Thoughts on startups by investors that
fund them & entrepreneurs that run them

Which is Better? The Whole Big Market or the Strategic Niche?

Posted by on July 9th, 2013

True story: After this particular startup team pitched a couple dozen investors, many of the investors told them their strategy was too narrow and too focused. One comment: “there’s a huge potential market, and you’re boxed into a niche.”

maze, strategy, route, flickrcc jen_tik

Later, when I talked to the startup founder about it, she was disappointed. “The last time we pitched they all said we were trying to do too much,” she said. “They told us we shouldn’t talk about the big market, but identifiable, defensible niche instead.”

I see this a lot. It’s a bit of a “grass is greener” problem. Potential investors, trying to help, and with all the best intentions, make suggestions. And quite often it’s like focus groups, in which the conclusion is determined by the most vocal member. So different groups have conflicting recommendations. I’ve seen this on other issues, but the whole-market-vs-niche is the most common.

My preference is a so-called beachhead strategy, in which the startup focuses on a strategic niche first, but is already thinking about how to move from strength in the niche to other contiguous markets, growing the market as they go. I think validation is easier to get in a niche. And sales. And cash.

Done right, that’s the best of both worlds.

(Image: Jen Tik, Flickr cc)

Written by Tim Berry

user Tim Berry

Tim is the founder of Palo Alto Software and bplans.com, the co-founder of Borland International, and the official business planning coach at Entrepreneur.com. He has been called the "Obi-wan Kenobe of business planning" and "The Father of Business Planning." He is a serial author of books and software on business planning.

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