no business model, the subreddits full of complaints about a workflow nobody has named yet. You’re looking for people who have already changed how they hope to work and just haven’t been handed the right product yet.

Thanks to Emily for sharing her insights!

You are receiving this newsletter since you opted in earlier; if you would like to opt out of future newsletters, you can unsubscribe immediately.This newsletter is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. You should consult your own advisers as to those matters. This newsletter may link to other websites and certain information contained herein has been obtained from third-party sources. While taken from sources believed to be reliable, a16z has not independently verified such information and makes no representations about the enduring accuracy of the information or its appropriateness for a given situation.References to any companies, securities, or digital assets are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Any references to companies are for illustrative purposes only; please see a16z.com/investments. Furthermore, this content is not directed at nor intended for use by any investors or prospective investors, and may not under any circumstances be relied upon when making a decision to invest in any fund managed by a16z. (An offering to invest in an a16z fund will be made only by the private placement memorandum, subscription agreement, and other relevant documentation of any such fund which should be read in their entirety.) Past performance is not indicative of future results.Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Content in this newsletter speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Please see a16z.com/disclosures for additional important details.