3 ms·

Bollocks. 1% is not a fallacy. It's just a way of mentioning a low-risk target without specifying the strategy. You don't know the specifics of the strategy be

by ucee054 14y ago

Bollocks. 1% is not a fallacy. It's just a way of mentioning a low-risk target without specifying the strategy. You don't know the specifics of the strategy because you're a startup - to quote Clayton Christiansen, the needed market research costs much more than making the product, so you can't afford to do it - and to quote Steve Blank, you may need to pivot if you get your hypothesis wrong. It's called a "fallacy" because idiot VCs don't bother to note these facts, and just want a sure fire winner business plan handed to them so they can fire the founders from their own company. Similarly, idiot VCs don't get why you'd want a hockey-stick graph or to say "these figures are conservative", for much the same reasons. So these become infamous "fallacies" too. If you play by the rules of these idiot VCs, you will find that it's impossible to make a business plan that meets their expectations and isn't fraudulent. It's better to walk away than to play their game. If by any chance you meet a sane VC, they're likely to tell you something useful. Instead of banging on about 1% being a fallacy, they'll say something like "at your stage you need to have a working prototype before seeking investment" or "at your stage you need a more aggressive advertizing plan". You know, something with content.

stevenameyer 14y ago
But if the whole point is saying there is a lot of money in this space so it's less of a risk then why mention 1%? Mentioning the market size and opportunity is important but I think the issue people (such as myself) have with this specific framing is: 1) It makes it seem like you believe there is no way you could get less then 1% market share. Because 1% is so small that it must be easy to get. 2) It often de-emphasizes why people would choose your product over any others because you only need such a small percentage to be successful 3) It makes it seem like you aiming low. Aiming to get only 1% of a market to me means you ether don't have huge faith in your product.
- ucee054 14y ago
  Aiming to get only 1% of a market to me means you ether don't have huge faith in your product. You forget the question of time. Maybe the product is good enough to get 100% eventually. But maybe you'll go bust in the meantime if you have a ridiculous burn rate. "Aiming" for 1% means making your burn rate sustainable on 1% so can live to fight for the 100%. Microsoft wasn't built in a day. It often de-emphasizes why people would choose your product No because that's covered in another part of your pitch, which deals with your product characteristics. The 1% part of your pitch deals with your strategy. By the way, you are not supposed to have faith in your product, you are supposed to have a willingness to deliver whatever product the customer wants. That's what pivots are for. Business is supposed to be a rational process, not based on faith.
  - stevenameyer 14y ago
    When you are talking about large markets 1% is not a short term goal. It is important to specify how you plan to keep your company running as you grow, but I don't see how saying if we reach 1% market share we will make a lot of money does that. Also I'm not saying that using 1% and explaining what makes your product good are mutually exclusive. Just that more often then not people who use a 1% pitch tend to focus less heavily on the why it is a competitive product. This is just the trend I see, although I may be wrong and if there is any hard data on this I would be interested in seeing it. Maybe "faith" was a bad word to use. What I ment was that by using 1% it seems like you don't have confidence in your team to produce a competitive product. When it comes down to it 1% is often used as a place holder for arbitrary small number, and in this case it is a complete fallacy. 1% of a large market is hard to get, and if you can get it then why can't you get more? Basing your math for a pitch based on this arbitrary number kind of renders the rest of the pitch worthless. Finally 1% is never a good metric to aim for. If you wouldn't accept it for retention rate, conversion rate, profit margin etc why is it ok for market share? My point is you should always be aiming higher then 1% so why use it in a pitch?
    - ucee054 14y ago
      When you are talking about large markets 1% is not a short term goal This is where you are precisely wrong. A VC wants to cash out within 3 years. Finally 1% is never a good metric to aim for. If you wouldn't accept it for retention rate, conversion rate, profit margin etc why is it ok for market share? Because your short term market share goal is in this context a proxy for your ambitions for your burn rate. So it is the exact opposite. You want your conversion rate to go up while you want to keep your burn rate down. 1% is an excellent number in this context. Basing your math for a pitch based on this arbitrary number kind of renders the rest of the pitch worthless. You will find that whatever numbers you target in your pitch are arbitrary, absent a crystal ball that can actually tell you the future. The comical term for this is Scientific Wild-Ass Guess.
      - stevenameyer 14y ago
        This is where you are precisely wrong. A VC wants to cash out within 3 years. I think we may have different definitions of "short term". When I say short term I mean that you are in the process of proving a concept as viable and at the point that pivots are not very costly. If you've reach 1% penetration in a large market then you are past this point. 1% is an excellent number in this context. I would definitely agree that it is a good target to hit. I'm just saying that it should not be your golden standard. There is a difference between saying "this is how we plan on securing a foothold in the market", and saying "If we can get only 1% of the market then we will be successful." The comical term for this is Scientific Wild-Ass Guess I completely agree. Thats why i actually disagree with stating a target marketshare in a pitch. Personally I think that stating total market size, an underserved aspect of that market/competitive advantage and how you plan to try and break into that market should be enough. I don't think making wild guesses at market share is really worth while at all.

by ucee054 14y ago

stevenameyer 14y ago

But if the whole point is saying there is a lot of money in this space so it's less of a risk then why mention 1%? Mentioning the market size and opportunity is important but I think the issue people (such as myself) have with this specific framing is: 1) It makes it seem like you believe there is no way you could get less then 1% market share. Because 1% is so small that it must be easy to get. 2) It often de-emphasizes why people would choose your product over any others because you only need such a small percentage to be successful 3) It makes it seem like you aiming low. Aiming to get only 1% of a market to me means you ether don't have huge faith in your product.

ucee054 14y ago
Aiming to get only 1% of a market to me means you ether don't have huge faith in your product. You forget the question of time. Maybe the product is good enough to get 100% eventually. But maybe you'll go bust in the meantime if you have a ridiculous burn rate. "Aiming" for 1% means making your burn rate sustainable on 1% so can live to fight for the 100%. Microsoft wasn't built in a day. It often de-emphasizes why people would choose your product No because that's covered in another part of your pitch, which deals with your product characteristics. The 1% part of your pitch deals with your strategy. By the way, you are not supposed to have faith in your product, you are supposed to have a willingness to deliver whatever product the customer wants. That's what pivots are for. Business is supposed to be a rational process, not based on faith.
- stevenameyer 14y ago
  When you are talking about large markets 1% is not a short term goal. It is important to specify how you plan to keep your company running as you grow, but I don't see how saying if we reach 1% market share we will make a lot of money does that. Also I'm not saying that using 1% and explaining what makes your product good are mutually exclusive. Just that more often then not people who use a 1% pitch tend to focus less heavily on the why it is a competitive product. This is just the trend I see, although I may be wrong and if there is any hard data on this I would be interested in seeing it. Maybe "faith" was a bad word to use. What I ment was that by using 1% it seems like you don't have confidence in your team to produce a competitive product. When it comes down to it 1% is often used as a place holder for arbitrary small number, and in this case it is a complete fallacy. 1% of a large market is hard to get, and if you can get it then why can't you get more? Basing your math for a pitch based on this arbitrary number kind of renders the rest of the pitch worthless. Finally 1% is never a good metric to aim for. If you wouldn't accept it for retention rate, conversion rate, profit margin etc why is it ok for market share? My point is you should always be aiming higher then 1% so why use it in a pitch?
  - ucee054 14y ago
    When you are talking about large markets 1% is not a short term goal This is where you are precisely wrong. A VC wants to cash out within 3 years. Finally 1% is never a good metric to aim for. If you wouldn't accept it for retention rate, conversion rate, profit margin etc why is it ok for market share? Because your short term market share goal is in this context a proxy for your ambitions for your burn rate. So it is the exact opposite. You want your conversion rate to go up while you want to keep your burn rate down. 1% is an excellent number in this context. Basing your math for a pitch based on this arbitrary number kind of renders the rest of the pitch worthless. You will find that whatever numbers you target in your pitch are arbitrary, absent a crystal ball that can actually tell you the future. The comical term for this is Scientific Wild-Ass Guess.
    - stevenameyer 14y ago
      This is where you are precisely wrong. A VC wants to cash out within 3 years. I think we may have different definitions of "short term". When I say short term I mean that you are in the process of proving a concept as viable and at the point that pivots are not very costly. If you've reach 1% penetration in a large market then you are past this point. 1% is an excellent number in this context. I would definitely agree that it is a good target to hit. I'm just saying that it should not be your golden standard. There is a difference between saying "this is how we plan on securing a foothold in the market", and saying "If we can get only 1% of the market then we will be successful." The comical term for this is Scientific Wild-Ass Guess I completely agree. Thats why i actually disagree with stating a target marketshare in a pitch. Personally I think that stating total market size, an underserved aspect of that market/competitive advantage and how you plan to try and break into that market should be enough. I don't think making wild guesses at market share is really worth while at all.