Competition is not market validation
7 hours ago
- #founder-fallacies
- #startup-competition
- #market-validation
- Competition does not necessarily validate a large market; it may indicate oversupply or inefficiencies.
- Startups operate in three markets: actual, investment, and founder markets.
- Oversupply of money, founders, ideas, and infrastructure can lead to high competition without a large market.
- Some markets are better served by consulting firms due to lack of standardization and scaling potential.
- Perfectly efficient markets with many competitors often result in low profitability.
- Competition should be viewed as one signal among others, not definitive proof of market size.
- Litmus tests for entering crowded markets include Ease of Entry, Hot Space, Consulting/Lack of Scale, Budget Elasticity, and Me-Too tests.