After years of hard work, every entrepreneur, investor, or creative, including myself, usually comes to the same painful lesson: The market matters most.
For whatever it is that you’re creating, a product, song, book, podcast, restaurant, the number of people who want that thing today and in the future dictates your success more than anything else.
Here are some timeless quotes and links on this subject.
Personally, I’ll take the third position—I’ll assert that market is the most important factor in a startup’s success or failure. Why? In a great market—a market with lots of real potential customers—the market pulls product out of the startup. The market needs to be fulfilled and the market will be fulfilled, by the first viable product that comes along.
Markets trump all. I want it to be the reverse but to use a surf analogy is the rider skill matters but it is the second order bit after the wave and where the wave is going.
As I look for patterns in successful startups, the more I believe the market, inclusive of timing, is more important than the initial startup idea. People get so enamored with the idea — even putting it up on a pedestal as the be-all-end-all — that they don’t step back and spend enough time assessing the market. … Take any famous entrepreneur. I bet they picked a great market (and timing!), found an opening in the market (an initial idea), and then built a suite of offerings to service that market over many years. … Pick a market, not an idea.
I think market is often the most important variable to consider when thinking about an endeavor … For us we think we try to think about the overall size of the market and not in some abstract terms but in terms of how many people are paying for this thing and how much are they paying per year for this thing and then try to think about if you are successful how many of those people can you convert over to your product and how much are they going to pay you and it’s really important to think about both the overall size of the market but also the address ability of the market and how hard it is to reach those people and sort of capture that spend.
We have always focused on the market. The size of the market, the dynamics of the market, the nature of competition because our objective was to build big companies. If you don’t attack a big market it’s highly unlikely you’re ever going to build a big company.
When starting a new company, you want to get to monopoly. Monopolies mean you have a large share of a market. How do you get to a large share of a market? You start with a really small market and you take over that whole market. And then, over time, you find ways to expand that market in concentric circles. The thing that is always a big mistake is going after a giant market on day one, because that's typically evidence that you somehow haven't defined the categories correctly, and it normally means that there's going to be too much competition in one way or another. And so, I think almost all the successful companies in Silicon Valley had some model of starting with small markets and expanding.
I think a much better mental model to have is that you’re serving some market, and then there’s the percentage of the market that you’re serving. And whatever percentage you are not serving, you just haven’t built the go-to-market functions and organization that’s brought the product to those market segments ... What we did not do, but what I wish we did, is six months after launch, we should’ve mapped out the concentric circles of our market.”
The only only advice I have about trying to start something big is pick pick a market where it seems like there's some version of the future where it could be big if it works but other than that it's like one dumb foot in front of the other for a long time.
You also really want to take the time to think about how the market is going to evolve. You need a market that's going to be big in 10 years. Most investors are obsessed with the market size today, and they don't think at all about how the market is going to evolve. In fact, I think this is one of the biggest systemic mistakes that investors make. They think about the growth of the start-up itself, they don't think about the growth of the market. I care much more about the growth rate of the market than its current size, and I also care if there's any reason it's going to top out. You should think about this. I prefer to invest in a company that's going after a small, but rapidly growing market, than a big, but slow-growing market.
Notice I don’t talk about the idea. I think ideas are almost irrelevant … The more important thing is that you pick a large space that you’re knowledgeable and passionate about. And then you will figure out what the right thing to do within that space is.”
Simply put, a company’s choice of markets and M&A is four times more important than outperforming in its markets. This finding comes as something of a surprise, since many management teams focus on gaining share organically through superior execution and often factor that goal into their business plans. … Startups can also learn a lesson from this. Riding market growth in a fast growing market is a lot easier than trying to take market share in a slow growth market.