The Startup Velocity Question: Selling Pieces of a Company

I once worked on a company that was #4 in its market. 

The market itself was actually two different markets, one smaller, and one very large.

In the larger market, this company didn’t have much of a defensible edge.

In the smaller market, however, it had a uniquely differentiated and very powerful technology. As a result, it had a fabulous customer base of marquee names.

The problem was that the company was positioning for the combined market and not acknowledging that it didn’t have what it takes to compete with the larger players.

The real TAM was relatively small.

The company shouldn’t have raised huge amounts of funding.

But it did.

The right answer should have been to raise a small amount of money and sell the unique, differentiated technology / product to one of the larger players.

Instead, the company went bankrupt.

Be careful about raising money on flawed investment thesis.

Be careful about overrepresentation of your TAM.

Key Takeaways:

• Proper market segmentation and positioning are crucial for startup success.
• Companies often overestimate their Total Addressable Market (TAM).
• Bottom-up TAM analysis is more relevant to investors than top-down estimates.
• Misalignment between a company’s strengths and its target market can lead to failure.
• Raising excessive funding based on flawed assumptions can be detrimental.
• Sometimes, the best strategy is to focus on a smaller, differentiated market segment.

My Question to You:

What is your company’s unique unfair advantage?If you think you need help, consider 1-on-1 Private Consulting with me. I will diagnose and create a path forward in an hour.

Photo by Pinar Kucuk on Unsplash

This segment is a part in the series : The Startup Velocity Question