11 ms·

Beware: if there are markets that appear uncompetitive, there is a damn good reason for it. And it's never becaues no-one thought to look there. If you do fin

Beware: if there are markets that appear uncompetitive, there is a damn good reason for it. And it's never becaues no-one thought to look there. If you do find uncompetitive markets, it'll most likely be because someone has regulatory capture, or there is something preventing new entrants, high barriers to entry, or the cost of user acquisition is simply too high for new entrants.

kube-system 6y ago
Those are all good points -- I would also imagine that many of the least competitive markets are simply just niche markets. There could be a potential to easily make a 10x product in many of these markets, but the reward is likely not great enough to make that profitable. Although, some people do okay if they're able to make a one-man-shop out of it.
- PeterCorless 6y ago
  "Science Fiction" was niche until Star Wars sort of blew the doors off. Sometimes it is niche until technology catches up with a need. Sometimes it is niche until an un-suckful product is actually offered. Sometimes it is niche until a sudden shift in the entire economy or market. The shift from horseshoe-clad transportation to a new thing was rapid only after about 20 years of "niche" gas-powered automotive vehicles.
  - kube-system 6y ago
    Sure, some things are niche until they aren’t... but some things really are niche and will stay that way. My first thought was, someone who makes a hard-to-find part for a low volume vehicle. Take, for instance, the original Tesla Roadster. It sold about 2500 units. Maybe they have a problem that happens in 10% of units. You have a maximum of 250 customers, assuming none are scrapped and you provide the only potential solution. These are the sorts of situations in which you’ll find very little competition. For a lot of people with niche interests there’s always “that one dude on the forums” who is the only person with the solution. The same kind of situations arise often in enterprise too, and it’s the kind of things that internal teams or contractors might one-off. But, if you make an off-the-shelf product for it, you’ll be the only game in town!
    - trevett 6y ago
      I think someone should start a thread asking about all the one-offs people have written and see how much duplication there is.
haolez 6y ago
What a wonderful meme: "regulatory capture". Words have power! I'll definitely use this.
- kube-system 6y ago
  It's a pretty common political/economic term
  - afarrell 6y ago
    https://xkcd.com/1053/ https://xkcd.com/1053/ sometimes it is nice to bask in the glow of another person's TIL. There is a simple joy to it like the smell of freshly-cut grass. yes and -- informing someone that the term is more widely used than they might otherwise have known is indeed useful
    - wenc 6y ago
      Yes to your second sentence. I read kube-system's comment in good faith. It was providing community context. I once got excited about what I thought was a cool idea (I can't remember what it was, but something along the lines of "black swan theory"). I didn't know how established it was, so I started inserting it in talks with the assumption people didn't already know about it. I belabored its definition and dwelled on it, when in fact people in academic communities had already discussed it in depth, and have moved on to other ideas. No one said anything, but no one engaged with me after my talks and I wondered why. Looking back, I wished someone had nudged me and explained the context of that idea in those communities. I must have come across as a pseudointellectual (in that particular context). Feedback matters and is helpful when given kindly. (on "regulatory capture" specifically, I admit I had not heard the term until about a year ago when it came up several times on Tyler Cowen's blog and on HN)
  - haolez 6y ago
    It's not common in my native language.
    - 6y ago
Jommi 6y ago
I think you should still include the temporal factor here. Yes there might _have_ been a reason for a the market to be competitive, but something might have changed in the past few years that has removed or minimized that reason. These are the marketing that are ripe for competition.
ChuckMcM 6y ago
Okay, this comment reminds me a bit of the economist joke with the $20 bill[1]. But the essence of the comment is spot on, these apparently barren landscapes of competitors often have a cause, and so just finding such a market is only the start of analyzing WHY it seems to be so noncompetitive. [1] Two economists are walking down the street and one sees a $20 bill on the ground and picks it up. The other asks, "Why did you pick that up? It's clearly counterfeit, if it were a real $20 bill someone else would have already picked it up."
- xapata 6y ago
  That's the efficient market hypothesis.
  - ChuckMcM 6y ago
    Like I said, an economist joke. :-)
    - sloaken 6y ago
      Not only a good joke, but it demonstrates a reality of thought, which I am often guilty of.
trevett 6y ago
Could be nascent markets with a few seed-funded startups trying to serve them. The goal is not to find totally uncompetitive markets but those that are more niche, with a lighter degree of competition, where marketing efforts can be more efficient. The last requirement is that there is an overlap with a larger, adjacent market along a few dimensions.
raverbashing 6y ago
Or, some businesses are just not worth it. You can throw as much business intelligence and automation to, let's say, an Ice Cream truck. It will still be an Ice Cream truck. Nobody is becoming a millionaire with it.
- crispyporkbites 6y ago
  Pretty sure there are quite a few millionnaires who own ice cream trucks.
  - system2 6y ago
    All startups either fail or succeed mostly because of management.
  - deleted 6y ago
    [deleted]
- Animats 6y ago
  You could have a gamified app which tells kids when the ice cream truck is getting close.
- cameron_b 6y ago
  I think this is a good example of how sometimes we sit in the VC space where you go from $0 MRR to THE MOON or it really doesn't mater. There are a lot of avenues to really significant lifestyle businesses outside of 4 Hour Work Week SaaS Solo Ventures, It is important to remember that sometimes taking the risk back a notch, applying all the same principles, leveraging less, and working hard -- maybe even making a tangible product, like food, say -- can be just as rewarding.
- at-fates-hands 6y ago
  What if the end goal for the business owner isn't to be a millionaire? Maybe he's totally cool with just having a couple of ice cream trucks and clearing 150K in income every year? Would THAT be worth it then? Maybe not to you, but to the guy who came from a third world country and built his company from nothing and now he's living an upper middle class lifestyle? To that guy it's the essence of the American Dream.
afarrell 6y ago
One class of markets that I suspect is a target-rich environment: disability-adaptation tech. 1. There is a decent chance that existing entrants are tied down by a focus on meeting the regulations rather than on delighting users. 2. You might be able to significantly scale-up and thus improve the unit economics. While the market of people who can pass the means-testing to qualify for whatever government-subsidized benefit exists might be small, the nature of bureaucracy means there is often a MUCH wider pool of people who are "quasi-disabled", either permanently or temporarily. Note that there are a few disabilities which are so overwhelmingly common that the market is already saturated. The classic example is eyeglasses. 3. The specific disabled population is a ready-made population of early adopters IF you identify that you can keep your focus on delighting users and just use the regulations to remind yourself of risks and edge-cases. (This really will depend quite heavily on the quality of the regulations -- notice the difference between Japanese zoning and SF-bay housing-approvals) Lots of legacy disability tech: * Has a pretty frustrating maintenance cycle, so you can win on a strong customer service brand IF you can innovate on operations. * Can be pretty frustrating to use, so you can win big on design. A focus on delighting users rather than ticking boxes is naturally going to produce a naturally better product. Here is the key tactic though: lean on the early-adopters for high-detail feedback. This problem occupies a much larger proportion of their lives than the average user of a product. This higher-strength signal of user needs is known as the "Curb Cut Effect". https://thingofthings.wordpress.com/2014/11/15/the-curb-cut-effect-or-why-it-is-basically-impossible-to-appropriate-from-disabled-people/ https://thingofthings.wordpress.com/2014/11/15/the-curb-cut-... This also seems to hint at a good trick to turn any regulatory box-ticking exercise into purpose-driven-design. After all, a focus on privacy-by-design is better than a focus on the letter of GDPR-compliance, right? ---------------------------------------------------------------------------------------------------------- Hilariously, I used to work for a YC company unwittingly building assistive tech for my particular disability. Their Curb Cut effect was so ridiculously strong, they've occasionally written ad copy with reference to a symptom I've experienced and I'm pretty sure they still don't even realize it. Looking back, I now really wish I had been self-confident enough to explicitly disclose -- especially when their CEO started using a wheelchair.
- rglovejoy 6y ago
SkyPuncher 6y ago
I'll challenge this. I've found there are a lot of secondary markets that get overlooked by VC. Typically, these markets have (1) a lower ceiling so they're overlooked by VC's needing an outside return. They can still be massively profitable for a bootstrapped or lean company. (2) Require deep knowledge of two non-overlapping subjects.
- edoceo 6y ago
  Anecdata: I've seen three or four companies that look like this, one attracted VC (after proven traction), one was rejected cause (external risk) and the others are a nice tidy business for the founders and a few employees. Sometimes I hear, pejoratively, a "lifestyle" business.
Joeri 6y ago
To give an example: I once considered entering the market of doctor appointment software. The existing players in my country all have bad UX, and it seemed relatively easy to build a superior product. But then on researching it deeper I discovered the basic problem with the market is that doctors won’t pay enough on a monthly basis for a high-touch sales process and they still mostly insist on one or more personal visits before buying the product. So, you basically lose money on every customer for the first year or two, meaning it is really hard to build a sustainable business. I got access to the financials of two of the existing players, and they were not good. They did the minimum investment into the product they could get away with because the market wouldn’t allow for more than that.
- tmamic 6y ago
  In the words[1] of @spakhm appointment software for doctors is not a showstopper and definitely not a gamechanger. I've been researching medical market a lot. There are many reasons why appointment and practice management software isn't a great business. But the number one reason is that it doesn't create a great value for doctors. Patients will still come and use the same doctor, insurance companies will still pay them the same, it won't bring new patients, it will not make it easier for doctor to manage his practice since he still has to have a nurse which does this. On another hand, it makes it easy for their patients to go somewhere else since EHR need to be completely available to patient. This is an unnecessary risk. [1] https://www.defmacro.org/2013/09/26/products.html https://www.defmacro.org/2013/09/26/products.html
  - ozim 6y ago
    This can be nicely compared with booking.com, where hotels get great benefits from the platform. Because market for hotels is so much different. You are not going to look for a doctor on the other side of country. So if one wants to make an appointment/booking software, would have to look for things that would bring new customers. Helping with discovering places.
    - PopeDotNinja 6y ago

kube-system 6y ago

Those are all good points -- I would also imagine that many of the least competitive markets are simply just niche markets. There could be a potential to easily make a 10x product in many of these markets, but the reward is likely not great enough to make that profitable. Although, some people do okay if they're able to make a one-man-shop out of it.

PeterCorless 6y ago
"Science Fiction" was niche until Star Wars sort of blew the doors off. Sometimes it is niche until technology catches up with a need. Sometimes it is niche until an un-suckful product is actually offered. Sometimes it is niche until a sudden shift in the entire economy or market. The shift from horseshoe-clad transportation to a new thing was rapid only after about 20 years of "niche" gas-powered automotive vehicles.
- kube-system 6y ago
  Sure, some things are niche until they aren’t... but some things really are niche and will stay that way. My first thought was, someone who makes a hard-to-find part for a low volume vehicle. Take, for instance, the original Tesla Roadster. It sold about 2500 units. Maybe they have a problem that happens in 10% of units. You have a maximum of 250 customers, assuming none are scrapped and you provide the only potential solution. These are the sorts of situations in which you’ll find very little competition. For a lot of people with niche interests there’s always “that one dude on the forums” who is the only person with the solution. The same kind of situations arise often in enterprise too, and it’s the kind of things that internal teams or contractors might one-off. But, if you make an off-the-shelf product for it, you’ll be the only game in town!
  - trevett 6y ago
    I think someone should start a thread asking about all the one-offs people have written and see how much duplication there is.

haolez 6y ago

What a wonderful meme: "regulatory capture". Words have power! I'll definitely use this.

kube-system 6y ago
It's a pretty common political/economic term
- afarrell 6y ago
  https://xkcd.com/1053/ https://xkcd.com/1053/ sometimes it is nice to bask in the glow of another person's TIL. There is a simple joy to it like the smell of freshly-cut grass. yes and -- informing someone that the term is more widely used than they might otherwise have known is indeed useful
  - wenc 6y ago
    Yes to your second sentence. I read kube-system's comment in good faith. It was providing community context. I once got excited about what I thought was a cool idea (I can't remember what it was, but something along the lines of "black swan theory"). I didn't know how established it was, so I started inserting it in talks with the assumption people didn't already know about it. I belabored its definition and dwelled on it, when in fact people in academic communities had already discussed it in depth, and have moved on to other ideas. No one said anything, but no one engaged with me after my talks and I wondered why. Looking back, I wished someone had nudged me and explained the context of that idea in those communities. I must have come across as a pseudointellectual (in that particular context). Feedback matters and is helpful when given kindly. (on "regulatory capture" specifically, I admit I had not heard the term until about a year ago when it came up several times on Tyler Cowen's blog and on HN)
- haolez 6y ago
  It's not common in my native language.
  - 6y ago

Jommi 6y ago

I think you should still include the temporal factor here. Yes there might _have_ been a reason for a the market to be competitive, but something might have changed in the past few years that has removed or minimized that reason. These are the marketing that are ripe for competition.

ChuckMcM 6y ago

Okay, this comment reminds me a bit of the economist joke with the $20 bill[1]. But the essence of the comment is spot on, these apparently barren landscapes of competitors often have a cause, and so just finding such a market is only the start of analyzing WHY it seems to be so noncompetitive. [1] Two economists are walking down the street and one sees a $20 bill on the ground and picks it up. The other asks, "Why did you pick that up? It's clearly counterfeit, if it were a real $20 bill someone else would have already picked it up."

xapata 6y ago
That's the efficient market hypothesis.
- ChuckMcM 6y ago
  Like I said, an economist joke. :-)
  - sloaken 6y ago
    Not only a good joke, but it demonstrates a reality of thought, which I am often guilty of.

trevett 6y ago

Could be nascent markets with a few seed-funded startups trying to serve them. The goal is not to find totally uncompetitive markets but those that are more niche, with a lighter degree of competition, where marketing efforts can be more efficient. The last requirement is that there is an overlap with a larger, adjacent market along a few dimensions.

raverbashing 6y ago

Or, some businesses are just not worth it. You can throw as much business intelligence and automation to, let's say, an Ice Cream truck. It will still be an Ice Cream truck. Nobody is becoming a millionaire with it.

crispyporkbites 6y ago
Pretty sure there are quite a few millionnaires who own ice cream trucks.
- system2 6y ago
  All startups either fail or succeed mostly because of management.
- deleted 6y ago
  [deleted]
Animats 6y ago
You could have a gamified app which tells kids when the ice cream truck is getting close.
cameron_b 6y ago
I think this is a good example of how sometimes we sit in the VC space where you go from $0 MRR to THE MOON or it really doesn't mater. There are a lot of avenues to really significant lifestyle businesses outside of 4 Hour Work Week SaaS Solo Ventures, It is important to remember that sometimes taking the risk back a notch, applying all the same principles, leveraging less, and working hard -- maybe even making a tangible product, like food, say -- can be just as rewarding.
at-fates-hands 6y ago
What if the end goal for the business owner isn't to be a millionaire? Maybe he's totally cool with just having a couple of ice cream trucks and clearing 150K in income every year? Would THAT be worth it then? Maybe not to you, but to the guy who came from a third world country and built his company from nothing and now he's living an upper middle class lifestyle? To that guy it's the essence of the American Dream.

afarrell 6y ago

One class of markets that I suspect is a target-rich environment: disability-adaptation tech. 1. There is a decent chance that existing entrants are tied down by a focus on meeting the regulations rather than on delighting users. 2. You might be able to significantly scale-up and thus improve the unit economics. While the market of people who can pass the means-testing to qualify for whatever government-subsidized benefit exists might be small, the nature of bureaucracy means there is often a MUCH wider pool of people who are "quasi-disabled", either permanently or temporarily. Note that there are a few disabilities which are so overwhelmingly common that the market is already saturated. The classic example is eyeglasses. 3. The specific disabled population is a ready-made population of early adopters IF you identify that you can keep your focus on delighting users and just use the regulations to remind yourself of risks and edge-cases. (This really will depend quite heavily on the quality of the regulations -- notice the difference between Japanese zoning and SF-bay housing-approvals) Lots of legacy disability tech: * Has a pretty frustrating maintenance cycle, so you can win on a strong customer service brand IF you can innovate on operations. * Can be pretty frustrating to use, so you can win big on design. A focus on delighting users rather than ticking boxes is naturally going to produce a naturally better product. Here is the key tactic though: lean on the early-adopters for high-detail feedback. This problem occupies a much larger proportion of their lives than the average user of a product. This higher-strength signal of user needs is known as the "Curb Cut Effect". https://thingofthings.wordpress.com/2014/11/15/the-curb-cut-effect-or-why-it-is-basically-impossible-to-appropriate-from-disabled-people/ https://thingofthings.wordpress.com/2014/11/15/the-curb-cut-... This also seems to hint at a good trick to turn any regulatory box-ticking exercise into purpose-driven-design. After all, a focus on privacy-by-design is better than a focus on the letter of GDPR-compliance, right? ---------------------------------------------------------------------------------------------------------- Hilariously, I used to work for a YC company unwittingly building assistive tech for my particular disability. Their Curb Cut effect was so ridiculously strong, they've occasionally written ad copy with reference to a symptom I've experienced and I'm pretty sure they still don't even realize it. Looking back, I now really wish I had been self-confident enough to explicitly disclose -- especially when their CEO started using a wheelchair.

rglovejoy 6y ago

SkyPuncher 6y ago

I'll challenge this. I've found there are a lot of secondary markets that get overlooked by VC. Typically, these markets have (1) a lower ceiling so they're overlooked by VC's needing an outside return. They can still be massively profitable for a bootstrapped or lean company. (2) Require deep knowledge of two non-overlapping subjects.

edoceo 6y ago
Anecdata: I've seen three or four companies that look like this, one attracted VC (after proven traction), one was rejected cause (external risk) and the others are a nice tidy business for the founders and a few employees. Sometimes I hear, pejoratively, a "lifestyle" business.

Joeri 6y ago

To give an example: I once considered entering the market of doctor appointment software. The existing players in my country all have bad UX, and it seemed relatively easy to build a superior product. But then on researching it deeper I discovered the basic problem with the market is that doctors won’t pay enough on a monthly basis for a high-touch sales process and they still mostly insist on one or more personal visits before buying the product. So, you basically lose money on every customer for the first year or two, meaning it is really hard to build a sustainable business. I got access to the financials of two of the existing players, and they were not good. They did the minimum investment into the product they could get away with because the market wouldn’t allow for more than that.

tmamic 6y ago
In the words[1] of @spakhm appointment software for doctors is not a showstopper and definitely not a gamechanger. I've been researching medical market a lot. There are many reasons why appointment and practice management software isn't a great business. But the number one reason is that it doesn't create a great value for doctors. Patients will still come and use the same doctor, insurance companies will still pay them the same, it won't bring new patients, it will not make it easier for doctor to manage his practice since he still has to have a nurse which does this. On another hand, it makes it easy for their patients to go somewhere else since EHR need to be completely available to patient. This is an unnecessary risk. [1] https://www.defmacro.org/2013/09/26/products.html https://www.defmacro.org/2013/09/26/products.html
- ozim 6y ago
  This can be nicely compared with booking.com, where hotels get great benefits from the platform. Because market for hotels is so much different. You are not going to look for a doctor on the other side of country. So if one wants to make an appointment/booking software, would have to look for things that would bring new customers. Helping with discovering places.
  - PopeDotNinja 6y ago