One of the Top 10 reasons about “Why do startups fail?” is “Not having niche market”.

A very common mistake for a young entrepreneur is trying to offer as many products or solutions as possible. As a consequence, they don’t have a niche market and neither a portfolio of loyal customers. In order to understand the problem and how to avoid. I divided in these four sections:

What is a niche market?

A niche market is a small or specialized market for a type of product or service. 

• Sector: For example industrial, health, banks, education, services, insurance, travel, etc.
• Location: For example by town, city, province, country or specific area in the world.
• Size of the company: Grouped by small, medium, big, enterprise and corporate.
• Finance sources: Public or private.

A niche market can be also for a specific type of solutions:

• Quality: High or low.
• Type of products or services: It can be Software or hardware.
• Licensing model: SaaS (Software as a Service) or permanent license.
• Price: Low cost or luxury.

I am going to give you a few examples of my own mistakes and my own experience at the cybersecurity market.

Practical examples of not having a niche market.

My experience with cyber security startups involves system integrator and distributors. The examples that I speak here are related to these type of companies.

System integrator without a niche market. 

Unfortunately, I cooperated with many small resellers with the “supermarket” concept. It means, they were offering all type of solutions. This comes from the wrong concept of: “Having all the possible solutions, I am able to sell to more companies. In this way, my sales will be bigger rather than having few solutions.”

If you work in the IT sector you probably are already aware that these concepts are not working like this in real life.

Distributor without a niche market.

Here, it is exactly the same case with system integrators. I will give you another real case: I have met one Italian distributor with only 3 employees. These 3 employees were working with 30 products. In any of these products they were not specialized and neither the most selling distributor in the country. Are you surprised about this? It is not possible to be efficient in 30 products with 3 people. More even if you have in mind that there was only 1 technical person for 30 products.

Tech Startup without a niche market.

I recently cooperated with a startup without a niche market. On the beginning, they were trying to sell to small, medium business and enterprise customers. The process and methodology differ a lot from each other. In the same way, business requirements are very different from each other.

Later, they realized about the focus on enterprise and corporate customers were their core business and they stopped to don’t waste efforts with the small or medium business.

Real examples of startups having a niche market.

The examples that I speak here are related to these type of companies.

System integrator with a niche market. 

One of the most relevant system integrators that I have met in my first startup, it was working only with the same type of solutions. Their core business portfolio of solutions is network monitoring solutions. In this way, their type of customers is in a niche market. Their type of solutions is in a niche market as well.

This system integrator is also well recognized in their market for this type of solutions.

Distributor with a niche market.

I have worked with one of the most important local distributors in Central Europe. What do they do very well?

1. They know their niche market is with enterprise and corporate customers.
2. They work only with cybersecurity solutions. Not average IT solutions or other standard solutions such as routers.
3. They have exclusivity in many of their solutions.
4. They combine startups vendors with well-known brands.
5. Their solutions complement each other.

My tips and conclusion.

I made these 4 tips and conclusions as a summary of this common mistake.

1. It is important to define how it looks like your potential customer and why. This definition can be by type, location, size and finance sources.
2. A niche market is also defined by the type of solution you are offering. This can be grouped by quality, type, licensing model and price.
3. It is a common mistake to start a business without targeting a niche market. But, it is important to realize about the mistakes and pivot your startup.
4. Having a niche market also creates a good reputation and referrals for other customers target by you.

I hope this article helps you to understand a niche market and define your own one. This fact, it will make your chance to success much higher compared with business and startups without a niche market.

If you are interested in know and avoid the other Top 10 startups mistakes, you can find at this link: “Why do startups fail?”

Let me know your feedback on the comments below.

Javier Nieto León