PS#042: Building 10x Market Maps (Part 1)
For those of you who have taken my class or been following me for some time, you know that I am big on creating and providing value.
Whether it’s in venture capital or some other industry, I think that you should do it first and often.
Do it enough times and you’ll get a reputation for being valuable.
For venture capital specifically, when you’re just starting out, there’s one major question…
How do you provide value?
It’s a great question.
One great way to start is by building market maps.
Over the next two issues, we’re going to talk not only about how to build a market map, but how to 10x your market maps and provide real value to your ecosystem.
What is a market map?
To keep it simple…
Market mapping is the process of organizing competitor products to visually illustrate a sector.
The purpose for doing so is to provide a better understanding of the market landscape and, ultimately, a clearer picture of potential investment opportunities.
With a well-built market map, an investor can get a better sense for the competitive landscape, market trends, product differentiation, business models, problem sets, customer dynamics, etc.
A process for building market maps.
Alright, now that we are aligned on the definition of a market map, how do we build it?
The good news is that market map building will fall directly in line with your venture funnel. It’s simply adding another step. After sourcing and evaluating companies, you’ll provide another layer of analysis on top of the categorization and organization.
OK, with that in mind, let’s get started…
1) Choose your medium(s) (i.e., notion, excel, word, google suite, miro, etc.).
It may sound a bit obvious, but hey, I’m here to provide the nitty gritty details.
The first step in all of this is trying to figure out how you’re going to track all of the data. If you’re doing this right, there will be a lot of data to track.
After building a lot of different market maps, I’ve come to the conclusion that all of them work, it’s just about finding the right one for you. The right “one” for you can even be a combination of multiple tools.
Right now, for my team, we are using a combination of google sheets, word, and miro. It allows us to quickly grab the information (i.e., google sheets, word, etc.) and then start visualizing it in miro (which is essentially an online whiteboard tool).
The most important thing is to make this process as frictionless as possible. You’ll see by the end of this that it’s all about collecting, categorizing, and synthesizing. If this process is a pain, you won’t want to do it in the future.
2) Categorize the companies at the top of the funnel (e.g., leads, first calls, etc.).
I discussed this in a bit more detail in PS#030: How to Build Your Leads Funnel, but as a quick refresher, we want to map out the different components (or value chain) of our target space/industry and categorize the companies according to that map.
When I think about building the “value chain” of a target space/industry, I’m focusing on the journey from problem to solution. I usually ask myself three questions…
What is the problem that needs to be solved?
How do these customers solve that problem?
Is there a better way to solve the problem?
This makes sure I think through the problem itself, the status quo for solving the problem, and what the ideal solution may look like in the future.
Once we have that visualized, we can start breaking down the specifics.
3) Analyze the companies (i.e., customers, product, GTM, business model, etc.).
This is where we start breaking down the data.
Through our sourcing efforts and first calls, we should have a decent understanding of the companies in this space/industry. We can use this more detailed information to start comparing and contrasting the types of solutions or the specific companies themselves.
More than anything else, this process is going to help us generate insights that are the true value of market mapping.
So how are we going to do this?
Great question, we should look at this from two perspectives: (1) how do the different approaches in the market compare, and (2) how do the specific companies compare?
For these two perspectives, we’ll use the following criteria…
Target customers
Product differentiation
Technological differentiation
Go-to-market (“GTM”) strategy
Business model (i.e., pricing, costs, etc.)
These 5 characteristics will give you a really good idea of how each solution/company is playing in the market. It will ultimately help you build an opinion on what will ultimately win, and therefore, where you would aim to invest.
4) Mapping and comparing.
By the end of the process, you’ll have an incredible wealth of information that will provide a basis for sharing value in this specific industry or space. We now need to turn this information into a product that is both useful and easily digestible.
For this step, you have a couple of options…
Visual market map (CB Insights Book of Market Maps)
Competitive matrix grid (G2 offers some good examples)
Direct company comparison across key characteristics
The last one is a bit more nuanced and can depend on the dynamics of a particular market or segment. The most effective versions will be built on the insights you believe are critical to the success of the business.
10x’ing your market map process.
Next week, we are going to discuss how to 10x this process.
I know this feels like a lot (and it often is if done all at once), but next week I’m going to give you a sustainable approach for building multiple market maps at a time with outputs for multiple audiences.
Stay tuned for more.
