The US Market is Underappreciated

20 May

Unless you’ve lived or worked extensively outside the US, I think you don’t appreciate enough some of the major advantages that the US market provides businesses.  This is especially true for new businesses, whether in technology or other industries. 

One major advantage is size of markets, as the US has the 3rd largest population of any country in the world.  Choose any reasonably established market in the US and its large.  Online advertising, dog food, financial trading systems, etc.  This is perhaps obvious, but rarely recognized.  Most markets are large on both an aggregate dollar size basis as well as on a per capita basis (where relevant, eg for a consumer products business).  You don’t need to own half the market to build a big business.  In some industries in some countries, you will never build a big business.  The market isn’t there.  And yet you still see entrepreneurs starting businesses in those markets.  

One nuance on market size that people sometimes miss is that it’s not simply about a large population or aggregate market size, but also per capita.  In other words, you want individuals consumers to have a high ability to purchase your goods and services, and you want consumption power to be distributed.  India’s population is 4x the US’, but on a per capita basis the consumption power of a US consumer is many orders of magnitude larger.  Low per capita GDP really limits your addressable market and can complicate your go-to-market strategy.  For instance, in some countries your target population may be small but very spread out geographically, so you have to have a national presence to build scale whereas in the US may be able to build a big business in a single state.  

Also, while incredibly diverse, the US is homogenous in some important ways.  One is language.  You team, marketing materials, website, sales reps, etc. for the most part only need to speak English and in some business maybe Spanish as well.  Dealing with multiple languages doesn’t have to be a huge obstacle, but it creates additional friction.  Similarly, differing currencies and rules/regulations can generate friction.  

Finally, I think the average US consumer is pretty forward thinking when it comes to experimental consumption.  There are a lot of first adopters willing to try new goods and services.  

This is especially true and critical in technology.  One of the big challenges facing startups (especially tech startups) in less “developed” environments is the lack of early adopters, both in terms of consumers and enterprises   These startups are unable to test their products to make sure they have product-market fit.  This is one of the big reasons why startups and big trends often start in cities like San Francisco and NYC.  There are just more first adopters.  This effect is magnified when you think across countries.  

In the technology arena, you really see this in the enterprise space.  The spread of cheap smartphones and global platforms like Twitter and Facebook means that consumers around the world are getting more and more sophisticated when it comes to their personal technology usage.  I’m not sure that the same can be said of enterprises in many countries.  In Europe, small and large enterprises have been behind the US in adopting new technologies (e.g., SaaS, cloud delivery, etc.)  Take a more difficult market like India and it’s worse.  

Some of the above helps explain the US’ success in leading the world in new technology formation.  But it certainly isn’t the whole story.  Will save that for another post.  

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