Serge Toarca Offers Three Reasons To Bootstrap In a Small Market

Serge Toarca offers three good reasons to consider starting in a smaller market in “Why the hell am I building a product with a tiny market?” I offer another ten.

Serge Toarca Offers Three Reasons To Bootstrap In a Small Market

From Why the hell am I building a product with a tiny market? by Serge Toarca (April-27-2013)

Serge Toarca (@stoarca)There are a few big advantages to be had competing in a smaller market.

  1. Everything happens on a smaller scale. Successes and failures are smaller in magnitude and take less time to pan out. Less effort is required to build a com­pet­i­tive product, since the existing ones are not as well-developed. The result is a tighter feedback loop for your learning.
  2. You can demon­strate expertise. When you opt for a smaller market, you have a wider choice for a domain that you’re skilled in. Coupled with the small scale, this lets you aim at being the absolute best in the market. You have a chance to wow your users and make them loyal to you, even as you move to new ventures.
  3. You can iterate faster on non-pro­gram­ming skills. Since the product is small enough that I’m building it alone, I don’t just program, I do everything. There is no option to pass work off to somebody else.I wrote this article. I built a tutorial video when I found out users didn’t know how to use one of the key features. I respond to every tweet, send every email, and configure everything on the server.Con­se­quent­ly, my thoughts have become more coherent. I can speak more clearly. I know how to avoid audible breathing and swallowing on a microphone (much harder than it seems). I’ve even made new friends and re­con­nect­ed with old ones. I am learning to sell, apologize, stroke egos, manage ex­pec­ta­tions, talk to the media, and build a company.

SKMurphy Take

Serge Toarca was developing a power tool for regular expressions (regex) called debuggex. My perspective is aimed at folks developing a tool to solve a niche problem in an engineering, scientific, or technical domain.

  1. Small markets don’t attract large well-funded competitors (because their investors don’t let them target them or redirect them to larger markets) allowing you to develop and refine an offering you can then aim at larger adjacent markets/segments. One good book that outlines the trade-offs is “The Origin and Evolution of New Business” by Amar Bhide that did a rigorous analysis of the Inc 500 companies.
  2. Competition: you have to be careful about “Lighting the Way for YoursCompetitors.” Once you show a breakthrough is possible you encourage others to compete. You are on safe ground when you are talking about the results you can deliver. The more you have to explain “how” you do something, the more cautious you should become. Talk about specific hard problems you can solve for customers. Focus less on getting “buzz.” You only need to educate firms in the niche you are targeting to be able to prosper. Never talk about how large the market is or how much money you are going to make.
  3. Speak the language of your niche: use terminology that will resonate with your customers. Don’t “dumb it down” for the mass market to come. Speak to the folks who are ready to buy now. Provide specialized content on your blog, a newsletter, and in existing forums where members of your niche market have already gathered. Only start a new forum if you cannot find an existing one.
  4. Collect as many hard problems–problems that are real–as possible. Focus on “power users” who are spending at least a quarter of their time working on problems related to your focus. One way to measure the strength of your “technology barrier” is the number of hard problems you can solve compared to alternatives prospects are considering.
  5. Focus on “power users” who spend at least one day a week working on problems that you can help them. There may be many more who spend four hours a month, but in the beginning focus on the power users. Benchmark your results against what they consider to be viable alternatives.
  6. Consulting can be significant fraction of your revenue in the early days.  Your end goal is a product, but it’s often easier to start out as a power user of your product and sell the results. When you can charge by quality of result, instead of time spent, you are half the way to selling the product.
  7. Before and After: compared to how they were solving the problem before they used your product what are the key benefits that your product offers? What errors do you prevent?
  8. “3 minute test”
    1. What are your prospects doing three minutes before they realize that they should use your product? What triggers the use of your product?
    2. What are your prospects doing three minutes after they finished using your product? What is the key result your product delivers? In the early market, sell this result instead of the product.
  9. Consider three angles on usage:
    1. Executive: what is the economic ROI, money saved, revenue generated?
    2. Manager:  how does this affect headcount?
    3. Workers: can you save them time? Prevent errors that cause rework (and therefore lost time)?
  10. What are workflow and interoperability requirements? What are key inputs and outputs?

Another Perspective: Dick Costolo on Hidden Barriers to Entry

Of course, hidden barriers to entry are those great things that cause lots of people to look at what you’re doing and say “that’s simple, I could do that”, only to realize that the more work they do to try to copy your solution or position in the market or whatever, the more they realize they are farther and farther away from what you’ve accomplished.

While barriers to entry are helpful if they’re clearly marked, a potential competitor can size up the obstacle course and get a good sense for what needs to be done to get from point A to point B. Hidden barriers to entry are particularly helpful to your company because potential competitors will severely underestimate the level of investment and resource commitment required to compete with you. I cannot tell you how many times since we first launched FeedBurner I have heard the following comments from senior executives at large companies, industry pundits, hobbyists, and my five year old son: “We could build FeedBurner in [a weekend, three months with three people, whenever we wanted]”. When you have hidden barriers to entry, you don’t get too worked up about these kinds of comments because you know there are lots of pitfalls and issues and challenges that you don’t understand fully until you are far enough along in development that you stumble into them and think “oh wow, now what do we do”.

But there are even better hidden barriers to entry in some businesses. I’ll call them Quantum Hidden Barriers to Entry.

Quantum Hidden Barriers to Entry happen when you keep encountering new and unforeseen cliffs you have to scale as you move through different stages of market penetration. While hidden barriers to entry make it harder for potential competitors to enter the market, quantum hidden barriers to entry keep popping up as you move through stages of market penetration. When you are thinking about companies and markets, it’s fun to think about the kinds of businesses where there might be quantum hidden barriers to entry. I think you can anticipate these when you see markets that are characterized by: spiraling complexity, market reactions to the first mover (gaming behaviors, 3rd party ecosystems, etc.), and centralized platforms”

Dick Costolo (Founder, FeedBurner) in “Strategic Advantage Part II” (Feb-27-2007)

Related Blog Posts

See also HN: Why I am building a product in a tiny market by Serge Toarca

Image Credit: Twitter profile photo for Serge Toarca (@stoarca)

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