David Cummings on Startups

Small, Fast Growing Markets

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David Cummings

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As I mentioned yesterday, I believe the market is more important than the management team, assuming both are good at a minimum. For me, I focus on small, fast growing markets as opposed to large established ones. Why? Good question. Here are a few reasons:

  • These markets usually have leaders that aren’t so large as to suck all the oxygen out of the space (e.g. what Omniture did to the high end of the web analytics market once they achieved scale and Google Analytics when they consumed the small-to-medium segment).
  • These markets by their very nature don’t have incumbents that have to be replaced. Rather, you’re often the first vendor for a company making it easier to define the standards of the market.
  • The fast growing nature of the market makes it more likely for several startups to flourish at a small scale.
  • The functionality required rapidly changes making it even more fun to be part of the innovation.

What else? Why types of markets do you like?

Comments

10 responses to “Small, Fast Growing Markets”

  1. Patrick Nickles Avatar
    Patrick Nickles

    While I certainly agree w/ the “small and fast moving” vs. “huge and established” market concept one also has to be extremely wary of entering a market so early that you spend all of your time “educating” potential customers rather than generating revenues w/ those same customers. Innovating on the front side of “the chasm” is an extremely dangerous (read: expensive) place to try to survive.

    Years ago I wanted to be on the cutting edge. Now when I see a firm which has been around for 18-24 months I sense an opportunity to step in and steal their thunder w/ better execution.

    Which brings us back to the market vs. management discussion. I’d argue that solid managers will avoid moving into immature or overdone markets. (That said, it does seem as though most of the “big successes” we read about are not so much based on an exceedingly impressive “vision” but instead are largely a matter of unintentional timing.) So, which comes first? The manager or the golden egg?

    Reply
    1. David Cummings Avatar
      David Cummings

      Thanks Patrick for the good comment. I agree that educating a market can be an expensive proposition and kills many startups.

      Reply
  2. David Cummings Avatar
    David Cummings

    Another thing it note is that small is different from tiny. Regardless, it needs to be fast growing as opposed to the potential to be fast growing. Being in a market too early is often bad.

    Reply
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