Updated 20 April 22
A common misconception when starting a new business is that you need to focus on building the perfect product, with less thought given to external influences, such as the current state of the market. We’ll talk you through the importance of targeting the right markets to disrupt, as well as the potential trends that can influence the opportunities available in markets.
A great market does not translate to a market that is already established, with big names and a lot of revenue. A great market for startups is a market that has the opportunity to grow fast, and growth is triggered by trends and unsolved problems. A successful entrepreneur is one that realises a trend or problem, and capitalises quickly enough to make it their advantage.
Which of these do you think is most likely to succeed?
The latter is more likely to succeed because a crowded market is likely to contain at least one “800 lbs Gorilla”. In business, this refers to a company with the resources and market share to crush potential competitors with ease. Where does an 800 lbs gorilla sit? Wherever it wants to. You are much more likely to succeed once you find your niche, something we will cover later on.
Now, let’s go through examples of shifts that have affected the growth rate of a market.
Technology is probably the most obvious trend that can affect the growth rate of a market. With technology continuing to progress, opportunities to enter markets are always likely to appear. But timing is everything. Let’s take taxi-hailing as an example.
If Uber were to have launched in 2004, they would have failed. This is because we didn’t have the access to the internet like we do today through mobile devices. On top of that, we didn’t have the technology to think the problem of booking taxis on the move existed. Conversely, Uber would not have been the giants they are today if they tried to launch in 2012, with competitors Gett and Lyft founding in 2010 and 2012. Somebody else could share your idea, so act quickly.
Society will forever change and being more open-minded about the way we think and act has paved the way for many businesses. The online dating industry has benefited from this more than most.
The thought of meeting a new partner online did not exist until the mid 90’s when Match.com was launched. Back then, it was seen as a digital alternative to a lonely-hearts advert in a newspaper, and using the online dating platform was portrayed pitifully by the mainstream media.
Fast forward a few years and we had Tinder launching in 2012. When Tinder was launched there were negative connotations that the app was both shallow and an excuse for a cheap hookup. While some of those accusations still remain, the app has become a household name and has caused a ripple in the market with apps like Bumble and Happn benefiting from the relaxed stance from society on digital dating.
While it is unclear whether online dating changed society, or vice versa, it is clear that society is likely to change if you address the right problems for your users.
As we have previously noted, the intuitive side of you will want to find the biggest market possible, and it seems like that’s what the investors want to hear, but there are flaws to this approach:
Paypal is a great example of a startup finding their niche and expanding smartly at the right time. Initially, Paypal realised that Ebay held a monopoly of the ecommerce market, and they recognised payment was a big issue for their users. Being the official and exclusive payment method for the largest ecommerce site helped build their reputation and trust, and naturally they grew as the ecommerce market grew. Ebay bought Paypal for $1.5billion in 2002 and at the time of their separation in 2015, Paypal was worth more than the company they were originally just a service for.
Get a product in the market, the sooner the better
Startups are risky. Nobody can predict with confidence what market will grow next. You can make an educated guess, but until you get a product into the market, that is all it will remain. By getting your product in the market, real users can test your product against real competition, and that information is more valuable. Our proven process at Nova involves building startups that are centered around the problems or needs of the target users.