Don't Give Up
Perception is just an information
Over the past few weeks, I had many discussions with entrepreneurs who are facing hard perceptions from investors about the market in which they navigate. What they hear is often the same…
The space is too crowded.
There is already a clear leader.
The market is a graveyard of companies.
The sector doesn’t seem very big, there are only small players.
I wish I could tell you that those reasons to pass are all nonsense, but they aren’t, it is unfortunately very legitimate to feel concerned about a company that evolves in a space that doesn’t seem to want it. You will often hear that adage: Market Beats Team. And often after that Team Beats Product.
It means that if the timing isn’t right (when was the right time to launch Uber) or if the buyer persona is fully loaded with solutions and won’t give anything else a try (LMS, CRM… If there is an acronym already, it doesn’t look so great haha), if the inner forces or dynamics of the market, often driven by the incumbents, are too strong (Live entertainment for instance, or the Temporary work market…), your odds of success will be limited. Does it mean it’s impossible? Of course not!
Look at Tiktok: They have replaced the friends’ graph by algorithms. Look at Airbnb, they’ve built a trusted intermediary in their space. In our portfolio company, we also have many small companies that have raised small amounts, built up their presence over the years, and are now generating dozens of millions of recurring revenues with profitable economics, to a point where they might even become market leaders at some point.
Now that we’ve talked about the challenge, let’s talk about the solutions :)
The space is too crowded. If that’s the case, your knowledge about it must be extraordinary and you must demonstrate the following:
You have understood something that other players haven’t;
You have a unique angle to win the market;
You are very fast and precise when it comes to strategy, tactics, and execution.
There is already a clear leader. You will meet investors who want to back the category leader/definer and if you’re not that player, just forget about them and move on to other investors.
You can start from a different geography and win over there. Europe VS US for instance. It’s very common to see two different players tapping into different markets. It doesn’t always work out, look at Airbnb versus HouseTrip for instance back in the day.
You can build a more frugal and capital-efficient type of company where instead of growing at all costs, every cent is invested to provide a higher yield potentially. You won’t probably build that multi-billion dollar behemoth, but that won’t prevent you from being incredibly successful nonetheless. We have many companies like this in our portfolio and it’s amazing to see them thrive.
You can also demonstrate how the leader has forced itself into a position that you can now benefit from to gain early market shares and take it from there…
The market is a graveyard of companies. Sometimes you indeed enter a market where almost no leaders have emerged and it looks like the market doesn’t want you.
Start with a niche and nail it. That is how DICE started with small venues in London just to expand into bigger ones after many years or how temporary work startups are starting in subcategories or through very specific needs instead of launching broadly.
Be profitable to avoid the graveyard. Remember all the quick commerce or mobility startups. Many of the survivors are the ones who tried hard to build solid unit economics regardless of the challenge of this task.
Get the last mover advantage. By being the last mover, you can also learn from all the previous mistakes which should either prevent you from even launching or enlight you on the way to go.
The sector doesn’t seem very big, there are only small players. This one is tricky because most companies remain small in a way, but investors are reassured by a space where it seems there is traction, you want to be pulled by the demand in a way.
Work hard on finding a very strong product market fit and then only activate the hard push distribution button, your own traction will change the investors’ perspective.
Team beats product, remember? it’s not because there are only small players that you can’t crack a stronger distribution traction. In the same category, many great products fail and many bad products succeed, the difference between the two is distribution. The latter have simply been way stronger at selling.
Stop beating yourself. it’s ok to be a small player, grow from there. We over-estimate what we can build in one year and under-estimate what we can build in 10 years :)
I know it’s hard to face investors who have so many doubts, it’s like their fear is taking over the room, leaving you no chance. But on many occasions, it will take so many meetings to get a single investor to commit at the end. Airbnb was rejected many times, Uber was rejected many times... Some of the best companies in the world have never reached consensus and it’s ok.
Don’t give up, gain clarity of vision, speed of execution and show them who’s the boss!
Keep it up :)
