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OK tech entrepreneurs, you have your idea for a startup, the first round is funded, and you’re going to change the world, right? Great.
Here’s the good news: You have a chance. Even in markets with dominant players, there’s always room for making processes and products better, bigger, smarter. Remember Physics 101? We live in an ever-expanding universe. The same is true in this economy if you have the right idea and the guts to go after it.
The bad news? Everyone — including your competition — knows the good news.
Related: How Small Companies Are Keeping Big Giants on Top of Their Game
Even Jeff Bezos has had sleep-wrecked nights worrying about some cocky, caffeinated code-jockey who might dis-intermediate his empire. Believe me, someone out there is trying.
See, there is no “game over” in the internet economy. No matter how big the business, new opportunities exist and always will. The trick is how to see them and exploit them before anyone else.
With all this in mind, here are a few things I’ve learned about seizing opportunity while building Tripping.com, a new entrant into a market filled with established players and old-line travel companies:
Remember you’re hunting big game.
If you see an opportunity in a market dominated by Silicon Valley darlings, you may be facing a tough slog. In our early days, Airbnb was gaining a ton of traction and investors didn’t believe there was room for another player in the home rental space.
So, understand what you are in for: Wedging yourself into a market that is already dominated by big players is a hard game.
Related: How 2 Former Warby Parker Execs Are Disrupting the $32-Billion Luggage Industry
Here’s how we did it:
First, we identified a $285-billion industry that had been slow to innovate. Then, we studied patterns inside the industry to create a hypothesis about where things were headed. And finally, we looked at different verticals with similar patterns to see which business models were most successful.
In our case, we noticed that the vacation rental industry was intensely fragmented. So we looked at other fragmented markets (like hotels and jobs) to see which companies were thriving (like Trivago and Indeed). When we noticed that metasearch sites were winning in fragmented markets, our path became clear and we charged full-steam ahead.
Follow the data.
First, live in your data — make it your company’s DNA. Data is going to be the best indicator of whether you are onto something that you can monetize and scale.
And by data, I don’t just mean blinking rows of 0s and 1s. Old-school research is vital.
Related: 4 Ways Startups Can Harness Innovation and Disruption
Yes, some marketing reports are going to amp up your burn rate. Luckily lots of analyst and earnings reports are available for free or a low-fee on the web. My favorites are S-1s, which are the filings used by companies on the verge of IPO to register their securities with the U.S. Securities and Exchange Commission. When we were pulling data for early investor decks, we used Kayak’s S-1 filing to show comparative data and highlight the strengths of the metasearch model. Your investors and industry friends may also have access to reports, so don’t be shy about asking them to help you track down the info you need.
Data will reveal opportunities, expose problems, and give you a stronger handle on your business. It ultimately saved my company and helped us spot a huge, gaping hole in one of the world’s fastest growing industries.
Vanity metrics are lethal.
We initially launched Tripping.com as a social platform where travelers could meet locals. Our user growth was explosive but we quickly learned that 22-year-old backpackers don’t have huge budgets. We were struggling, running out of money and starting to panic.
For us, user growth was a vanity metric. It made us feel good and it seduced us into believing we were successful. But in reality, it meant zilch without revenue. So we started to think about pivoting into the vacation rental industry.
Related: How Entrepreneurs Can Conduct Primary Market Research
My cofounder and I ate up reports from HomeAway, Booking.com and other travel sites. We read every interview that Brian Chesky, co-founder and CEO of Airbnb, gave. We’d even call property owners. We’d ask where do you list your properties? How much do you pay? What’s your biggest pain point? We were obsessed with understanding the industry inside and out.
Remember hedge fund manager Mark Baum, Steve Carell’s character in The Big Short? In the movie, he went down to strip clubs in South Florida before the real estate crash to find out who was buying all those homes with no-documentation, no-money-down mortgages. It isn’t always pretty, but research will take you in strange directions sometimes.
Less interestingly, we also picked the brains of venture capitalists wherever and whenever we pitched. Even if they passed on us, we still walked away with something. Information gathering never stopped.
Just make sure you’re gathering the right information.
Disrupting a big market is never easy. That’s why so few people are able to do it. But, if you have conviction behind your idea and good data to guide you, go for it. The market you’re trying to enter could one day be yours to own.
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