What is a niche product? It is a good or service with features that appeal to a particular market subgroup. A typical niche product can be easily distinguished from other products, and it will also be produced and sold for specialized uses within its corresponding niche market.
It sounds great…so why is that an issue for start-ups?
When asked about marginal niche, Paul Graham (Y Combinator co-founder) answers the following:
“Most of the groups that apply to Y Combinator suffer from a common problem: choosing a small, obscure niche in the hope of avoiding competition. If you watch little kids playing sports, you notice that below a certain age they’re afraid of the ball. When the ball comes near them their instinct is to avoid it. Choosing a marginal project is the startup equivalent of my eight-year old’s strategy for dealing with fly balls. If you make anything good, you’re going to have competitors, so you may as well face that. You can only avoid competition by avoiding good ideas.”
I agree 100%. The initial questions entrepreneurs should ask him or herself are NOT am I the first with this idea? Or am I alone with this idea? Or is my target market not too competitive?
The answer is NO in 99.9% of the cases: NO, you are not the first; NO,you are not the only one; NO, your market is not a HUGE opportunity that nobody had ever spotted before…
By the way, if you are really the only one with this idea… so what? Will the success of this project lie in the fact that you came up first with the idea? Answering YES to such a question only makes sense if you are an inventor.
Inventors come up with new products; entrepreneurs scale organizations building a value proposition around new products. Let’s not confuse ourselves.
When I analyze a new investment opportunity, I love when I see different groups of smart people coming to me with somewhat similar ideas and target markets; that mean that there is most probably an opportunity. I then have to choose wisely the right team…
On the contrary, the fact that nobody has come up yet with the idea of building a global marketplace to exchange shark tooth necklaces with a freemium model to monetize additional consulting on how to optimize/personalize your own collar (just hope it IS true… *) does not mean that this is a good business (hence investment) opportunity; there is business logic behind the fact that nobody has decided to build it: It is called a marginal niche…
A vision is most of the time shared by different groups of individuals at the same time.
In contrast, a hallucination is the result of eating too many psychedelic substances or… pursuing an idea that nobody shares (remember the Gollum entrepreneur we commented in the #1 serie.
The Entrepreneurial team that succeeds is NOT the one that comes first with the idea; it is the one that scales first; and the one that is able to face competition with a disruptive differentiation solving a somewhat similar need in the market.
* Preparing this blog, I looked up on the web shark tooth necklace; unbelievable what you can find on Etsy, Ebay, Amazon etc.; silver, gold… Here’s one that I quite liked.