"The smaller the niche, the lower the bar to success."
And the smaller the success. Careful how small you go. Avoiding competitors is kind of admitting, "I can't build a competitive product, so I'll build a crappy one for people who don't have any alternatives." You may wow your target audience, because no one has ever paid any attention to them, but that doesn't mean you've built a successful business.
An old oil field and platform manager once said to me (after he'd been doing water table research work for municipalities for a few years), "You're going to bust your ass no matter what. You might as well bust your ass for $10 million as for $10 thousand."
Y'all can take all the 10 thousand dollar markets you want...I'll be over here working on cracking a billion dollar (and growing) market. I might not come out on top of the heap...but even second place is going to be a pretty penny.
This is something of a straw man, since they were talking about "taking a 1 in 10’000 bet that you can make billions, it is better to take a 1 in 10 bet that you can make millions."
Although the article pre-empts the need of billions by setting the context as "lifestyle business", it is good that you remind of the downside.
Success in a small niche can enable success in a larger niche, which in turn can enable a larger success. One of the properties of a market niche (or segment) is that the members reference each other's buying decisions (in other words one member will be influenced by another member's testimonial). If you get to critical mass in a niche (typically about 1/6) before anyone else, then your marketing costs go down and your customer acquisition becomes easier. There is a lot of benefit for aiming at a small niche to get started, and it doesn't preclude serving a larger market later. By the way, 1% of a large market is a recipe for extinction. You have all of the cost of trying to reach a large market recouped over a tiny customer base.
"By the way, 1% of a large market is a recipe for extinction. You have all of the cost of trying to reach a large market recouped over a tiny customer base."
This is actually a different argument. 1% of any market is a recipe for extinction...but less so in a larger market. The problem with the "even if we only get 1% of the market we'll make X million" fallacy is that reaching each new customer costs a certain amount--it doesn't matter how many potential customers there are...you have to community your product and its benefits to each of them individually. In the end, every sale is an individual sale...you have to convince someone somewhere that your product provides greater value than its cost to them (even if it is free, they have to learn to use it, remember to come back, etc.).
I don't believe this really counters anything I've said above. There are plenty of niches that are so small that they won't even support a lifestyle business of two or three people in comfort...sure, you won't have many competitors, but you also won't get any vacations or live very large. In many tiny niches you'd probably even have to have a real job to make ends meet.
My argument was, and remains, "be careful how small you go".
1% share is often an outcome of aiming at too large an initial market. I respectfully disagree with your concerns about starting too small. I would start as small as possible and then scale up.
"it doesn't matter how many potential customers there are...you have to communicate your product and its benefits to each of them individually."
Once you get to reasonable share (e.g. 1/6) your existing customers will help you communicate it to other members of the niche.
Don't pick a niche that you don't know how to reach. It can be very, very tough to market to a small niche--especially if you have something unique. Educating the potential customer when you don't even know how to reach them is costly.
It's funny, I think I have made all the mentioned mistakes up to number 8 over my 10 years of web development. I learned the hard way, and I can tell you that those are really great advice.
Point 1, 2, 4 and 12 are especially important. Developing a prototype quickly and and including the end user as early as possible make a huge difference in the success level of a project.
"Creating a new, successful product is like writing a book, creating a movie, or raising a child. It’s a fiendishly complicated task that requires great adaptability creativity. Rules can only get you so far. No amount of advice can guarantee you success. Sometimes, the rules fail, and you need to adapt to those situations and do what needs to be done, even if it flies in the face of accepted wisdom. For every rule of product development, there is a dozen examples of teams which did it differently and still succeeded."
Networking doesn't necessarily mean schmoozing. It means hanging out with the folks who are in the same field as you and going to the same events they do. Most of the time, they'll have the same interests as you, so these'll be the folks you want to hang out with anyway.
Posting on news.YC or programming.reddit counts, for example.
Absolutely. By networking I (I'm the author) meant putting yourself in situations where you will meet the kind of people you want to be working with and become friends with them.
If you go there with a pure agenda of "recruiting a co-founder", people will sniff you out and you won't make any friends. But if you go there to meet people in the community you probably will, incidentally, meet some who might end up being your cofounders.
There is an implication that I specifically not hire from resumes, etc. If I have to make any categoricals, I will categorically avoid hiring through networks.
I can list a whole lot of successful web-based companies that don't fit many of this guy's criteria. I'd suspect this was a DHH sock puppet writing it except that he thinks that small businesses on the web are a lousy market, and DHH's success with Basecamp probably proves otherwise.
And the smaller the success. Careful how small you go. Avoiding competitors is kind of admitting, "I can't build a competitive product, so I'll build a crappy one for people who don't have any alternatives." You may wow your target audience, because no one has ever paid any attention to them, but that doesn't mean you've built a successful business.
An old oil field and platform manager once said to me (after he'd been doing water table research work for municipalities for a few years), "You're going to bust your ass no matter what. You might as well bust your ass for $10 million as for $10 thousand."
Y'all can take all the 10 thousand dollar markets you want...I'll be over here working on cracking a billion dollar (and growing) market. I might not come out on top of the heap...but even second place is going to be a pretty penny.