Demand drives opportunity
One day, I was sitting down with Nicolas*, a biomed software founder who attended my workshop on go-to-market strategy.
The group had just learned about market sizing and opportunity assessment.
And Nicolas, a post-doctoral researcher, practically had his head in his hands. He’d had an epiphany, and it wasn’t the good kind. This software platform he was building… It had a worryingly tiny market opportunity.
This was a big deal.
So many smart researchers, academics, and developers turned entrepreneurs go from product to launch without considering market size. Some put time and resources into development before they’re even sure there *is* a market.
For the first time, Nicolas looked at his software and, instead of focusing on the product, he ran through his users, his buyers, and their needs.
His entire pool of potential customers came to about 1000 academic research labs.
A viable business or a side project?
A market of less than 5000 academics wouldn’t be enough to grow the company beyond a home-office microbusiness.
It was a long way off Nicolas’s 8-figure growth ambitions.
For Nicolas, this meant that the transition time from side-project to full-time business would be much longer and more risky than he’d expected. What’s more, Nicolas had two young children at home. He had moved from Europe to North America for his research.
The path from academia to business had just become a maze, and he was lost.
He needed a way out of the maze.
Escaping the market size trap
To review, small market size meant limited growth potential. This is a red flag for investors, so funding opportunities would be limited.
But more to the point, Nicolas would struggle.
Without sufficient market opportunity – without the wings that market size can give you – the demand wasn’t there. There was nothing to tap into.
Yet the software Nicolas was developing was amazing. It would help researchers learn more about their target disease populations than ever before. With the software, customers would be positioned to provide better clinical services, cut time to development on new devices, and decrease time to market.
It almost felt like an obligation to bring this amazing product to the people who need it… but the business needed to be profitable as well as inspirational.
Not to spoil the story for you, but Nicolas would find a new market opportunity. Before he found it, though, there was something he had to do first.
Overcome the key roadblock to growth
Nicolas was confronting the roadblock that many early-stage founders face.
Entrepreneurs in Nicolas’s shoes need to match product to demand in order to create a business. Some key questions:
- Is the product you’re building going to serve a big enough market? Big enough means sustainable for the long-term.
- And if it’s not big enough, can you extend the addressable market?
- You can extend the market by asking, Who else needs these capabilities? Not the features themselves but what the product can do for them.
Dare to go back to the market sizing drawing board
After the workshop, Nicolas got to work. He took the techniques he learned in the workshop to ballpark market size.
The R&D market wasn’t big enough. So he looked at the disease population – the people with the disorders and diseases that the researchers tackled. It was reasonably big. But people with those diseases wouldn’t use the software, so Nicolas’s business wouldn’t be selling to them.
Then he looked elsewhere. He realized there was another huge market that could use this software – and it wasn’t in research.
It was in clinical care.
Which makes perfect sense. Software for biomedical researchers can find a place in the hospital and specialist physician market.
And that realization got the ball rolling. What started as a research platform could have applications in multiple adjacent markets. Now, Nicolas had the potential to expand.
This all became clear to Nicolas after we talked about the capabilities of his software platform, and how he could use the data in the platform to reach new markets.
We expanded our scope and dared to ask:
- Who else needs those capabilities?
- And what else, if anything, do they need in the product?
2 key market sizing assessment questions
So if you find you’ve got your head in your hands because you built your product but didn’t consider your market, look at these two things:
- Adjacent markets. What are groups of people (i.e. markets) need these capabilities?
- The product vision, or the roadmap. What would you need to add on to the current product (if anything) to reach those other markets? Always consider the data your software collects as part of the product.
In the end, after Nicolas resized the market opportunity, he ended up speaking with an angel investor group. They loved what he was doing, and they immediately grasped the business opportunity. Based on these discussions, he realized he already had what it takes to bootstrap this company to the first million in revenue within the healthcare market. He wouldn’t need investors until later, once he was ready to enter the bigger gaming market. And at that time, he would have investor contacts he needed finance that future growth.
It’s not too late to size your market
Even if you’ve done a lot of R&D on your product without doing the same due diligence on the marketing side, it’s not too late to get started on market sizing. Just do it before you start investing in the marketing and sales push of a product launch.