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02. Picking The Market

One of the most common mistakes first-time founders make is obsessing over ideas and underthinking markets. They ask, "Is this a good idea?" when the more important question is, "Is this a good market?"

Ideas are easy to change. Markets are not. A startup is not just a product; it is a bet on a slice of the future. And the size and shape of that future matter more than most founders realize.

A useful metaphor is to think of markets as oceans and startups as boats. You can build an extraordinary boat, but if you launch it in a pond, you won’t get very far. Meanwhile, a merely decent boat in the open ocean can still travel a long distance. This is why markets with a large Total Addressable Market (TAM) are fundamentally better. Not because competition is lower (it usually isn’t), but because the probability distribution of outcomes is better. In small markets, even the best possible outcome is capped. In large markets, mediocre execution can still lead to meaningful success, and excellent execution can lead to generational wealth.

Before starting a company, ask yourself: If this works unbelievably well, how big can it get? If the answer makes you slightly uncomfortable because it feels too ambitious, you’re probably in the right territory. If the answer feels neat, contained, and predictable, you’re probably not.

Big Markets Are Not About Greed, They’re About Math

Founders often feel uneasy saying “I want a big market,” as if it’s greedy or naive. But this is just arithmetic.

If a market is worth ₹1,000 crores a year, then

  • 1% market share is ₹10 crores
  • 10% market share is ₹100 crores

If a market is worth ₹10,000 crores,

  • 1% market share is ₹100 crores

You don’t have to be more ambitious in the second case. You just have to be present. Big markets forgive mistakes. Small markets don’t.

Why Big Markets Increase Luck

Earlier, we talked about luck and how to be slightly luckier than average. Big markets amplify all four kinds of luck.

  • Chance I (Blind Luck): More things are happening. More randomness means more opportunities to accidentally be in the right place.
  • Chance II (Motion): Just by being active in a large market, you bump into more customers, partners, and ideas.
  • Chance III (Prepared Mind): Big markets generate more anomalies, edge cases that look unimportant to others but reveal massive opportunities.
  • Chance IV (Luck Seeking You): If you build specific knowledge in a large market, more people will come to you with opportunities.

Small markets are quiet. Big markets are noisy. Noise is where luck hides.

The Myth of Start Small Markets First

You’ll often hear advice like: “Start with a niche market.” This is correct in product focus, but wrong when applied to market size. You should start with a narrow user, not a small universe. Facebook started with Harvard students, but social networking was a massive market. Amazon started with books, but retail was enormous. Stripe started with developers, but payments were gigantic.

A good pattern is Large market × narrow initial wedge.

Fast-Growing Markets Are Even Better

A large market that is stagnant is good. A large market that is growing fast is excellent. Growth covers many sins. In expanding markets,

  • Customers are actively looking for solutions
  • Incumbents are slower to adapt
  • Standards are still forming
  • Users are willing to forgive rough edges

This is why technology-driven markets are disproportionately good startup markets. They don’t just grow, they reshape behavior.

Avoid Markets That Are Big But Closed

Some markets are large on paper but effectively closed due to

  • Heavy regulation
  • Dominant monopolies
  • Deeply entrenched distribution advantages
  • Buyers who don’t adopt new vendors

A good market is not just large, it must be open to new entrants.

One heuristic: If incumbents laugh at you, it’s probably open. If they ignore you, it’s even better. If they block you at the gate, reconsider.

Don’t Confuse Competition With Saturation

Founders often say, "This market is too crowded". What they usually mean is, “This market is valuable.” Competition is a signal. It means:

  • People are paying
  • Demand exists
  • Value is being created

What matters is not whether competitors exist, but whether users are still poorly served. In big markets, they almost always are.

Personal Fit Still Matters

Big markets alone are not enough. You still need

  • Insight others don’t have
  • Specific knowledge
  • A reason you can do this better

But when choosing between a perfect idea in a small market, and a rough idea in a massive market, always choose the second. You can improve ideas. You cannot resize markets.

A startup is already hard. Don’t make it harder by choosing a market that can’t reward success. The best founders don’t just build good products. They place themselves where good outcomes are statistically likely. And that starts with picking the right market.