Why enter into a crowded market?

I stumbled across this great post that explains how this VC tried to discourage an entrepreneur from starting a party planning portal/website - "been there, done that", being the reason. The entrepreneur ignored the advice and has created a hot little company called mypunchbowl.

I must confess that I have historically been a "big idea" addict - gravitating towards revolutionary new concepts, as opposed to evolutionary improvements. However, there are a hell of a lot of advantages for entering into existing product categories: 1. buyers have budgets 2. you can learn from the mistakes of the early entrants and do better 3. it is a lot easier to differentiate than to invent from scratch Here are a list of examples big and small:
  • Google is the easiest, most obvious example. Me and everyone else were using Yahoo! before Google came along with better, faster.
  • The Ladders is a great jobsite that uses a model that is the inverse of Monster, Careerbuilder and HotJobs. Candidates pay and job postings are free.
  • Webex OWNS the web presentation market, but that did not stop gotomeeting, who has built a nice business, with the 80/20 model (80% of the functionality for 20% of the price).
  • Why on earth would anyone want to enter the pizza market with Dominos', Pizza Hut and Little Caesars owning the market? Papa Johns did and has consistently gained market share over the past 10 years while the others have lost share.
blah blah blah . . there are so many examples, it is ridiculous. Don't hestiate from entering a crowded market because it's crowded. Just sort out how you will differentiate and take the business away from the other guys.

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