Korva is a scroll of the internet’s best ideas.
A large market gives a company room to become very big. Stripe went after payments, a huge market dominated by old, stodgy, legacy companies, so a newcomer that took over a big share of it could become enormous. A fast-growing market works too. Airbnb started in what was then a very new market, people renting out rooms in their homes, and created a new category at the beginning. That market later became more traditional, with home rentals that are pretty well established, but at the start it was growing fast.
The best case is a company that has both: a really big market that is growing at the same time. The ones to avoid are niche tools, products in small markets, and anything where you can't see a path for lots of companies or consumers to use the product.
How do companies estimate how big a market is?
Analysts usually estimate a market in two ways. A top-down estimate starts from an industry's total spending and takes a share of it. A bottom-up estimate counts the likely customers and multiplies by what each would pay. The result is often called the total addressable market, and the two methods frequently give very different numbers.
How did Airbnb create a new category?
Airbnb began in 2008 in San Francisco, when its founders rented out air mattresses in their apartment during a design conference. At the time, renting a stranger's spare room was an unusual idea, and there was no established marketplace for it. The company built the trust mechanisms itself, including profiles, reviews, and payment handling. Those features became a template that later short-term rental services copied.
Why does a small market cap a company's growth?
A company's revenue ceiling is roughly the number of possible customers multiplied by what each can pay. In a small market, even winning every customer produces a modest total. Investors and employees both feel that ceiling, since it limits how large the business and its pay can grow. Companies in small markets often have to expand into neighboring ones to keep growing.
More from next play
