Why size matters, especially market size, for startups

Once we set our boundary conditions for the ideation process, we began looking for target markets in earnest.

One of the first areas we identified during our early brainstorming for our next startup was the music space. It seemed like space where a lot of artists and a lot of talent exists, and there is a perpetual pain point with exposure, growth and making money.

In our checklist, music ticked the “interest area” box, and it seemed like we could potentially build a “differentiated experience” too.

So we looked at the market size for music. Our hunch was that it was large, since everybody listens to music, right? Wrong!

The total music industry revenue in India is Rs 1,200 crore, which seems like a large market.

Dig a little deeper, and it gets smaller very fast. Bollywood accounts for 80 percent of the revenues, which is controlled by large record labels like Sony and T-Series. Devotional music takes up another major chunk.

So if we were thinking of a startup in the non-movie music scene, we were playing in 10 percent of the music market.

Picture credit: Cover of the single “No money in music” by Gelled Bangs.

Think of all rock, hip-hop, EDM, pop and other music in the country. Add all the live concerts, gigs and mega-events like NH7 Weekender. All of it adds up to Rs 120 crore.

Even if we captured 100 percent of this market, we would still be Rs 120 crore in revenues. To compare, that’s equal to Big Basket’s monthly revenue.

No wonder everyone in the music industry has a day job!

The music suddenly didn’t seem like a very attractive market to dive into. Realistically as a startup, we can expect to garner 5 percent of the market in the 7–8-year timeframe. So we would end up creating a Rs 6 crore company after all that effort!

Getting into a large serviceable market was key so that our startup would have space to grow. Which market did we pick? Stay tuned!

 

Ganesh Balakrishnan is an entrepreneur currently building a consumer brand in the footwear space. He founded two startups earlier – Momoe (mobile payments) and Windsleeve (retail tech). You can read his previous articles here.