Working Out Market Size for Halllp

Since the app derives value from the number of users and their engagement levels, estimating market size is a difficult task. However, to assess whether the opportunity is big enough, I have tried to make a rough estimation of how big the target market can be.

Halllp is targeting college students.

Total number of college students globally - over 200 million
Average spend per student on products/services per year - >$1,000 ( conservative assumption taking into account students having different levels of disposable money)
Commission rates of any intermediary - 1% (conservative)

Hence Market Size = 200 mn * 1000 * 1% = $2 billion

Competition is Good!

This may sound adsurd but believe me, entering a competitive market can be good.

A competitive market implies that a market exists and this fact already been proven by the players which exist before you. A competitive market must also imply that the market size is big as a lot of players exist in it. The biggest businesses cater to the biggest and most competitive markets. Also competition will always keep you on your toes, thereby making your startup lean and efficient.

If you look at the biggest internet space in India at the moment, it has to be the horizontal e-commerce space. Despite having the bigger players like Flipkart, Amazon & Snapdeal, you are still seeing a plethora of new startups entering the space (like Paytm, Shopclues etc.) and are scaling fast. This is because the market is big enough and growing at a rapid pace. The key to succeeding in such a market is by offering a superior experience and creating a distinctive differentiation for your brand.

How big is the market???

This is one question entrepreneurs have to deal with.

At times, a lot of us wonder why. Even I did when I had attempted to start a 'Zomato for Spas' back in 2010. I used to see the number of spas growing exponentially in Delhi. Seeing so many spas, I thought that there should be a service which could tell users which spa is better, what massages do different spas offer, pricing of services in different spas and so on. I could see a gap and could also see physical growth of the Industry. However, one thing I did not take into account was the existing size of the market.

Think of it like this. If I have a vision of disrupting an Industry and becoming a leader in it (which has to be a vision when starting up especially in the technology space), I would eventually want to capture a 5-10% of the total market share. So if the Industry size is bigger, the business vision automatically becomes bigger. If the vision is bigger, the opportunity cost of doing something else (like doing a course or a job) becomes comparatively smaller and it makes more sense to start a company. If I target a small market, the potential vision for my company becomes smaller and comes close to the line which separates doing a startup vs getting employed elsewhere.

Also if you look at it from an Investor's perspective, they know that typically they will only make good money from 1-2 ventures out of 10. Hence, if they invest in smaller markets, the multiple of returns for them in that particular ventures becomes smaller. Taking into account the money they will lose in some businesses, the averaging of returns doesn't quite work out for them.

So to sum it up, identify a big market, find a gap and innovate in it. It's better to go after a good idea in a big market than to go after a great idea in a small market (unless you want to set up a small/local business).