The Entrepreneur’s Guide To Estimating Market Size For It’s Startup

Note: Before I begin, I would like to clarify the difference between market potential and revenue estimate. I have often seen entrepreneurs use the two terms interchangeably.

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Market Potential

Market Potential is about estimating the size of the overall market opportunity. It is a sum total of the potential revenues of all players who are addressing that opportunity, if all the potential customers were to buy. I.e. If you were selling ‘affordable’ golf kits for first-time golfers, then you could estimate market potential as follows (all numbers are indicative for illustration and do not represent actual market) :

  • There are about 20 millon golfers across the top 10 golfing markets in the world. Additionally, about 100,000 new people take up golf every year across the top 10 golfing markets in the world.
  • About 25% of these find the cost of golf kits expensive. If you take this as the addressable market at USD 400 a kit for 5 million buyers, we are addressing a USD 2 bn market opportunity, even if you look at only those who find the price of current golf kits too high.
  • Additionally, the ‘high-quality at lower price’ value proposition is likely to attract regular and casual golfers too i.e. 20 million golfers. This opens up a USD 8 billion market among existing golfers. And that’s a market growing at 15% pa.
  • However, given that most people who want to play golf do not take it up because the current kits cost upwards of USD 1500, we believe that a USD 400 kit will explode the market and we would be able to encourage 10 times the number of people to start playing golf. I.e. by redefining the price-point, we can create an additional market potential worth over USD 500 mn.
  • i.e. with an ‘affordable and high-quality golf kit’, we will be playing into a market that’s roughly USD 8 – 10 billion in the top 10 golfing markets of the world.

Revenue Estimate

Continue reading “The Entrepreneur’s Guide To Estimating Market Size For It’s Startup”

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How angel investors can boost the start-up ecosystem in India

Senior professionals, moderately successful entrepreneurs as well as high net-worth individuals (HNIs) have been expressing an active interest in investing in start-ups. Individuals who are keen to explore start-ups as an asset class, however, have to recognise that investing in them is a high-risk, high-return game.

Angel-Investor

They need to get comfortable with the fact that they could lose their entire capital in some of the companies they invest in, and that most of the start-ups they invest in may not succeed.

Anyone who has the ability to spare Rs 5 lakh or above a year — and not lose sleep over it — could look at co-investing in two-three start-ups a year, so that over a two-three-year period, they are able to build a good portfolio.

With a diversified portfolio, investing in start-ups can provide better risk-adjusted returns. Existing angel groups and investors typically invest in start-ups raising upwards of Rs 2-3 crore, as their members do not usually want to write smaller cheques.

Continue reading “How angel investors can boost the start-up ecosystem in India”

My advice to students aspiring to be entrepreneurs

During my talks at engineering colleges and business schools I often come across students who are clear that they want to be entrepreneurs, but they cannot do so immediately because they have student loans or other financial commitments to take care of. And that is a perfectly understandable reason for deferring your entrepreneurial ambition.

My advice to such aspiring entrepreneurs is to keep their entrepreneurial ambition as the key focus on their lives. Sure, go ahead and take up a job because you need to. BUT NO MATTER HOW MUCH SALARY YOU GET, KEEP YOUR EXPENSES AND LIFESTYLE WITHIN RS.25000 – RS.30,000 (USD 500). Continue reading “My advice to students aspiring to be entrepreneurs”