Timing a new market is one of the most difficult things to do in a startup. If you’re too earlier, there’s a serious chance you’ll run out of money or run out of energy by the time the market takes off. If you’re too late, which can be hard to tell, you’ll rapidly see a handful of competitors separate themselves from the pack and take disproportionate market share. Like Goldilocks and the Three Bears, you want to be just right.
How do you time a market? From my limited experience, you want to be in the middle part of the early adopter phase and before the chasm has been crossed, but not at the end of the early adopter phase. Depending on how fast the market develops, this is somewhere between 4-7 years before the market becomes mainstream. A number of anecdotes are available regarding companies that were too early but had some notoriety (e.g. Friendster) while the market is shaking out and winners emerge (e.g. Facebook and Twitter) and other once high flying competitors are almost no more (e.g. MySpace).
The next time you think about your market or a startup opportunity, ask yourself the following questions:
- What percentage of the market has a vendor currently?
- How fast is the market growing?
- Do you have to replace an existing vendor or are you the first vendor a customer has ever had?
- When will the chasm be crossed over into the early majority? How will you know? What will be the percentage of market adoption?
- What position do you need to be in once the chasm is crossed to be relevant going forward (e.g. one of the three largest vendors, a certain number of employees, etc)?
Timing a new market is one of the most difficult things to do and results in many startups going out of business or pivoting to find a market opportunity with better timing.
What else? What are some other thoughts on timing a new market for startups?