His point about risk is very unclear and/or misleading. He suggests we should think big vs small. It's almost insulting to read an article this vague. What do you even mean by small and big? As far as I know, businesses that aim to make 2M/yr rev have a better shot than ones that must make 100M.
I was thinking the same thing. If we all took his advice and went for the big markets, we would all be selling consumer goods and getting crushed by WalMart. Niche markets are awesome because here, we can win.
For my money, organized crime has more in common with big box retailers than startups, because the amount of cash on hand you require (not to mention the infrastructure) is a pretty nasty barrier to entry. The market is dominated by a few key players and focus is on sustainable growth. Startups are about rapid growth and disrupting established industries by artificially lowering the barriers to entry.
Are they? What did Facebook disrupt? What did Highrise disrupt? What did google disrupt (in search)? Some technologies are disruptive, some aren't. Many are just a little bit better and that snowballs into a large advantage over time, especially in winner take all markets. Just because a company is huge doesn't mean it's disruptive.
Walmart started as one store, don't believe you can't compete with them, I see mom and pop shops sell products in the same categories as Walmart and win.
It's easy to point out how $2mil a year might be only 1% or even 0.001% of the total size of some particular market, but that's irrelevant. No amount of business is guaranteed. $2mil is still $2mil, it's still x number of people each ponying up y number of dollars, for pretty significant values of both. Without a compelling product and a solid brand you have no guarantee of that. There's no such thing as a business venture that makes $2mil in a worst case scenario. The worst case is always losing money.
The numbers are arbitrary, so it would have been better for me to say "business models that produce nonzero revenues even when things go wrong are superior to business models that return nothing unless everything goes right, especially for bootstrapped companies".
The counter argument is that the latter kind of business models (e.g. social) have much higher potential payouts due to scale. But I believe one doesn't have to look too hard in the first category (e.g. SAAS) to find billion dollar opportunities that collapse into million dollar ones if the winds change.
> There's no such thing as a business venture that makes $2mil in a worst case scenario.
The opposite is true though: there are a lot of companies that will have trouble doing more than $2 million. I think the author is suggesting you don't pick one of those.
In the end, the real cost is time. Do you want to spend your time building something small, or something big? That depends on why you're working, I suppose, but if you really don't care what the business is, might as well build something big.
> Better still to find an opportunity that has a chance of making it to $100mm if everything goes perfectly, but might end up at $2mm on a bad run.
If you know of a business where even a bad run nets you $2mm, I'm sure everyone here would love to know.
This kind of vague general math is silly. It assumes that the chance of success stays more or less the same while the potential pay-off obviously grows for larger ventures. If it were that simple. You simply can't make an intelligent generalization along those lines. Any comparison should be made on a case by case basis.
I think he means that at the beginning, the risks are the same either you aim a potential small market or a potential big market then, "you have less risk per dollar if you aim big".
His point about risk is very unclear and/or misleading. He suggests we should think big vs small. It's almost insulting to read an article this vague. What do you even mean by small and big? As far as I know, businesses that aim to make 2M/yr rev have a better shot than ones that must make 100M.