Market Size Beyond Incumbents

A discussion on how entrepreneurs and investors often misjudge market sizes by looking at existing players, when true market potential can be much larger.

Key Examples of Market Misjudgment

• Airbnb vs. Couchsurfing

  • People initially saw Airbnb as "Couchsurfing but better"
  • Couchsurfing's limited success made people doubt Airbnb's potential
  • Market was viewed as niche "vagabond hippie traveling"
  • Reality: Airbnb became mainstream and massively successful

• Shopify vs. Traditional E-commerce Platforms

  • Competitors like BigCommerce, WooCommerce, Magento existed
  • These platforms had peaked at modest sizes
  • People questioned need for another e-commerce platform
  • Reality: Shopify became a blue-chip startup far exceeding predecessors

Why Markets Are Underestimated

• Looking at existing players as market ceiling

  • Using current market leaders as benchmark
  • Assuming market is saturated or limited
  • Missing potential for category expansion

• Failing to see behavior changes

  • Not recognizing how products can change consumer behavior
  • Missing potential for mainstream adoption
  • Underestimating market evolution

Investment Insights

• Best investments often appear niche initially

  • What looks small can become massive
  • Non-obvious markets often have biggest potential
  • Need to look beyond current market size

• Success Examples

  • Twitch: "Who would watch others play video games?"
  • Shopify: Seemed limited to "indie maker seller type things"
  • Both became massive platforms

Key Takeaway

• True market potential often can't be judged by looking at existing players
• Need to imagine how markets and behaviors can evolve
• Best opportunities often appear non-obvious at first
• Current market size ≠ future market potential