Experienced venture capital investors have been telling us for years how they “invest in big markets and founding teams.” Markets and People.

First, there needs to be a new market category that can grow big enough to support a couple market-leading companies that will become extremely valuable. Investors are placing bets to own a piece of future leaders of popular categories.

The other part of this equation is the “people”: the founders and the leadership team of the business.

Most investors have learned that the founders and leaders themselves are most important part of the success equation, if not the only part. The more experience I get in this game, the more I believe this too.

Unfortunately, many ambitious startup founders are hearing: “We invest in passionate founders who are really smart, work hard and have a big idea.”

This leads to disappointment when startup founders make a capable pitch and demonstrate early progress, but don’t get funded. Or they get some funding but don’t make progress and get stuck on their growth journey. Both of these are painful–and typical.

Being smart and playing in big markets is just not enough to succeed in creating a big company and growing a new category.

Most startups have both smart founders and lots of potential, but almost no startups actually grow up to become big and valuable companies that change the world and pay back investors. That’s the brutal reality of the startup game.

Here’s what investors really mean by “we invest in great people,” paraphrased from hundreds of conversations I have had with experienced investors and super-successful founders:

“Look, being smart and energetic and resourceful are great, but creating new markets AND growing a really big company are 10 times harder than most startup founders imagine.

It takes a freakish intensity and rare perseverance to overcome the 10 or 20 massive and inevitable obstacles that will stop all the other companies in their tracks.

Somehow, against the odds, some founders keep finding ways to defy death and regularly overcome these massive challenges. Those are the ones we try to invest in.”

There are 10 to 20 fire-breathing mountain-sized dragons that will need to be slain on the journey of creating a big market-leading company and a new category that doesn’t exist now.

Investors know the real game they are playing: Experienced investors invest in the dragon-slayers who will figure out how to overcome the inevitable obstacles that will stop everyone else.

It’s hard to imagine these outsized challenges–the big dragons–if you haven’t been through this journey. They don’t teach you this stuff in school. Your parents never prepared you for this. 

Fewer founders would attempt their noble quests if they knew how hard it will be. I still haven’t met a successful founder that said, “Growing a big business was easier than we thought it would be.” The death-defying transitions are just part of the game. 

The game of growing a small startup into a big, valuable business is defined by the dragons–the critical transitions and obstacles–that will either kill you or be vanquished.

Some founders and their teams will slay these dragons. Most won’t.