How New Markets Are Formed

This lesson was driven home during my time at Automated Insights, where I developed algorithms to create automated narratives from sports data. To showcase our groundbreaking technology, we constructed websites for every professional and collegiate football, basketball, and baseball team in the United States. We updated these sites multiple times a day with automated content, including game summaries and player statistics, which astonished many.

However, nearly all 800 teams already had human reporters covering their events. We were entering a well-established and fiercely competitive market, where our solution wasn’t significantly superior to what was already available.

By chance, we pivoted our focus to fantasy football. For platforms like Yahoo Fantasy Football and NFL.com, we generated millions of matchup recaps weekly—a successful application of our technology. This led us to shift gears entirely. Rather than competing in the saturated sports market, where we had some recognition, we ventured into a new territory by creating narratives where human reporting was impractical. We expanded our offerings beyond sports to finance, marketing, and other sectors, ultimately selling the company to a private equity firm four years later.

Starting with the End in Mind

I frequently discuss the three narratives of a startup: the A Story (current operations), the B Story (future aspirations), and the C Story (the vision for achieving a billion-dollar valuation). It’s essential to focus on advancing the A Story while keeping the B Story in view and the C Story in mind.

Many startup leaders concentrate solely on immediate challenges, postponing thoughts about the future. However, without a plan aimed at a billion-dollar outcome, attaining that level of success becomes unlikely.

Avoiding the Incumbent’s Game

Every entrepreneur aspires for their startup to be the “better version of X,” where X represents a successful company and “better” implies improvements in cost, speed, engagement, or other areas.

While targeting a familiar market can yield initial traction, if potential customers already recognize your offering, it’s likely because they have existing solutions. Consequently, your product may merely be seen as a slightly improved version of something they already use.

If you aim to compete with established players, avoid playing by their rules. Don’t address the problems they solve, target their existing customer base, use their terminology, or measure your product’s benefits against their benchmarks. Instead, align your unique strengths with the customer’s revenue growth, illustrating how you can enhance it.

Building a Bridge to the New Market

Transitioning customers from an old market to a new one requires support, which can be structured around three key components:

1. Education: When you step away from the “better than X” narrative, you must rely on innovative concepts. Sales may be challenging without proper education. Once prospects grasp your offerings, the sales process becomes significantly smoother, making it vital to assemble a team focused on educating potential clients.
2. Onboarding: As a pioneer in a new market, your customers might lack the necessary skills to maximize your product's benefits. Thus, effective onboarding is crucial. This entails a customer success team to facilitate initial engagement and a managed services team to ensure customers can fully leverage your product.
3. Evolution: In any emerging market, traditionalists will exist. Many innovators I encounter have clients who prefer to operate using older methods with new tools. While it’s acceptable to serve these customers, avoid altering your product to cater to them. Instead, develop workarounds or hire temporary staff to generate revenue without regressing.

Customers Shape Market Rules

Even if you’re at the forefront of innovation, your product’s success ultimately hinges on customer adoption and how your startup facilitates that process. Many startups err by trying to predict customers' needs. Instead, listen to their feedback; once you engage with them, your competitors will struggle to catch up.

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