5 Reasons To Launch Your Startup In An Existing Market

Have you ever spoken with would-be entrepreneurs who are waiting on the sidelines for the “perfect” product idea to come to them that is totally unique, no competition, and will serve an entirely new market?  They purposely avoid markets with existing competition and feel the only way they can succeed in tech startup game is to launch with a novel idea that no one has ever seen before?  I think they’re crazy.  For new tech startups looking to bootstrap, generate revenue quickly, and learn a lot about the startup game, I’m a huge fan of intentionally jumping into an existing market with competing products.  Here’s why….

In Steve Blank’s book, The Four Steps to Epiphany, he highlights there are two different types of markets – new and existing.  Too many times would-be entrepreneurs are seeking product ideas in new markets – trying to come up with inventions that will allow customers to do something entirely new that they haven’t been able to do before.  However, this path, as Blank highlights, is VERY expensive and risky.  You have to educate your market BEFORE they will buy your product; what your product does, why they need it, why it’s better than what they are currently doing, and why they should spend money on it.  Then, and only then, will they (maybe!) buy from you.  This is what many refer to as the “bleeding” edge of technology.  I know several first-time startups that are suffering through this experience right now – and I know they aren’t having much fun.  For startups looking to bootstrap and grow the value of the companies (prior to an investment round)…this strategy is very difficult to execute and can often end in bankruptcy.

Instead of trying to create an entirely “new” product and market, we love targeting existing markets with existing competition and so, too, should entrepreneurs who are looking to bootstrap their first tech startups.  It is part of our corporate growth strategy (something I will be blogging about soon) – starting out simple by identifying growth markets and developing improved products for those existing markets.  By doing so, it allows us to bootstrap and maintain control of our companies, learn a lot of lessons and gain valuable startup experience, and most of all generate revenue (fast and early!) to help grow our companies and be able to self-fund our next venture.  It’s funny how strong, early revenue can take the “risk” out of a startup (and attract investors!).

Here are the top 5 reasons we love playing the startup game in an existing market with competing products (and why I believe new startups should, too):

  1. Validated Market: Customers are already paying for the competing products, which means there is a value proposition that makes them want to buy.  Build a better product and they will buy yours.  No need to guess whether there is a market for your product or if anyone will buy it – the competing products have already validated that.
  2. Educated Market:  The bleeding edge of technology is a lonely place – not only do you have to explain to potential customers what your technology does, but also why they should buy it.  Painful, slow, and expensive.  In an existing market, the competition has already educated your customers for you – and you didn’t have to pay for it!  Selling an improved product to an educated customer is much easier, faster and cheaper (lower cost of customer acquisition) – all awesome!
  3. Defined Feature Set:  Too often startups get hung up on what features to include in their minimum viable product (MVP) – and spin their tires while burning cash.  With some basic research in an existing market, you can quickly identify which features are required by customers and replicate and/or improve on these.  The key to gaining market share is to obviously match the competitors MVP AND making sure your product is better than the competition in terms of one or more features.
  4. Price Point:  This is a struggle for many startups – what pricing to use in their go-to-market strategy.  In an existing market, your competition has already established this for you.  Check out their features and pricing and price your product competitively – done.
  5. Up Your Game:  Jumping into the startup game with competitors makes you a stronger company.  You identify the market leader(s) and set goals for taking market share from them.  No different than olympians performing their best at the Olympics against the best in the world, launching a product in an existing market forces you to be your best right out of the gate.  Competition helps motivate those who want to win.
So for those entrepreneurs who haven’t jumped into the tech startup game because they’re still trying to come up with something that no one has ever seen before – I suggest you re-think your strategy.  Identify an existing growth market, look at the existing competitive landscape, and decide if you can out-do the market leaders with an improved/advanced product …. and then jump into the game!
Follow me on Twitter (@tburke_quark) for more on innovation, tech startups and entrepreneurship – thanks!
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3 thoughts on “5 Reasons To Launch Your Startup In An Existing Market

  1. Naysawn says:

    Great post. Thanks for the thoughts.

    Steve Blank does point out that if you’re going to bootstrap, it’s probably best that you enter an existing market as you can make money from day 1. It is somewhat odd that as entrepreneurs we just keep thinking that we should do something new…

    • Thanks very much for your feedback. I’d agree, too many founders are focused on entirely unique ideas – without realizing that in that position you have years of customer education in front of you (and not many sales!)

  2. naysawn says:

    Thanks for the thoughts. I’ve been thinking that it’s odd that we tend to cherish coming up with new ideas. Sometimes it’s best to just think how you could make something dramatically better. Apple seems to be the king at doing this.

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