Toy Markets

This reads like a variation on the "many successful products started off looking like toys" post I've seen repeatedly over the years. The problem with this theme is extrapolating that all toy markets/products will grow into sustaining ecosystems.

You can and should consider toy "beachheads" into larger and growing markets, but the idea of targeting a small/limited market is flawed IMO.

The examples presented are successful in what where HUGE markets with limiting factors. No one debated the size of the retail book business when Amazon started, the challenge was how to pay for things over the internet. Ebay provided market-making for individuals to sell stuff - anyone remember classified ads and the buy & sell? That was big business for newspapers.

I feel like there's a lot of selection bias and revisionist history in this post.

Story time.

Almost a decade ago, I had a web project for kids. One day a VC invited me to a meeting. I drove up Sand Hill Rd., showed a txt file with notes on a screen, and talked with the VC for about 30 minutes.

At the end of the meeting he said it “was interesting”, but it is a “toy”. And that they do invest in such, but can’t invest in my “toy” this year cause they already invested in another one, and they only do one “toy” a year.

That other “toy” was Roblox :)

We're in a tiny market (we're like the strava of paragliding) and are expanding into growing markets (if a person attached a gps tracker to it, we'll show it's movement and tell the story).

Long-term we are creating a new type of media. It is so difficult to get a clear concise story to an investor about the path of growth of all of these things.

Reading stuff like this by YC, helps us realize/believe we are on the right path.

Any advice on how to approach and spell out the future?

Would it been better if uber had come out and said "today we are about black cars, but tomorrow it is cabs and then the movement of any goods"? Would investor have gone for that? I think many would have said "yeah right, like you're going to take on the taxi market.

Oh, and if you want to see the future of outdoor sports, check out https://ayvri.com

So we're building for a fairly niche industry: the space industry.

On the one side, you can't get through most days without an article about SpaceX, Blue Origin, Planet, Spire, etc. popping up, but on the other hand, the market is still pretty much dominated by the traditional large players.

We're already "weird" by the fact that we're ONLY building software, and no hardware. Further more, our software is not in itself a product, since we're building a marketplace of sorts. So what we're really trying to attack are the business and engineering processes.

Although we haven't been actively fundraising, I've talked to quite a few investors, and nobody seems to care, because if you're not building a satellite, a rocket, a space station, or something similar, you're not really in the game.

We're banking on the fact that commercialization of the space industry is coming, and so business and engineering processes will have to adapt.

Convincing people of this to the point where they're willing to put money on the table is proving super difficult.

The solution for us has been to not fundraise and try to minimize burn to the point where we can bootstrap for a very long time.

From this article, it seems we're in the "behavior change" category. The article only briefly touches on this, and I'd be interested to understand how to be effective in communicating that behavior change to investors, especially in cases where things like TAM are largely "? x ?".

Anyone with additional tips/resources?

The author graduated university 2006. Assuming this was the beginning of his careeer, then he seems to be looking back fancifully on events he wasn’t party to.

Many people fell out of planes without parachutes and survived. Founders make the mistake of not jumping without procuring a parachute first, and it makes sense. But clearly a parachute, while helpful, is not strictly necessary.

> Many of the largest companies in the world started in markets so small they looked like toys. Over time, each of these companies grew their markets or created new ones to dominate.

A typical VC (elevator pitch or pitch deck) asks for the Total Addressable Market number, leaving no space for "in the future..."

A major challenge is that there are different tiers of investors and since most start onthe low tiers they have smaller funds (=more financing risk) and their LPs will have less patience and will want to see short term portfolio performance. The result is that VCs tend to hunt in packs and try to coat tail off larger investors who can afford to have a bolder vision because they can push their portfolio companies through even if the metrics are crap. Small markets while great in theory tend to carry too much risk for most VCs because they need to worry about the rest of the markets perception. We need to find ways to allow VCs to take more risk.

> "Amazon was for selling books online when relatively few people used the internet. Google was a search engine in a landscape crowded with search engines that weren’t themselves gigantic businesses. Ebay was for selling beanie babies."

I don't find Google, Amazon or Ebay as compelling examples of "toy markets". Google started when search engines such as lycos, ask jeeves and yahoo were already household names. The key issue is that at that point, none of them were giant companies because they hadn't figured out how to monetize their businesses. However, their market was clear and obvious as the internet already had wide adoption.

Ebay was an auction site. People have a lot of crap and want to get rid of it. The site obviously had a large potential target market to begin with.

Amazon started out with books, which is a huge and well understood market. An online bookstore could offer a far better selection than any physical bookstore. Even if Amazon were just selling books, it would be a fairly large company. If Amazon was never founded, there would have been someone else who filled the niche pretty quickly.

(Some of these early companies definitely made big bets on the popularity of the internet. Amazon was founded in 94 and Ebay in 95. Back then, the internet had less than 20 million users, so it was obviously a niche, but it was also growing very quickly (usage just about doubled each year for the next 4 years) [1]. If an investor was already bullish on the rising popularity of the internet, than the fact that companies like this would have large markets was a no brainer. It's kind of like how Coinbase, or someone similar, will obviously be huge if cryptocurrency pans out.)

The article also mentions Facebook, which again, was founded well after the internet became a big thing. MySpace was already getting pretty big traction by the time Facebook came around.

When I think of companies that started out as "toy markets", I think of Apple where their early product (the Apple I) was geared towards early-adopter consumers. But even Apple wasn't really a huge company until Jobs came back in the two thousands (in 2001, after the tech bubble collapsed, their market cap was about 200x less than it is now and far far smaller than Microsoft was at the time).

The fact is that many very successful companies don't start out in "toy markets". They start out in big markets, but they just do things better than the next guy. Amazon and Walmart didn't invent retailing, but they did (and do) run very efficient supply chains. Apple didn't invent the market for cell phones, but they made iterative improvements to what was out there until they came to dominate a huge market.

[1] https://www.internetworldstats.com/emarketing.htm