Market share, market size, and success

When pitching to investors, many founders point out that their market is so large that, even if they were able to capture just 1% (or a similarly small percentage like 0.1% or 0.5%) of it, they would become very large businesses.

In reality, the companies that develop into very large businesses do so by capturing at least a double digit percentage of their market. This figure is certainly more than 1%.

And the companies that fail capture much less, or none of their market.

By stating that even capturing 1% of their market would produce a very large business, founders are suggesting that they will succeed due to the size of their market rather than their competitive position and resulting market share within that market. The former belief demonstrates a misunderstanding of what it takes to succeed, so such companies rarely do.

Also published on Medium.