Speed & Depth

Speed & Depth

When launching your company, look for small, deep markets that have a quick exit path out of them.

In January 1975, the Altair 8800 was announced on the front cover of Popular Electronics magazine. It went viral for those days. Expected to maybe have 200 orders, the Altair 8800 far surpassed expectations.

The Altair 8800 was one of the first accessible computers. It was for hobbyists and those that wanted to build their own computer. It also ushered in the start of one of the most successful companies of the modern era.

During this time, in order to interact with a computer, you had to know an interpreter software language, usually the FORTRAN or BASIC languages.

So in 1974, as this computer was being developed, Bill Gates and Paul Allen hear about the Altair and think, "I bet we could write a Basic interpreter for it.”

Surpassing expectations of 200 orders, when the Altair 8800 hit the cover of Popular Electronics, they sold 1,000 units. This also meant 1,000 potential customers for Bill & Paul’s new startup that produced software for computers. But as the market quickly grew to 5,000 and then subsequently exploded over the next two decades, Microsoft was born by optimizing their product in a small market that was speedily growing.

We’re all quite familiar with the Facebook story. Facebook launched with colleges. The market was deep—lots of colleges with students who wanted to stalk pretty girls. Once Harvard had it, Yale and Princeton wanted it, then Stanford and Pepperdine, next the entire Ivy League had it and it spread like wildfire from there. With a slight shift in design, now high schools could open it to their networks, and by that point hundreds of thousands of people were on the platform and it takes off. Now even grandma is stalking her beaus in her retirement home on the site.

A deep but small market that had a fast path out of it.

Don’t be discouraged by a small initial market when you’re launching your product. Is that small market growing? And is there a fast way out of it into the mainstream marketplace?

HT to Paul Graham’s article

(photo via vonderauvisuals)