By Yelena Kensborn (@yelenakensborn), Contributor
Innumerable articles have been written about how ‘users are everything’ and the best start-ups are those with the biggest market.
Recently though, there have been a slew of new start-ups emerging that are targeting smaller niche markets. Is this a change of direction emerging in the start-up world or are we now seeing much deserved focus on an older business truth? Does it go to the heart of what start-ups are and can achieve?
A good place to start is to look at the ways to calculate market size. There’s top down, bottom up, TAM, SAM – a long list of methods and techniques.
All are valid, but for an outsider can appear like a dark art when a valuation of a company seems outrageously high. Every business plan includes a vital section – your target market. For example: you can start with the number of teens in a country, divide that number by the amount born into certain economic groups, and you get (roughly) the total market for your new teen must-have accessory. Large numbers and you’ll make a billion in revenue after your first year… or so the wisdom goes.
This leads to “Disrupt”, the most over-used word in the start-up scene, and one you’ll hear repeated chant-like at any event on entrepreneurship (probably more than you ever want). It illustrates the idea that a lean start-up can out-manoeuvre a larger, established player. It’s wrapped up in ideas of global companies like Uber, Facebook, Twitter, Air B n’B. Successful companies are described as having it as part their DNA, allowing them to grab users in vast numbers and get the golden ticket to success stamped in bold large font – “DISRUPT”.
With niche, a smaller market means companies have to make sure they meet customers needs quickly and can establish a presence as well as revenue. All investors understand this and look for it in proposals big or small, yet it’s never a hot topic discussion.
A recent example of this is the app Dattch, fresh from securing a $1 million investment and a re-branding exercise to become Her. It’s aimed at the lesbian dating scene, providing a social space in an app with a premise that seems to limit the growth, especially when larger dating and social platforms exist that can cater directly to the same market segment. The beauty of Her though, is that it is built only for women. The idea is to not be just another dating service. It achieves this through various ways but one feature sticks out – it demands gender verification to stop unwanted male users and, that way, allowing for a secure environment for users to enjoy.
Her is going for the consumer market – treading a path Facebook and others took long before. For these sorts of services, if they can meet the needs of their users quickly and effectively they will be in the best place to grow in the market.
The founder Robyn Exton has already stated she is considering producing services for other demographics. The faster Her achieves a level of revenue and market share among its target group, the quicker they can start working on new market segments.
Niche is not a new concept but an important one – it’s always been there, start-ups just need to be focusing on this as it means a far better chance of success. Like most success stories you’ll hear about, their commonality is in delivering products and services users want and like. The household names may operate on a vast scale now, but like the early day start-up they knew the old universal truth epitomised in Sam Walton’s famous quote:
“There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.”
Get the customer and you get the market.