If you are like most founders I know, you are talking about your product. A lot. Maybe you talk a bit about the customers and how you’ll make their life better. Money too sometimes. But how often do you talk about the market you are in? If you are like most of us – only when they put a gun to your head and make you do it.
Choice of market really matters. It impacts your chance of success. It determines the full potential of your business. It makes a difference between a hobby and a business. Between having a fun experience and getting stinking rich.
Let’s say you are building Meeting Wiz, a Doodle for enterprise. You market is then SaaS productivity tools, which generated less than a billion in revenues in 2011 ($700M-$800M), although it is growing (predicted to grow to $1.4B by 2015). The market incumbents include all the big boys: Google, Microsoft and IBM, but also some growing “challengers”, like Atlassian and Zoho. This does not sound like a large and inefficient market, not yet disrupted by the web.
Time to pivot.
Imagine I knew something about the wedding industry (I don’t, what follows is a result of a 15 minute Google “research”). You’re making an online wedding planner now. Oh wow, this is a different story. Only in the US, the size of the market was $58.5B in 2006 (estimated to $139B if you include non-direct, but related items). Arguably this market is relatively stable (number of marriages might slightly decrease, which will be offset by increase in population). 22 million engaged couples (or their parents) spend on average $26.4K on a wedding. People getting married are typically increasingly internet-savvy, busy young professionals. The industry seems ready for some web.
See what I’m getting at? If you are starting with a new idea, please do take some time to research your market. You want to do this early on.
Here are some questions to think about:
- What is the name of the market? Yes, not an easy one
- What is the total amount of money made in that market? Is this growing or shrinking?
- Which segment are you in? Which percent of the total goes to your segment?
- How many potential customers (projects, licenses…) are in your segment?
- Browse through competition (both established and starting companies), their products, their earnings, recent investment rounds…
And then, choose a winning market. You can use this research to make a choice between several ideas. And it doesn’t have to take long. Thanks to the pressure from the Founder Institute, I researched three markets in one week. I wasn’t happy with the findings, so I went and researched the fourth one for a couple of more days.
You do get to chose your market. This could mean a similar product for a different market. Maybe your Meeting Moz could be transformed to Nurse.Me, an online scheduling tool for home visits of nurses. Don’t look at me like that. It’s your idea, I’m just trying to help here.
Don’t forget about your likes and dislikes. It’s your startup, your life. If you’re really committed, you will be working in this market for years. So make sure you choose one which you can become passionate about. Some draw their passion from a frustration – need to fix what’s wrong. And don’t forget, in the center of the market is a human customer, so make sure you’ll want to spend a big part of your life with people that make up your chosen market.