The Consequences of Innovation
Updated: Oct 22, 2020
Go Ahead, Shrink Your Market Size
“What’s the market size?” is a common question amongst investors and curious minds trying to size up your company and opportunity.
Here is the newest iteration of my answer: “Actually, it’s pretty small… and our platform is making it even smaller. Stay away!”
One telltale sign of a disruptive company is its ability to shrink the market size. Such shrinkage can only come with economies of scale and increasing operational efficiency.
Today’s startups are lowering software costs through better design (low support costs), automated training (little-to-none training), and cloud architecture (no maintenance costs). That means that yesterday’s bloated $100K deal is today’s lean $20K deal… and the invoice only has one line-item on it.
This doesn’t mean that startups have to settle on lower returns or downsized dreams. It just means that they have to make up for the smaller market size by building new products, targeting bigger/better opportunities, and expanding into new verticals.