How traditional startup accelerators get it wrong
The Six Percent Entrepreneur
How traditional startup accelerators get it wrong
May 1, 2021
In this episode, we talk about what they teach at traditional accelerators and how they are wrong.
Today we're going to look at the difference between what they might teach you at a traditional accelerator program where they are focused on making the investors happy versus the way I teach how to build ventures by making the founder happy. 

So in traditional startup models there's this idea of your TAM, SAM and SOM and you're TAM is like this your tam is your total available market or it's also the total addressable market size. So this is the entire market for your product and service. And when you are pitching to a V.C. Or any kind of investor, they are looking for a huge total available market size. And the reason why they want to see a huge total addressable market size, total available market size. Your TAM is because they want to see that your company has a lot of upside potential. 

And then they also look at the SAM and the SOM. The SAM is a serviceable available market and it's a smaller portion of the TAM. So if you think of it as a Venn diagram and think of three bubbles, the largest bubble is your TAM and then the smallest bubble inside the TAM is your SAM which is your serviceable available market size. And this is a portion of the TAM that is directly targeted by your offer and likely within your geographic area. Then you have within the SAM within the serviceable available market size, you have the smallest bubble, which is the SOM. So TAM, SAM, SOM is a serviceable obtainable market and this is the portion of the serviceable available market that you're trying to capture. So you can prove that you have product-market fit. 

So this model, the way that it works is when they're looking for huge market sizes, you're usually building a venture that's competing in a red ocean, the vertical method. Instead, we forget the tam, we forget the TAM, SAM, the SOM. We don't care about the total addressable market size. We are just only going after a very specific niche. And when we do this, there is no TAM, SAM, or  SOM. Well, there's a TAM, but there's no salmon song because we are taking over the entire niche. Our goal is to be the monopoly over that entire niche. So what we're doing instead of going into a red ocean where they might have a TAM, sorry TAM, SAM, and SOME, we are creating a blue ocean and we are capturing the entire market. So when we say, we're capturing the entire market by going vertical, the total addressable market size for a vertical company by definition is really tiny. 

And this is not going to really occur, you know, excite a lot of investors. However, who cares about investors. This is all about making the founder happy and making the founder happy when we chose the vertical methods. So going vertical means you are drilling down into a very specific niche and you are hyper-focused on delivering as much value as possible, as much value as possible for the customer experience. And when you do that and you dominate that market, you will start attracting a market that will resonate with you and your brand. It will be very difficult for other people to steal this market. And essentially, you have no competition because you just created a blue ocean. 

So how do you do this? The way that you do this, even if you have a product that you believe is made for everyone. If you have a product that's made for everyone marketing, it is very difficult because you really do need a marketing unit for every type of use case for every type of customer journey, etcetera. So when we're going vertical for you to be able to do it the right way, here's how you do it in three steps. One, you identify your niche, which is probably harder than it sounds, but this is the most important step. And you want to identify a niche that's congruent with your core identity. So you're building a business that's sustainable for you and keeps you happy. Then the second step is you identify the customer journey. 

So, within your niche, there's going to be several different journeys. Let's say that your niche. Okay, we're drilling down into a niche, right? So, and I'm just creating this one on top of my head, let's say that you are going after athletes. Well, there's so many different types of athletes, but you want to vertical eyes and you want to approach a single type of athletes. So let's say it's an athlete and you want to focus on swimmers well, even within the swimming community, there's a bunch of different swimmers. 

They're all going through different customer journeys. There might be people that are swimming for the very first time and they're taking a high school course, but they want to be a swimmer athlete or uh what do you call summer athletes? Swimmer, I guess. They want to be a swimmer. They want to be a girl swimmer and they're taking their very first course. They don't even know how to swim yet. And then you might have Olympic-level swimmers that are competing for the next Olympics and they want to improve their times. And it's a totally different customer journey. And then everyone in between, right, you might have some people that are swimming in high school, some people that are swimming in college, some people that are just swimming for fun and for recreation. Um for a little cardio, you have all these different customer journeys. What you do is you identify just one customer journey. And then the 3rd step is you focus on one single use case. 

So as an amazing founder that you are, you probably have several different use cases and you're thinking in terms of Peter Thiel 0-1 where you can just like take over this entire market with all the different things that your product can do because you're building a platform instead of just a product. However, I would encourage you not to do it that way because that relies on investor capital and it really sets the founder of for failure and it only makes the investors happy. 

So what we're doing instead is after we identify the niche, we identified the customer journey, and then we are focused on one single use case. What happens is your marketing efforts for that one single use case get easier because you're totally focused on just this area and you are able to attract new users, new subscribers based on this. Use the singular use case that you aim to dominate because no one else is taking care of their customers for this niche for this customer journey for this use case. Um as you are and that is the essence of going vertical. When you start doing that, it really makes it difficult for other people to compete. And once you dominate that group, that niche with your customer experience, then you can start thinking about moving on to other niches. 

So Facebook did this when they first started with Facebook, they only focused on Harvard and the value proposition was Harvard students dating other Harvard students. Same thing with Amazon. Amazon only started with books getting books into the hands of its users in a very easy way where you can see all these different books and you're not confused about which books are where and trying to find the book that you need several different ways to do it. So what we're doing is instead of looking at the Tam's Salmon, some we don't care about that. Those are Red Ocean markets. We are only going after a Blue Ocean. We're creating the Blue Ocean and we're doing this by identifying a niche, identifying the customer journey, focusing on just one use case, and crushing it on that use case. I hope that helps this is Robin Copernicus. Boom, bam. I'm out. 

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