That dumb market share assumption just won't go away



This week I got hit by it three times… It’s such a cliche it’s not even funny. Here goes: “If we only hit a 2% market share then our business will be worth [large random number]”.  OK folks, back to some basics here.

If you think your business is huge on 2% market share, you have either (a) misdefined your directly addressable market or (b) you are wrong.  Voila.  It is late here in London and I am entitled to a random opinion with no evidence or justification whatsoever.

On that note here is a splendid occasion to remind my dear readers of a seminal post (series) on the topic of getting ready for your VC, from the master guru in person.  Read this now, print it, read it again.  Yes, this one is worth killing a tree for.  Here is the relevant abstract:

  • And never, ever say your market projections indicate you’re going to
    be hugely successful if you get only 2% of your (extremely large)
    market. That also signals naivete. If you’re going after 2% of a large
    market, that means the presumably larger companies that are going to
    take the other 98% are going to kill you. You have to have a theory for
    how you’re going to get a significantly higher market share than 2%. (I
    pick 2% because that’s the cliche, but if you’re a VC, you’ve probably
    heard someone use it.)

http://farm1.static.flickr.com/122/296211136_2d8651f9be.jpg <–here is the the guru, lost his hair b/c of sociopath VC

The image “http://americanhistory.si.edu/collections/comphist/andreessen.gif” cannot be displayed, because it contains errors. <– the guru before his undergoing sociopath VC exposure

Technorati Tags: ,

Powered by ScribeFire.

This entry was posted in Uncategorized. Bookmark the permalink.

5 Responses to That dumb market share assumption just won't go away

  1. Robin Klein says:

    Thought provoking as ever, Fred.
    These may be semantic arguments however.
    If you are attacking or disrupting an established offline market by doing something in an entirely different way – eg the rental of DVDs then you can certainly build a big enough business by taking a relatively small share.
    Over time you may create new markets or simply migrate markets. The Grocery eCommerce business addresses the entire grocery market etc.
    All that said, 2% is pretty unambitious – even when the addressable market includes the established channel or service.

  2. Wow, poor Marc… I had no idea!

  3. Mauro says:

    Excellent point Fred, I totally agree. Are you bored of the word “conservative” too when people talk about numbers? I am!

  4. Top-down planning is so 2007.

    Had the greatest thing last week when an entrepreneur told me: “We realize these numbers are extremely ambitious. It’s a stretch plan but we think we can do it.” I felt very weak at the knees.

  5. If you are attacking or disrupting an established offline market by doing something in an entirely different way