Some of the most common questions questions asked so often during Startup pitch event shortlisting is – ‘what’s the market size’ followed by ‘tell us about your team’. That’s because, they represent some of the major things Investors care so much about. In a recent post by Paystack – the Lagos based, YC backed fin-tech company – titled “The 3 Ghanaian startups joining us at the Y Combinator Lagos Meetup,” they profiled three Ghanaian startups that won the chance to attend their YC themed event in Lagos.
Why Size of Market?
To quote Louis Foreman from this article on Entrepreneur.com – ‘Put simply: an invention or concept that could only potentially appeal to a small population is typically a riskier investment than those with mass-market appeal.’
For two of the three Startups featured in Paystack’s article, one re-occuring thing is the consistent use of data – specifically from World Bank. Government statistics, trade associations, corporate consultant reports (PDF File) are some ways you can get data to estimate market size. It’s important that you pay attention to data – that should be one of your first resort when answering the question – ‘how big is the market?’
Team Experience Is Also Important
Once you find data of a huge market that seem largely untapped or under-served, the next question to ask yourself, am I the right person to solve this problem? What does this mean to Investors? You are more likely to succeed in a field that you have first hand knowledge of how the existing solutions work. If you don’t have experience in the field, does it mean you can’t go ahead?
Well there’s no straight answer – because life is not an exact science. People with experience are more likely to get funding faster than those without.
Lack of Experience Options
If you don’t have experience there are some options available to you. If you must proceed immediately, then look and get for yourself, a co-founder with heavy experience in the area (even if on a part time basis initially). Conversely, if you have the luxury of time, go and Intern/volunteer for a firm that currently operate in that area. Consider the smaller businesses over the big ones first. Reason is, in the smaller businesses, your chances of getting in the thick of the action in a short period is greater compared to more established businesses where the processes are more advanced and structured.
This is one of the reasons why going to do IT in organisations like Total is a bad idea for young undergraduates. Doing IT at a Total contractor company in the area of your specialization is preferable in my opinion.
In conclusion, solving problems investors are willing to back starts with paying attention to data. Identify the sources of data around you, compare the data on a city, national, regional and continental scale and then you are able to know if there is a sizable market. Only then can you estimate your addressable market size.
Also published on Medium.