Market Share

Any start-up investor pitch in the West will include a projection of market share, on a global basis.

Starting at zero, the hockey-stick projection will show anything from 10-90% market penetration.

This is usually needed to justify the projections of increases in enterprise value, and on such projections are investment decisions made.

Investors use the traveller’s ‘packing rule’; they halve and halve again the market share projections to get the scenario that they use to tell their LPs why they made the investment.

In reality start-up companies achieve a huge range of market shares, the median of which has absolutely no mathematical correlation with their collective initially preferred scenarios.

There is a long-tail effect here; most start-ups achieve little or no market share and a handful get a market share that justifies their original investment.

The Chinese on the other hand do not consider market share at all.

They just start companies, make a product as cheaply as is humanly possible, and flog as much of it as they can through on-line channels and distributors.

This way they avoid telling lies to investors and they also save costs on business planning, strategy development, market reports, marketing in general, and the list goes on.