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Sam Altman offers a fresh perspective on market size, challenging the conventional investor question: “How big is your market?” He argues that instead of looking at a market’s current size, investors should focus on its growth potential. If a market seems small today but shows signs of explosive future growth, it can be an ideal environment for startups to thrive. This mindset allows startups to tap into niches with high growth prospects.
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Finding “Small” Markets with Big Potential
Altman points out that some of today’s most successful companies started by capturing significant portions of small, specialized markets. For instance, Airbnb initially focused on apartment renters in New York City, while Stripe became the go-to payment solution for nearly all startups in its YC cohort. Both companies capitalized on focused markets that had room to expand, demonstrating growth potential and setting a foundation for scaling up.
Why Future Growth Matters More
Instead of basing investment on current revenues, Altman suggests looking at a startup's ability to grow within a burgeoning market. Identifying fast-growing niches—markets that seem small but show massive growth trajectories—means that startups can scale alongside their markets. This approach requires investors to look beyond traditional metrics and trust in the potential for expansion, rather than relying solely on current size.
Embracing Growth and Scalability
Altman’s approach encourages startups to capture a unique market early, even if it’s small. By focusing on potential over present figures, startups in fast-growing niches gain a competitive edge, moving from small-market dominance to larger-scale impact.
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