Is your startup idea revolutionary or evolutionary?
An evolutionary startup is one that is looking to enter an existing market, but the intent is to position the product or solution in a way that is “better, faster, cheaper” (or some combination of these) than the existing solution that exist.
Alternately, a revolutionary startup is one that is looking to create a new market and address a totally unmet need (perhaps even an unknown or unrecognized need).
Which is better? It depends. Neither can be said to be definitely better than the other but there are certainly pros and cons to each, and there are some investors (angels, VCs, etc.) who will only invest in one type of startup or the other – it comes down to their experience and what they’re comfortable with.
An evolutionary startup is nice because they’re going to attack an existing market. This means that a little research can help understand the size of the addressable market, the valuations of players in the market, an idea of the existing feature use, what users like and don’t like, etc. This information can be very useful in planning out the strategy of your product development, positioning, and customer acquisition tactics.
Going into an existing market though, by definition, also means that there is existing competition. This might means a diverse market with generally balanced market share between the competition, or it could be a situation with one dominant player then a bunch of smaller players.
To be successful in this market you truly do need to be better in one or more ways. And it’s very important that the way in which your solution is better is actually something that the users care about. In fact, I’ll say that they need to more than just care about it – the way in which you are better really needs to address a significant pain point. If you’re just a little cheaper, or a little faster, or you have a few small feature advantages – that usually isn’t enough to convince users to switch to your solution. Or if some do switch, without addressing a big pain point, it will be extremely hard (if possible at all), to be a newcomer in an existing market then be able to dominate it and oust the existing players.
A revolutionary startup on the other hand doesn’t have the benefit of current market statistics and research data. That means that even if you have done a lot of research (hopefully implementing a lean startup process for a customer feedback loop) you still aren’t sure what’s going to happen. You know what you think and hope will happen; and hopefully even what potential clients tell you should happen; but you really don’t know. The idea could be a tremendous win and realize a fast and huge adoption rate – or maybe there is a good reason that no one else is doing this, and once deployed, you realize that the actions of the potential user base isn’t matching expectations based on their research results.
Revolutionary startups are of course much riskier because of the unknown/undeveloped/unrealized market space. But if a revolutionary startup truly has a great idea that addresses a nice need (pain point) or strong desire, and if they have a strong team with stellar execution abilities, there is a tremendous amount of upside potential. For a founder team, and investment team, who understand and accept and are willing to put forth the effort required to create a market, this can be very exciting and also very profitable (or of course a total loss, like can happen with any startup).
It’s not hard to decide which type of startup you have and you should definitely know. You should also understand the differences and challenges with each; and when/if you are looking for funding, make sure you understand the preference of the investor(s) that you are trying to attract into your team.