Hacker News Reader

> You don’t look at a pie and just say, “I’ll take 1% of that”.

Exactly. Pretty much sums up everything that is there to say about the article.

100% wrong. Most products are launched into existing markets and estimating a likely market share is essential.

Essential for what? You can get an idea of what the ceiling of your market looks like, but that's it. Unless you can strongly and credibly argument how, saying you'll get 1% of the market is equivalent of saying nothing.

> The only thing market size can tell you is what the upper bounds are for a product niche. But unless it's a very, very small niche; why does it matter what the upper bound is.

Presumably that is, in fact, exactly what it's for--to tell you the absolute upper-bound to growth, so investors don't accidentally invest in your "growing" company only to see growth taper off completely when you run out of market to tap.

I would guess that this is actually common for brick-and-mortar businesses, because of locality. Pretty rare when your market is "anyone who can type a credit card number into a web page," though.

I think you're wrong.

The reason people put it on pitch decks to investors is that investors care. Now, this can be explained by investors being stupid. But there is at least one other explanation:

VCs are trying to hit the 1 in 1000 startup that makes it big. These startups are, necessarily, aiming at a large market. The VC realizes that, if the size of the market is huge, your chances of getting a good chunk of that market is small. But so what? They'd rather fund 100s of startups that will fail, but are all trying to make it big, than fund 100s of successes that are mediocre successes (to them).

Of course, as a founder, this isn't the math you should be doing; not by a long shot. But it is what matters to investors.

But unless it's a very, very small niche; why does it matter what the upper bound is. If you hit that, you've got a good problem on your hands.

Totally agree. I have a niche product that can be expanded further once it's gained critical mass. But, given the recent investor pitches I've done, there is some backlash from investors on that concept. They want to know is it possible to turn this into a billion dollar corporation at some point, and the reality is that in my niche market, it's not.

Saying "We're going for 1% of the market" is a top-down estimative.

And they usually are very off the mark

Rather, try to estimate from the bottom up. Your first realistic estimate should be 0.

Then start adding up, how many lemonades can you sell at a lemonade stand? (apply to your case)

These are inductive and deductive ways of estimating the same unknown. Both ways are valid and more helpful when used combined. They're far from the reality but their purpose is to provide a general idea.

Your example ignores the market (i.e. assumes that you are creating a new market, of which you will have 100%).

That is not the typical case, as most products enter existing markets and estimating market share is key.

Yes, but I wouldn't even go so far as to cite the 100% new market creation - where's the usual timing / major shift argument? If that actually applies for real, forget the fallacy. In all other cases, feel free to keep it in mind.

but who cares?

==It's the level of abstraction that has signalling value.