Founder-market fit describes the extent to which a founder’s skills, experience, passions and interests align directly with those of her target market. This concept is fundamental for seed-stage startups because of how closely linked it is to their ultimate chances for success. Investors seek to fund founders who understand market pains, opportunities and customer needs.

From the start, a founder with a good market fit knows more about the sector than anyone else. He can spot the real opportunities better and faster than anyone else, and act on them. If a startup has entered the market even six months later than its competitors, it can still catch up if its team members really understand the sector and are able to make better, faster decisions because of it. Investors think this is a likely outcome.

Founder-market fit also means credibility, which is important for startups. When founders have experience with the customers who are most likely to buy their product, they can often easily build a network of potential industry partners, buyers and even promoters. For example, if a founder has previous experience as a manager of a similar business, the network built during that time will facilitate preferential access to potential customers and distribution channels. This network not only facilitates business growth but also signals investors that the startup has a solid foundation upon which to build.