Everybody will tell you that if you are building a company you should make sure that your market is big enough. Otherwise, even if you dominate the whole market, you might not be making enough money to build a big and successful business.
The problem is that it’s almost impossible for a new startup to compete with the big guys and conquer a significant market share of a big market.
Luckily, there’s a workaround. The key is to start with a small market, dominate it and then expand your success to a huge market.
Big markets are bad for small start-ups
When you are just starting out, no one knows you, trusts you or believes your promises. If that’s not enough, big markets have big competitors that are well known, have many customers, reputation and reliability.
How are you going to position yourself against the big guys? Are you going to offer a cheaper price? Simpler user interface ? More features?
Usually, this will not be enough to fight the natural scepticism of the users. Not enough to make people take the risk and make an effort to try what you have to offer.
Let’s analyze an hypothetical example:
You’re building a mobile-phone and want to compete with iPhone.
The market for mobile phones is huge, so if you can even acquire a tiny part of this market, you’ll be considered a success story.
You create a cheaper mobile phone with a longer battery life and a bigger screen. But iPhone has millions of apps, it’s branded, trendy, highly publicized and much more. What are the chances to acquire a share of that huge market? Probably very low.
Let’s consider another scenario:
You are focusing on a small market of professional athletes, and building a mobile-phone that will be tailored for their needs. Since your market is so small you can build the very best product on earth for this specific market.
You can build a mobile phone with special sensors that are important for athletes. Add an ecosystem of apps allowing to use those sensors in order to share training results with teammates and coaches.
iPhone’s market is huge, Apple can’t focus on professional athletes, it needs to build an “one fits all” phone. This is your advantage, since hypothetically you can build a much better product for a very narrow market.
Doing this successfully will allow you to dominate that narrow market.
But what is the point of dominating a small market?
So now you have a big market share of a tiny market, since the market is so small dominating it might seem useless and you might be losing money.
You need to remember that dominating a small market is only the first stage.
When Mark Zuckerberg started Facebook, the market for it was very limited- Harvard students. It wouldn’t make any sense for the vast majority of today’s Facebook users
to sign up and create a profile (and it wasn’t event possible because of the invite only policy).
Then Facebook expanded to other universities, and the rest is history.
Another great example is Elon Musk’s Tesla Motors company. Tesla started out by building luxury electric sport cars. By focusing on great innovation and technology, Tesla dominated the market, and built it’s brand.
Later Tesla introduced the S-model, an electric Sedan, and the upcoming X-model was the cross-over. Currently over 70K Tesla vehicles were already sold and the company is growing rapidly.
In short: think big, start small.
Karan Sahi is the CEO and founder of Linking Tribes. He loves writing about start-ups and unearthing the inspirational stories hidden behind their starting up.