Evaluation a Business Plan in an Industry
- If you make $100,100 /year, you’re in the top 20%.
- If you make $1M /year, you are in the top 10%.
- If you make $100M /year, you are in the top 1%.
So, the question becomes, “Is it possible for you to make $100M /year in that Industry?”
Of course, it’s possible. But the probability rate is less than one percent. It’s like 99 percent chance of failure.
Start-up : Which Market to Focus? by Shishir Gupta, Founder, Oakter
“When a great team meets a lousy market, market wins. When a lousy team meets a great market, market wins. When a great team meets a great market, something special happens.”
— Andy Rachleff, (He discovered & named the concept of Product-Market Fit)
“In a terrible market, you can have the best product in the world and an absolutely killer team, and it doesn’t matter — you’re going to fail.” — Marc Andreessen
“We are not interested in creating markets. It is too expensive. We are interested in exploiting markets early.” — Don Velentine, Founder of Sequoia (Godfather of start-up community)
Mature Market : The number of buyers and sellers is more or less constant. The growth of the market (CAGR) is in single digit. Once a mature market is created then it tends to exist for a long time, like 100’s of years. If it only exists for a short time like less than couple of years then its called fad. Example of a fad would be vacuum cleaner market in India, global pokemon -go market
Emerging Market: The CAGR is double digit, may be triple digit. Number of buyers and sellers are both growing at fast pace. An emerging market might become a mature market in 4–5 years’ time
Declining Market : The CAGR is negative, it could be single digit (Current automobile market in India) or double digit (Nokia after iPhone). There could be opportunities to build a billion dollar business in a declining market too.
A new product can disrupt a market in three ways:
A. Cost : By doing innovation to reduce cost (Jio, Xiaomi Smart Phone, Control 4). The cost reduction shall be at least 3 times less than the existing pricing to create disruption.
B. Feature : Create a new feature which is preferred by a section of buyers (AirBnB, Uber, Patanjali). The feature should be very valuable for those tribe of users.
C. Both : Doing both (Oyo, Grofers, Xiaomi Smart Home, Micromax)
So a start-up can disrupt an existing market with nine combinations.
1A : Mature Market by Cost : Jio, Xiaomi Smart Phone
1B : Mature Market by Feature : Gmail, iPhone, Uber
1C : Mature Market by Both : AirBnB, Xiaomi Smart Home
2A : Emerging Market by Cost : Fitbit
2B : Emerging Market by Feature : Google Search,
2C : Emerging Market by Both : Oakremote ;)