« Our Market is huge” means “Our potential Market is really Big but our accessible market still needs to be defined”
Huge market. It’s something I hear a lot from entrepreneurs, and I must confess that in my previous life as an entrepreneur, I also used to say it. But now, my first answer will be so what?
I’m not interested as an investor in absolute and very big numbers in themselves. I’m interested in your ability as an entrepreneur to explain me how, even though you have a limited amount of money and time, you’re able to grab a big chunk of that market. So, the big, big mistake is to take a big juicy market and assume that with 2% of that market you will get to breakeven…and believe that this is still a very credible argument because it says that you have 15 million customers.
That is called by @guy Kawasaki, The Chinese soda dilemma, which is, 2% of the market of China for soda means 25 million potential customers.
Alright, great. But how much money do you need to get access to those 25 million customers or how much time will that take you?
Money and time, when it comes to persuading investors are very important because those are the two dimensions of the return on investment. So, when it comes to huge markets, do not confuse the market with THE market you can access.
There is a difference between the global market and your market. And you will build your credibility, you will build the confidence on your projects, by showing how you will get from customer zero to customer one, and then from customer one to customer 100. And eventually to that 2%.
That is bottom up, not top down.
It comes down to what the cost of acquisition of your customer is. The lower this cost will be, and the more data you will have to back up that number, the more credible will be your project, independently from the huge size of the market.
Remember the difference between The Global Market and Your Market (the one that you can access).