We have a dilemma.<p>We have come up with two product ideas in the last few months. We have done research on both markets and we have had great response to both ideas. Here is where things get tricky.<p>On one hand we have a product idea that definitely solves a problem for a small industry. We have spoken with 10 or so players in this industry and they would all be willing to pay for our software (they are hungry for a solution). This would be a very stable income producing product / company that could go on for years innovating in this industry but its growth potential would be somewhat capped. I can see it getting to 5+ million a year in revenue with 60% profit margins but then it becomes much more difficult to grow. Getting to 10 million would be a short term ceiling (Pending some other added revenue sources).<p>On the other we have an idea for a consumer product that has a huge market but a lot less predictability. Obviously the market is much bigger; but there are other players, the price points are much smaller, and there will be continuous competition because of potential for growth and future payouts.<p>What project do you think we should pursue?<p>Is it possible to get funding for a smaller market product?
>> On one hand we have a product idea that definitely solves a problem for a small industry. We have spoken with 10 or so players in this industry and they would all be willing to pay for our software (they are hungry for a solution). This would be a very stable income producing product / company that could go on for years innovating in this industry but its growth potential would be somewhat capped. I can see it getting to 5+ million a year in revenue with 60% profit margins but then it becomes much more difficult to grow. Getting to 10 million would be a short term ceiling (Pending some other added revenue sources).<p>I'd go with that one. Build the MVP(my rule of thumb is, if you cant get it out the door and into customers hands within 90days, move on) and charge them. You'll soon realize that your assumptions were right/wrong about that industry.<p>That being said, I'd always go for B2B rather than B2C.
One possibility for funding the small market app would be customer funding from the start: talk to some of the people you know in the industry and see if they would prepay (possibly in return for some sort of discount, or free until the product leaves beta) for a year's service or so.
If you earn >$1 million per year in profit with the niche product, would you regret not going for the hypothetical millions more you might have earned with the consumer product?<p>(Of course, the need to part with equity for external investment and lower margins might mean a successful consumer product company ends up returning less cash to the founders than a much smaller bootstrapped b2b company anyway)
Go with the smaller/safer one first and roll it out asap (2-6 months), then move on to the higher risk/reward venture. This approach will help you negotiate better terms with vc backers.
Otherwise, if you start out with the "bigger" venture first and fail, then it might be too late to go with the smaller venture idea since the void in the niche can be filled by someone else by that time...