Thread by @mijustin

I think folks misunderstand me when I say: "pick your market first."

❌ "Market" = "A group I'd like to sell to."
✅ "Market" = "A category where people are currently spending $."

Example:
"The global diamond market is currently $82 billion USD."

Another example:

❌ "My market is small SaaS companies."

This isn't a great market definition because it doesn't tell us anything about what they're buying.

✅ "I'm in the helpdesk market. Last year, small SaaS companies spent $10 million on helpdesk apps."

"SaaS companies" might be growing fast as a segment (meaning: there are more this year than last year), but that's only relevant if we know how they're spending their money.

How big is the market?

❌ "There are 1.4 million potential customers in this market."
✅ "Last year, 1.4 million real estate agents spent a collective $131 million on digital signature software."

You can definitely target a customer type ("Small SaaS companies") but the next step is to figure out *how they spend their money*:

If you asked 100 small SaaS companies: "What subscriptions are you paying for?"

They might respond:

1. Helpdesk & customer support (Kayako, Helpscout)
2. Email marketing (Mailchimp, ConvertKit)
3. Transactional email (Postmark, Mailgun)

☝️ potentially good markets.

Summary:

"A group of people" is not a market.

"A group of people spending money on X" is a market.

Another illustration of what I'm describing here. The fact that Rob is "a founder" isn't terribly pertinent.

But (from a market perspective) what's more interesting is that he's "a founder who spends money on X."

https://twitter.com/robwalling/status/1197195813920706563

Also notable:

How many products in @robwalling's startup stack are from established companies, with generous free tiers?

It's normal for startups to keep costs low!

This is "the way things are" in that market. Don't chase a strategy based on "the way you wish things would be"

I like the way @corey_gwin describes this:

“Look for demonstrated demand.”

Too often, entrepreneurs underestimate the power of inertia.

If a group of people is not already paying to solve a problem, it’s highly unlikely they’ll change.

You, likely, don’t have the energy, time, or resources to get a group who’s not spending to start spending.

Don’t focus on finding a niche containing a certain number of people.

What matters more is “there’s this many people spending X on Y.”

Look for product categories with demonstrated demand, not crowds of people that might want something you have for sale.

The fallacy goes like this;

“There are a million of people in this group. Surely 1% will want what I have for sale.”

But, it’s completely possible to have access to a large group where nobody wants what you have for sale.

As @sivers explains, there is a number less than 1%.

overcast.fm/+VF_dXte2o