There are 4 types of startups - and not knowing what type you are can cause big challenges. We call this discovery process "Market Types". There are 4 types of markets that you have a choice of (and the market you choose will be the type of startup you are).

The type of market will change everything you need to consider. Everything from:
market size, your sales model, how much funding you'll need and who your customers will be.

Let's explore each type of market and their defining factors:

1. Existing Market

In this market type:

• competitors exist
• customers want and need better performance
• usually technology driven
• the positioning is driven by the product and how much value customers place on its features
• the risk here is to think that competitors are dumb or too slow
• no "chasm" (which is the gap between early adopters and the main stream customers in a market)

2. Resegmented Market

In this market type:

• what factors can you eliminate that your industry has long competed on?
• what factors can be reduced well below the industry standard?
• what factors can be increased above the industry standard?
• what factors can be created that have never been offered?
• there is a bit of a chasm in this type of market

3. New Market

In this market:

• customers don't exist today
• market size is zero
• how will they become aware of their needs?
• what factors can you create that has never been offered?
• the chasm is biggest here because you'll only be selling to the very early adopters

4. Clone Market
In this market:

• takes a foreign business model and adapts it to a local condition (language, culture, import restrictions, local control)
• needs a market large enough, typically >100 million

Tip

If you are in a new market, it's critical that all stakeholders realize this and accept the fact that you won't have a "hockey stick" revenue or growth curve.... it may actually be flat for a few years. You shouldn't build your business or approach it the same way you would in an existing market.