The document discusses important considerations for entering a new market, including estimating the size of the target market, understanding the type of market (existing, new, or mature), and designing an effective market entry strategy. It emphasizes the importance of targeting a large market, developing a differentiating product or solution, and having a clear understanding of customers, competition, and viability. Effective market estimation techniques include reviewing published sources, analyzing competitors, and making educated guesses. A successful strategy also addresses customers, company strengths/weaknesses, competition, pricing, promotion, and positioning the product as a solution to an important problem.
Marel Q1 2024 Investor Presentation from May 8, 2024
Market Research for Startups
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Founder Institute – March 27th
, 2011 - Berlin
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Summary
Why is it important ?
Understand your market type
How do you estimate it ?
Design a market entry strategy
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1. Why is it important ?
Gives you
A potential target for your revenue (therefore also EBIT)
A valuation
Assessment of market players, hence your competition
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Potential target revenue
• Let’s say your market is $1b
• Everyone wants/says a 1% market-share
• That means you’re targeting $1b x 1% = $10m of revenues
• Impact:
– You’re a tiny fish in a pond with 99% revenue elsewhere.
• No barrier to entry (there are other players)
• Competitive edge is key (geography, product, customers…)
– Only 2 ways to grow
• Grow the market size (either by yourself, or the market grows as a whole)
• Grow your market-share
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Potential valuation / fundraising
VCs are only interested in risk-controlled returns, usually in
5 years.
Hence we need to estimate your valuation in 5 years.
Usually 3 techniques:
Multiples (turnover, EBIT, …)
DCF (for going-concerns, not startups)
Open market (early stage, or if Ricardian rent)
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Multiples
Former French tech stock market Alternext used to trade
with these multiples on average for tech companies:
2,2x turnover
23x EBIT
Maybe your industry has different metrics
From original example:
Your valuation is $10m x 2,2 = $22m
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DCF
Note : Let’s assume here the currency is irrelevant
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VC’s share
• Valuation bracket at exit = [$ 21,8-22,0m]
• If series A of $1,5m for 30% equity
• Then VC’s value at exit is
– $22m x 30% = $6,6m
• That’s a cash-on-cash return of :
– 6,6 / 1,5 = 4,4x (excluding tax impact)
• GREAT, but that’s only $5,1m made for the VC in 5 years (too small !)
– cost of opportunity is too high
• Nota: if you’re financing the company alone, then it’s a different story :
$22m-$1,5m financing = $20,5m profit in 5 years = $4m/year
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Advice you’ve already heard:
• Problem:
– either target market is too small,
– or target market-share is too small,
– or profit is too small,
– or asset created is too small,
– or there are too many competitors.
• Target a BIG MARKET
• Aim to be the #1 in your (BIG) market
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2. Understand your market type
3 options
An existing market
A market that doesn’t exist yet
An mature market : an opportunity to re-shape it
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Examples of entering an existing
market
• Richard Branson and all Virgin brands in air travel, finance, rail
• Steve Jobs and Apple : telephony, music, personal computers,
feature software
• Bill Gates on OS, office software, gaming, etc.
• Mark Zuckerberg (facebook) : social networks, the Internet
• Google : Android
• @jack with Square: payments
• Innovation and a differentiating factor are key
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A market that doesn’t exist yet
• Tons on literature on this
• Very risky, because
– No available numbers
– No guarantee you’ll find a market
– But maybe best way to reach #1 position, globally, because
• you know something competition doesn’t know yet :
1st
mover advantage
• You define the rules
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Sample new markets
Classic examples :
Walkman
Post-its
Netbooks, then tablets
Space travel
Twitter (?)
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A word of advice about innovation
Feature company
Product company
Solution company
Nice-to-have
Got-to have
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A mature market
#1 or #2 strategy
Not enough: redefine your
market as 10% max of revenue
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3. How do you estimate your market
size?
Many different techniques:
Guesstimate (à la McKinsey)
Published numbers (always a bracket)
Sum of all players in a market
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guesstimate
http://shop.wetfeet.com/Browse/Ace-Your-Case/asd-%281%29.aspx
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Existing markets
Press articles
Competitor’s literature (presentations, website, financial
statements)
Industry publications
Research institutes (IDC, Forrester, eMarketer, comscore,
etc.) < beware though
SlideShare is great !
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http://www.comscore.com/Press_Events/Press_Releases/2010/3/comScore_Reports_January_2010_U.S._Mobile_Subscriber_Market_Share
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Sum of all players
Hard not to compare oranges and apples
Take only direct competitors
Gives you a current picture, not a projected one
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4. Market entry strategy (in a nutshell)
4C :
-Customer
-Company (SWOT)
-Competition
-Community (PEST)
4P:
-Product
-Price
-Place
-Promotion
Positioning:
We sell THIS PRODUCT
To THIS CUSTOMER
At THIS PRICE
To solve THIS PROBLEM
PnL
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How big is your market ?
Reality check #1
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What problem are you solving ?
Reality check #2
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Why will someone PAY for your product ?
Reality check #3
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1 strategy is NOT enough
You need to assess different scenarii
4C 4P POS P&L
4C’ 4P’ POS’ P&L’
4C” 4P” POS” P&L”
4C’” 4P’” POS’” P&L’”
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What you end up doing depends
both on your RISK profile and SWOT
X Pos”
X Pos’
X Pos’”
X Pos
Return
(m€)
Risk
(wacc)
10% 20% 30% 40%
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Summary : entering a market
Why is it important ?
Understand your market type
How do you estimate it ?
Design a market entry strategy
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www.rodrigosepulveda.com twitter: @rodrigo
www.slideshare.com/rodrigo1971
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