Creating the Market
Is the market big enough?
This is one qualifying questions VCs ask themselves when thinking of potentially investing in a startup. If the market is big enough, then even if they own a small percentage of the market there’s still the possibility that the startup can potentially reach unicorn status.
But some of the most successful startups don’t enter existing markets but rather create the market themselves.
Uber created the ride share industry.
Airbnb created the local hospitality industry.
DoorDash created the food delivery industry.
Early on, these companies are not easy to evaluate. How can you perform a market sizing analysis for an industry that doesn’t exist? Yet, this is part of the fun of VC. They don’t call venture capital the highest risk asset class for nothing.