Niche: Mocked & Misunderstood
"It's good to start in a niche, but not to crawl into one." - Paul Graham
A common misconception among first-time founders is that a niche is viewed as a limiting factor, a confining space that can suffocate if not expansive enough.
While this can be true if you stagnate within that niche – or if only a small market segment perceives value in your offer – a niche is an accelerant. It's a powerful forcing mechanism that enforces focus, unlocking learning and speed.
With limited resources and time, focus emerges as THE competitive advantage for an early-stage startup. In the absence of case studies/references/brand equity, focus unlocks specificity, which unlocks trust.
A niche isn't just a random starting point. It's a calculated, strategic Go-To-Market (GTM) move.
Let's dive deeper.
1. Find the Easiest, Fastest Way to Prove Value:
Obvious Insight: The selected market should be excited and eager to leverage the advantage you can offer them.
Less Obvious Insight: Your initial target market should also align with the timeline you have to validate the current experiment.
This means that the selected market allows you to find and source early adopters AND has a buying process compatible with your funding and burn timelines.
It should be the easiest option to prove value in the market and further de-risk the opportunity for investors.
Starting down-market is often a successful way to demonstrate a willingness to spend AND gather product feedback on the fastest timeline.
In many cases, the user/buyer (i.e., owner/founder) are the same. Their processes are far less complex and complicated, allowing them to adopt/integrate a solution easily.
2. Expansion is Always on the Horizon (i.e., Up-market):
Obvious Insight: While many B2B startups start down-market, if they survive long enough, all roads lead to becoming an enterprise company.
Less Obvious Insight: Targeting the enterprise sector from the outset isn't advised if you don’t have the capital OR the timeline to learn, especially if you’re new to enterprise sales.
Startups are in a state of constant evolution. As you solidify your product-market fit within your niche, adjacent markets will inevitably open.
It’s important to note and realize that product/market fit found in the initial market (typically SMB/startups) is diluted — often purposefully — as startups expand and grow.
In many venture-backed cases, the initial niche is a strategy to prove Act 1 of the experiment, BUT it is often too small for scale.
Recognizing this, over time, startups churn out a piece of their initial market (as planned) to pivot and win Act 2, larger, adjacent markets.
In short, startups are NOT wedded to the initial target (i.e., Act 1).
I also go deeper into this from a post last week : link.
3. Be F*ckin’ Different
Obvious Insight: Many startups seek to win by delivering lower costs or more features to an over-served (albeit validated) market, but this is a slowly losing proposition.
Less Obvious Insight: In an overly saturated market where you are likely one of thousands, merely being better is insufficient. You need to be radically different OR identify an under-served market (however, fewer and far between).
Your unique insight and worldview need to make them stop and turn their heads — inspire them. When we say be different and inspire, this is usually done through being specific. Make them feel like this was built just for them — most incumbents are unable to do this as it’s uneconomical, and most startups don’t go deep enough.
If they compare you to their existing way of working, and it's not dramatically different, the effort to change might not be worth it. Again, we're talking about early adopters; they're drawn to finding a new way to gain an edge, alpha, and need to believe in it , YOU.
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In conclusion, the niche you select is a deliberate move—a foundational gateway to unlocking a rolling list of adjacent markets — and, most importantly, the first step in providing proof.
