[Data-heavy startups looking to enter a new market should be choosy about what kind of dishes to put their secret sauce on]
These days, it’s hard to imagine a startup that doesn’t leverage data to gain some advantage. But for some startups, data and information are the critical foundation of their competitive advantage. You will often find in these companies’ pitches phrases like proprietary algorithm and AI.
Indeed, these advantages can be powerful and can cement a leader’s position in the market for a long time. These companies leverage their superior data and algorithms to offer a superior product to their customers, and the more their customers use their product, the better the data and algorithms become. A company like Google that commands 90% share of web searches will almost certainly always be a step ahead of its search rivals in serving relevant results, because user search behavior is always used to improve the product.
The same concept applies to most AI products, including the many AI startups who have come through AppWorks recently, from healthtech to voice AI. One thing they would all love to have more of is data. Even companies not traditionally thought of as AI can call data their secret sauce: many non-bank lenders in the growing fintech space are able to offer the best rates to relatively less risky customers solely because they have better data.
Startups looking to enter a new market should be choosy about what kind of dishes to put their secret sauce on. A lender in Indonesia which has learned how to evaluate credit risk in a specific market like agriculture might find an easier lane expanding to neighboring countries while staying in the agriculture sector, than if they expanded to oil & gas staying in Indonesia (all else equal). A company with a successful English-speaking chatbot might expand to other English-speaking countries (and those with a similar flavor of English) before thinking about developing support for another language, even if the other market opportunity is bigger.
When it’s time for a successful startup that relies on information advantages to expand to a new market, it’s tempting to pick the biggest market or a market with which they are most familiar. But in some cases, especially in competitive markets, it could make sense to give higher weight to markets where your assets can be leveraged.
This is part 2 of the series “How well does your competitive advantage travel?”
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