1. The attainable market is much smaller than expected in the first 3 years.
2. Running an online strategy is foreign to most founders
3. Read on for more details

I have interfaced with over a hundred startups, and directly contributed to about 20 of them. I started categorizing why startups failed/succeeded. In truth, we all want startups to either succeed or fail, but most times, it’s somewhere in between. And it puts you, the founder, in a tough position. Here are my findings based on my experience.

Attainable market isn’t the same as market size

A newly identified market presents an interesting opportunity but it doesn’t mean that the consumers or businesses will buy your product right away. Let’s take an example. In 2018, studies showed that the “Big & Tall” audience in fashion was a growing opportunity. Millions suffer from not being able to shop for clothes that fit and look great. This insight led to multiple startups in the space. Do you see the one issue here? The Big & Tall audience has never shopped online, and doesn’t trust online services. Fast startups can launch and get the early adopters, but it doesn’t mean they will be the top company once the demand rises to the identified market size and competition catches up.

Your competition will know what you know now in 6 months. And competitors know the tricks of running an online marketing strategy. So how do you actually win? If the market size is truly big, it will support multiple healthy businesses. So you keep your head down and keep going to reach a revenue you are happy with. Here are examples: advertising technology startups represent about 10% of the market shares from the big tech and yet there are multiple 100M+ businesses that all started at about the same time 2010-2013. Other successes include recruiter startups since they are local and high margins. It’s hard to scale it but that also means you only have local competitors.

Technological moats also offer the best advantage but they are hard to find today. Having a strong online strategy, and continuously investing in it is the best advice I can give to making sure your business owns market share and stays healthy. Most likely you will share the market with your competitors and not own a market like one of the tech giants.

Most new founders don’t know how to run online businesses.

Let’s try to talk about inexperience without getting canceled. Most founders don’t have the training to run an online business. And It’s astonishing how many mistakes can be made without killing a business, but every decision you make will determine your market share 5 years from now. So making less mistakes is crucial for your longevity. The good news is that you can learn online strategies.

Mistake number one is pricing. You have to be over and under your target price to find the optimal price. That needs to feel uncomfortable. Mobile apps are a great example of price sensitivity. It turns out there is little to no price sensitivity once a consumer has decided to purchase a mobile app. That’s probably why prices seem to go up instead of down even though we are going into our second decade of having an app store on our phones. If you own an app, try upping your price. I guarantee you will see about the same amount of purchasers. An example here is Tower Maze Defense, a mobile game. We upped the price at some point to $8.99 from $2.99 and saw about the same quantity of purchases. But the people who decided not to purchase because of the high price left a 1 star review. So you need a lot of scale to dilute these.

Online strategy is still a new thing for most business owners. Digital ads, and digital branding requires constant effort and a highly scientific approach. You should do more of the things that work even if you don’t like it. That’s a big issue for most founders, when they realize that running a business is a lot of work that may not be fun. You can try to hire to do the things you don’t like but quality won’t be as good unless you manage and direct that team. I can’t name examples on this one without burning some bridges here :).

Conclusion:

This blog post is purely based on my experience. I am sure others have seen way more success/failure criterion. But big attainable markets, and having a strong business acumen will increase your longevity regardless of the business you are in. I guarantee it because I have seen it with most startups. None of them have become billion dollar startups though, but hey, running a 2-10M a year business is still pretty great if you have a small team!