Aug 25

Dreams & Passion Often Not Enough: Why Many Entrepreneurs Fail to Reach Market Success

Recently I went to a startup pitch venue in Boston. Of the five pitches, four were I-phone or Android applications. While the ideas were interesting, most of them seem to address a limited mobile market.  The majority of current day entrepreneurs seem to scoff at the fundamentals of old-fashioned need based entrepreneurship.  The first rule of which is to create a product, which truly addresses a sizable market need.

The 3 primary problems with choosing a limited market are:

Limited Profit Potential:

The target that you are aiming for has a relatively low amount of total potential users for the short and mid-term future. This means that you will be hard- pressed to reach the needed number to make your startup significantly profitable. As such you will be investing a lot of time and effort for a minimum return.

Scalability and Streamlining Costs:

A limited market base takes away one of the most lucrative elements of creating a startup: scalability. If you have a great technology that has the potential to scale but not the user base, you have lost a great opportunity. Reducing the cost of customer acquisition will remain a primary problem as well. Additionally it will be difficult to convince venture capitalists and angel investors to invest in something with zero realistic scalability potential.

Few Mistakes Can Be Made:

No startup is perfect and as such you have to consistently iterate and improve to survive. One prominent Venture Capitalist and former start up CEO whom I spoke with, stated it best when saying, “enter a market where there is a lot of room to screw up. This means that you can make the mistakes while you are developing and still get a good chunk of the pie if you are not first or second in the market.”  The ability to be in this market allows an entrepreneur to survive without needing to be perfect in order to extract profits.

The issue with many startups is this dreamers mentality that they will create a niche and instill consumer habits that previously no one envisioned. This can indeed happen but requires a great amount of innovation, timing, luck and vision.  More often than not these startups do not change the habits of consumers but prove as cautionary tales to future startups.

1 comment

  1. Carol

    Much appreciated for the information and share!

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