How can would-be entrepreneurs best understand and evaluate their market before building a company? originally appeared on Quora: the place to gain and share knowledge, empowering people to learn from others and better understand the world.

Answer by Erik Torenberg, Cofounder at Village Global, On Deck, & Token Daily, on Quora:

There are few key things that would-be entrepreneurs should think about when understanding and evaluating their market.

First, do you want to spend ten years on this thing? A lot of founders, especially students, believe that their startups will only take two to three years and then after that they'll work on what they're really passionate about. That almost never works. Good startups usually take ten years.

You also really want to take the time to think about how the market is going to evolve. You need a market that will be big in ten years. Most investors are obsessed with the market size today, and they don't think at all about how the market is going to evolve. The evolution is more important.

In fact, I think this is one of the biggest systemic mistakes that people make. They think about the growth of the startup itself, they don't think about the growth of the market. I personally care much more about the growth rate of the market than its current size, and I also care if there's any reason it's going to top out. You should think about this. I prefer to invest in a company that's going after a small, but rapidly growing market, than a big, but slow-growing market.

Another version of this, that gets down to the same idea, is Sequoia's famous question: Why now? Why is this the perfect time for this particular idea, and to start this particular company. Why couldn't it be done two years ago, and why will two years in the future be too late? For the most successful startups we've been involved with, they've all had a great idea and a great answer to this question.

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Published on: Apr 17, 2019