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The first founder to build in a market tends to prove demand, then watches someone who came in later take it. Pebble, Snapchat and Ahrefs show how it plays out, and why marketplaces and networks are the exception.
Show Notes
The first founder to build in a market tends to prove demand, then watches someone who came in later take it. Pebble, Snapchat and Ahrefs show how it plays out, and why marketplaces and networks are the exception.
Featuring: Eric Migicovsky, Dmitry Gerasimenko, Sam Walton
Brought to you by:
Trends.vc: Discover new markets and opportunities.
HeadsUp: Know when your competitors move. Before your customers do.
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Chapters:
(00:00) Sam Walton on copying
(00:15) Pebble proves the smartwatch, Apple sells it
(00:37) Snapchat's Stories and Instagram's copy
(01:00) Ahrefs builds another backlink tool
(01:19) Fragmented markets and winner-take-most markets
(01:45) Building in a proven market
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"Most everything I've done I've copied from someone else."
Sam Walton
I've read thousands of founder stories while building Trends.vc. The first founder to build in a market tends to prove demand, then watches someone who came in later take it.
Eric Migicovsky proved people wanted a smartwatch. In 2012 he asked Kickstarter for $100,000 to build the Pebble and raised over $10 million.
Apple launched its watch in April 2015 and shipped two out of three smartwatches sold that year.
Pebble went insolvent the next year.
Migicovsky spent three years proving the demand that Apple sold into.
Snapchat proved people wanted stories that vanish after a day. Instagram copied the feature in 2016.
Eight months later, 200 million people used Instagram Stories each day. Snapchat had about 160 million.
Apple and Instagram can reach hundreds of millions of users the day a product ships.
So they can let smaller companies prove the demand, then arrive later and take the market.
Dmitry Gerasimenko started building Ahrefs in 2010. Since marketers were already paying for tools that showed which sites linked to theirs, he built another one. His crawler refreshed every 15 minutes, while the others updated about once a month.
By 2018, Ahrefs brought in over $40 million a year.
Most of the markets I study are fragmented. The product works as well for ten customers as for ten million, so a company can win by owning one niche.
Several founders tend to win at once. Semrush, a tool Ahrefs competed with, grew as well and went public in 2021.
Marketplaces and networks are the exception.
Each new user makes the marketplace or network more useful to everyone already on it.
So these are winner-take-most markets.
Since the first founder to build in a market can spend years proving demand and still lose, an efficient move is to build in a growing market with proven demand.
Which growing market could you copy your way into?