Products Create Markets

Entrepreneurs and investors consistently underestimate market sizes for innovative products, often by orders of magnitude. The speakers share numerous examples of billion-dollar companies that were initially dismissed as niche opportunities, highlighting how difficult it is to predict the potential of truly innovative ideas.

Key Points:

• Products the speakers were wrong about:

  • Meditation apps like Calm - initially seen as "cute" but became billion-dollar companies
  • Snapchat - dismissed as a "goofy sexting thing"
  • Airbnb - viewed as just a slightly better version of Couch Surfing
    • Couch Surfing topped out at $50-200M while Airbnb became a ~$100B company
    • Now 1 out of every $30 spent on travel in America is on Airbnb

• CEOs who underestimated their own market size:

  • Jan Koum (WhatsApp): "We're just trying to make messaging better, not build some big business" - sold for $20B
  • Sarah Blakely (Spanx): "I thought I'd make a little side money, enough to quit my job" - became a billionaire
  • Nokia's mobile gaming head: "Mobile games are just a small add-on, it's not a real market" - now a $120B market
  • Domino's CEO (2010): "Delivery is a convenience, not a game changer" - market grew 15x
    • Now 70% of many local restaurants' order volume is delivery

• Investor perspective:

  • Bessemer Venture Partners initially valued Shopify at potentially $400M
  • Some Shopify employees thought the company would be worth at most $50M
  • Shopify is now worth $130B

• Why market size predictions fail:

  • Difficulty understanding exponential growth and compound math
  • Inability to envision how products evolve beyond initial use cases
  • Not recognizing when a product is creating an entirely new market

• Brian Chesky (Airbnb): "We didn't know the size of the market because we were inventing it. If we listened to market research, we would have just made a better Couch Surfing app."

• Elon Musk's approach: "I don't care about the market size. I care about if we can make something fundamentally different, because if you make something great, the market will come."