Why you should pursue BIG ideas in BIG markets
Whether you are looking to join a startup or launching a startup of your own, two critical factors in your filtering process should be market size and type of idea. It’s an oversimplification, but I think it’s useful to think of markets, and ideas, as being “little” or “big”.
Little markets are markets that by definition do not serve a broad population and have limited upside. Big markets, on the other hand, reach large portions of the population (of consumers or businesses) and have an almost unlimited upside.
Little ideas are incremental changes that can create value and be profitable. Big ideas are those that cause massive disruption and change the way an industry works.
I’d argue that the best place for a newly-minted MBA to start is with a company plays at the intersection of “Big Market” and “Big Idea”. Here is why:
You’re more likely to have a hugely successful outcome
Big ideas in big markets have a higher likelihood of major commercial success. Pursuing a big market means you don’t need to capture as much of it to create value. It’s easier to take a small piece of a large pie than a large piece of a small pie. For this reason, big ideas in big markets are more likely to get funded, as VC’s are looking for opportunities in the long tail to justify their investing model.
Investors are also interested in having their hands on major disruptive deals. Successes that are big ideas in big markets can lead to “big fame,” which can lead to future success since the VC asset class is unique in that returns are persistent over time because success grants access to superior deal flow.
A big idea in a big market can make it easier to “cross the chasm”. Having a “go big” mentality early on forces you to think about building products that will suit a broader market and help you avoid the trap of building exclusively to the preferences of early adopters. Take Dropbox, for example, which early on carefully balanced the requests of its core set of users with its vision for a mass market product.
Big markets have, by definition, big incumbents, which offer significant exit opportunities in the way of acquisitions. Big markets also have a well-developed institutional investor understanding, making it easier to IPO. The opportunities for acquisition and IPO allow big ideas in big markets to make “big money”.
You’re more likely to be surrounded by great people
Founders with big ideas attacking big markets are passionate and attract other people who share their passion. This is actually probably true of most startups early-on, regardless of the size of the opportunity or type of idea. I’d argue however, that in order to attract the talent required to scale, you need to have an idea that taps into the passion of many people. The passion of big ideas in big markets doesn’t get “diluted” as severely as niche ideas do after layers are added to an organization. Take for example, companies like Warby Parker, Eventbrite, and Airbnb, who I would argue continue to attract top talent because they aim to disrupt major markets.
Surrounding yourself with lots of great people gives you the opportunity to grow quicker and learn more. Great people also go on to do other great things – so it’s a good idea to get to know as many of them as possible.
You are better suited to stomach the risk now than later
While the upside is almost unlimited, it would be naïve to ignore the fact that big ideas in big markets can be riskier than niche opportunities. They are likely to be more competitive than niche opportunities, and often there isn’t room for multiple big winners. However, there is no better time in your life than now to be able to handle this level of risk. You will never have fewer responsibilities than you currently have.
Before you launch or join a startup, ask yourself “Is the idea I’m pursuing BIG?”
If it’s not, you may want to reconsider.
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