In mentoring startups, I have noticed two things have come up recently:
1. Entrepreneurs keep remarking to me that investors are looking for multi-tens or hundreds of billions in market size. I believe this is one of the results of the explosion of startups we have seen over these last few years, as investors at all stages keep raising the bar for the startups they invest in.
2. Startups at early stage are, more often than not, always focused on solving some singular problem and jumping on the early customer adoption as a sign that there is a business there.
But startups who are solving some singular customer problem still can’t seem to satisfy current investors’ desire for truly huge market size. One possible solution to re-defining a startup project with larger market size, is to use the concept of Upstream and Downstream to expand on what you’re working on to something with a bigger vision, and thus larger market size.
What is Upstream and Downstream?
If you solve a particular problem, then looking upstream means to look at what you can solve that is closer to the customer and what they need to do before they can use your service. Looking downstream means providing solutions for what the customer needs after they use your service. Expanding your capabilities up and downstream means you expand your potential business and market size by that much more.
For example, suppose you are an adtech startup. You help companies serve ads across multiple ad networks.
Looking upstream from the problem you are currently solving, you see what the customer needs before they get to your service. So if you are currently helping people serve ads, then things that need to happen before the ad serving are:
1. Media planning for the ad serving.
2. Campaign creation and management.
3. Ad creation and design, visuals and copy.
4. Landing page creation.
5. Ad network selection.
Looking downstream, what does your customer need after ads are served?
1. Analytics - ad performance results, which targets worked the best/worst.
2. Insight into what ads to run next and where.
3. Landing page results, testing, and management.
4. Post campaign management of ad networks.
5. Ad modifications due to results, suggestions for the modifications.
Now, you are providing a more fuller solution to your customers instead of just one small piece. If you didn’t provide these services, your customers would be forced to use other resources or services from other companies. Some of those might be connectable to yours, some they would have to stitch together by hand or home grown technology. Customers always want to have one place to do their work; multiple solutions complicate things dramatically. Being the one place where customers can do everything is a big advantage for them.
Ultimately, expanding your business both up and downstream is a recipe for world domination. Instead of serving only one portion of a customer's needs, you instead service all the needs up and down the chain.
Today’s world encourages cooperation amongst companies: expose your data via APIs and share it; use outsourced services to do things you don’t want to do. This may be true for some things, but more and more I am finding that startups need to do more by themselves instead of depending on others. By securing more value internally to themselves, they can then expand their vision to be much bigger, capture more potential revenue, and target a larger market which investors love.
End note: Of course, there are examples of startups doing one thing that have gotten big: SurveyMonkey, Evernote. Remember, these companies started years ago in a world where there wasn't so much competition. Today is different; there are thousands of startups out there and investors are much pickier. Without a bigger vision, you may not even be able to get off the ground. Work Up and Downstream and make your world domination plan a reality!