High market potential

High market potential – is it a good argument for a startup?

The answer seems to be self evident, that unprofitability to develop something for the low capacity market may occur, where the large and growing market is a whole different story and is worth the risk. What other reasons are necessary?

Indeed, in some cases we face the situation when projects authors provide data on the volume and growing prospects of their chosen market, and they believe that it is a sufficient argument to favor their development attractiveness.

Yes, there is logic in it. Generally, some market share might be occupied. And even the small share of a “big pie” in absolute calculation can be quite powerful.

Let’s consider it from the other side. Have you ever gathered mushrooms or berries from a popular and well-known place that everyone calls “mushroom or berry place”? Sometimes you can only be surprised how it’s possible to plow up without the remainder in such illimitable spaces. But when there are three or four competitors’ backs in your sight, your surprise changes to reflection, and it comes to your mind that it’s better to have a smaller and simpler place that’s only yours, or it’s necessary to bypass your competitors in some way.

Isn’t it the same situation with the market? If the market is large and growing, let’s be sure your idea to occupy it came not only to your mind. If the potential is rather significant, it would also attract field-specific giants who won’t button up its purse for resources and gained experience.

On the contrary, the limits of market can be a deterrent for large existing players while your product or service will be able to successfully and completely occupy this segment.

Try walking in an investor’s shoes: is it easy to believe that you will be successful in the market, which is tempting for Apple or Microsoft? Maybe it’s better to focus on a market that’s suitable for your project, but at the same time narrow and unattractive for the “masters”? Nevertheless, certainly, it would be better to sidestep leaders in their own field but you must look before you leap and ground your decision dozens of times.

As a result:

There’s a threshold of the potential market volume, and the enterprise below is not cost-effective. Next, the greater and more attractive is the market, the higher is the level and the higher expected competition will arise. Therefore a thorough analysis and situation forecast is needed. In addition, you will have to prepare more arguments that support your decision for your investors.