Sam Altman discusses the common question investors ask about market size, arguing that it's more insightful to consider how a market will grow rather than its current size. He emphasizes that the best markets for startups are small today but are projected to grow significantly in the next decade. Altman highlights that successful startups often capture a significant share of a niche market early on, citing examples like Airbnb in the apartment market and Stripe in payment processing.
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00:00The question that investors usually ask is how big is your market?
00:03I think this is a terrible question.
00:04You would never ask a startup how big is your current revenue and make your investment decision
00:07based off of that.
00:08You'd want to know how it was going to grow.
00:09And the same thing for markets.
00:10The markets that are best for startups are markets that are small today and going to
00:14grow explosively over the next 10 years.
00:15And very few investors ask this question.
00:17But what we like are markets like that.
00:19And so we'd like to see a market that is maybe small today, but growing very quickly.
00:24The fourth thing that is not perfectly predictive, but pretty good is has the company already
00:29captured a significant part of some small market?
00:32So Airbnb by the end of YC had captured a significant amount of apartment, then pre-existing
00:38apartment renters in New York City.
00:39Stripe had captured nearly 100% of YC companies in their current batch already that wanted
00:44to process payments.
00:46We'd look for something like that, but you don't always see it.