Folks that were very early to a new market often sort of lament it
Being much more than 24 months early is painful. There just aren’t enough customers, that the later entrants benefit from.
But pushed, what they really realize is they should have just stayed in it longer.
— Jason ✨BeKind✨ Lemkin ⚫️ (@jasonlk) June 8, 2021
As a founder, I’ve been on both sides of market maturity.
In my first start-up, we entered a very mature market that was basically a monopoly. That meant it was hard to break in, but once you did, the customers had big checkbooks. We closed $6m our first year (more on that here). It wasn’t easy, but once we had the break-out product the customers wanted — the cash was there. Because the market was mature and budgeted.
The second time, at Adobe Sign / EchoSign, the market was way early when we entered. It was less than $1m in total size, vs. > $2.5B today. More on that here. But once the market finally grew, boy it got big. Not only is DocuSign on a tear, but Adobe Sign was Adobe’s fastest-growing product in 2020 and 2021, and even smaller players are worth hundreds of millions and more:
Some of us are intentional in which type of market we pick — mature and competitive, or new and emerging (and likely less competitive). Some of us really want to compete with a new entrant in a proven market, and explode like a Datadog. Others want to help reinvent or invent a newer space, like Snowflake or UiPath. But I think for most of us, we find a business problem we want to solve. And the state and the maturity of the market sort of ends up what it is.
So what do you do if you are way early? By that I mean, a market is there for your product, but it’s tiny today.
- Be conscious that it likely will simply take longer. Assume even 3-4 years longer. So when you see other startups taking off faster, be challenged by that. But also realize your hyper growth may still be a few years out. Think about UiPath for a minute. It took 10 full years to get to $1m in ARR. And then went from $1m to $600m ARR in the next 5 years. More here. Make sure you are your co-founders at least are committed to the fact the journey may just take longer than planned for this reason.
- Take advantage of the fact that competitors will quit. In very early markets, new competitors pop up because they think it’s easy. In fact, it often is easy to build a 1.0 in a new market because the feature set you need to be competitive just isn’t as rich as in a more established space. But most of these copycats and new entrants will quit when it turns out the market is a lot smaller, and progress a lot slower, than they realized. Simply staying the course often means you win here.
- Keep the team together. Folks on your team may have an even harder time seeing the big picture when growth in the early days is slower than expected. They may start to simply believe the market will always be too small. Keep them inspired. Celebrate every new customer win. Show them how things are compounding, even from a small state. Compound any growing metric out for them, and show them how it will build into something pretty big in 5-10 years.
- Lean into relevant partner ecosystems. Even if your market is tiny today, it might still be of high interest to a partner with massive scale like Shopify or Salesforce. You may solve an important problem on those platforms that on its own, is more obscure or less obvious. List on those platforms and try to build relationships and high attach rates. This doesn’t always work, but when it does, it can help grow your market significantly.
- Be a thought leader. This can actually work in new categories and markets. A lot of marketers will want to try to turn their CEOs into “thought leaders” and it rarely works in established categories. But in new categories, you often have a shot. You can be an expert in your niche. Talk to anyone that cares about that niche.
- Use micromilestones to build confidence. OK, it may take longer to get to $10m ARR in a brand new market. But you can show folks the path forward by instead focusing on interim, micromilestones. Has your user base grown 5x this year? That shows traction — even if revenue is tiny. What about usage? Leads? Focus on some micromilestones early to prove to your team — and yourself — that the market is in fact taking off. Even if it’s still the early days. More on micromilestones here.
- Triple lean into customer success. In new markets, if your customers love you, they’ll often find you more customers. They’ll tell other CIOs and other VPs at peer companies how great your app is. This always works, but it works especially well in new markets. No one is doing a Google search for your solution yet. But get folks talking about how awesome it is, and that helps bridge the gap.
- Stay in the game. Related to point #2, but it’s so important. And it may sound trite or obvious, but it isn’t. When you enter a new market, your gut may be wrong. You may not see the progress you are making. It may feel like you’ll never get there, even when ARR is still growing and NPS is high. Your gut is wrong. It’s absolutely true you can get less done in a year than planned, but far more than a decade.
These aren’t magical solutions to the fact that if you’re early to market, your revenues will often be tiny in the early days. But have the confidence to see that your market will grow. And that if you can just get to $1m ARR, you’ll find a way to get to $2m ARR. Then $4m ARR. Then at least $10m ARR. And that’s enough.
Enough to compound into something amazing.