Connect the dots to a startup opportunity by understanding key trends in 2020.
Creating a startup is easy. Turning that startup into a successful company is hard. As someone who has helped build a billion dollar company and helped hundreds of people start and grow their companies, it’s not easy to grow a company to a point of stability and sustainability. So, why not hedge your bets and focus only on problems that face large segments of people across large industries? Using that strategy, even a rounding error might yield a $10 million company. Assume a $10 billion industry and with your startup, you achieve just one-tenth of one percent as market share. That’s a $10 million company. Again, it’s not about ideas but problems.
Let me explain. Your energy should not be taken up by ideas you might have for possible products or solutions as you don’t know if a market or industry opportunity actually exists. However, when you find a problem in a large industry that already has lots of consumers, you have a built in marketplace. For an example, let’s look at dog food in the USA. It’s about $30 billion in annual sales. Instead of trying to create something you need to “sell” in this industry, why not just follow the trend and introduce organic or plant based dog food by following the trends? Natural and organic dog food sales have doubled to $6.8 billion in the last ten years. They will double again in the next five years. With no real marketing. It’s all demand driven by the consumer who is eating healthier. So will their dog.
Here is the formula you should follow when considering the creation of a startup company that might have a better chance of succeeding: markets, large industries, trends and problems.
Large market segments that matter. Large population groups have their own characteristics and behaviors that drive product or service sales. You need to understand the key population segments which include the following: Baby Boomers at 71 million, Gen X at 56 million, Millennials at 70 million and Gen Z at 72 million. You need to analyze and understand what makes up each group, their age range, their income and most importantly, their beliefs and aspirations. Because opportunity lies in between their aspirations and their realities. As an example, Gen Z believes that plant-based milk is better for the planet based on sustainability, health and eco-friendly. Enter oat milk.
Industries that are large or growing. I like large or rapidly growing industries for several reasons. They are easy to see and research, you can analyze the competition, problems are sometimes easily seen and they usually have large revenues. By the way, there is no such thing as a good or bad industry, just opportunity. If you looked at the DVD rental industry in 2000, you might say it was not very good, too competitive, too costly to enter. That did not stop Netflix from disrupting the industry. Same thing with the taxi industry. Almost impossible to enter as you need large amounts of capital, vehicles, maintenance facilities, etc. That did not stop Uber from disrupting the industry with a different business model.
Trends are the alchemist. Most people don’t really track or “see” trends as they are occurring with either people in markets or companies in industries. But trends are the real alchemist with respect to startup opportunities. They could be the one thing that highlights a problem or opportunity in an industry or with a population segment. And if a trend crosses a large population segment and an industry at the same time, there is a major opportunity for disruption. Millenials didn’t want to stay at hotels and they wanted a local’s experience when they traveled. Enter AirBnb which has disrupted not only hotels but also the vacation rentals marketplace.
Problems are the goal. As has been stated before, creating a startup is easy but growing it into a real company is hard. So, why not hedge your bets and only look for problems that large segments of people have across a large industry? A problem is not an idea you are selling; it’s a solution people want to buy. You should only be starting companies against problems you have identified and tested viable solutions to the customer segment who feels the most pain. The Shopify ecommerce platform is a great example of people and smaller companies wanting to sell more online but they could not afford to have an expensive ecommerce website custom designed and maintained. Enter Shopify which is basically an “Amazon-light” ecommerce platform enabling almost 1 million companies to sell online. For $79 a month or less.
If you really have never paid attention to trends, you need to. Trends indicate the changes that are coming to a market or industry and if you pay attention, you might just see a perfect storm forming.