Tim DraperFounder and Managing Partne, Draper Associate · I back the ideas that look crazy first

Napster Founder Shawn Fanning: Why Market Size Decides a Startup's Success | Draper University

29 Jan 2015 · 2 min

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2:27

In this solo presentation at Draper University, Shawn Fanning discusses how entrepreneurs should choose the problem they solve, emphasizing that the most critical factor for building a large, scalable business is selecting a big market. He frames the decision as a choice among three pillars—team, product, and market—and argues that while a strong team and a great product are essential, they cannot overcome the ceiling imposed by a small market. Fanning critiques a simplistic interpretation of Lean Startup principles, warning that focusing solely on rapid iteration can lead to "startup purgatory," a state where a company is operational but fails to achieve the envisioned growth. He illustrates this with his own experience at SnoCap, a digital music startup that fell into purgatory despite investment and a talented team. The talk concludes with practical advice: prioritize markets with vast opportunity to avoid stagnation and unlock greater experimental and growth potential.

Chapters

One of the things I like to start out with thinking about starts with kind of how you choose the company that you build or kind of how do you choose the problem to solve. It's— you can look at it as something problem selection, market selection, whatever. And so I've asked my cousin this, sort of if you were to choose between the 3, what would you say the most important piece of the puzzle would be between the people on the team, the product you build, or the market that you choose, what's the most important part to building a successful large business? So the people are obviously important, having a great team, the product you design is ultimately what people are going to touch and use, and the market is going to dictate a lot about the scale of the business. And so I've actually kind of presented that to some of the entrepreneurs I worked with and got a variety of different answers, all of which were inspired from a number of different reasons. But the thing that matters the most in that case, and I've learned this firsthand, is picking a big market. And the reason is that if you pick a niche market, if you pick a small area, that's the upper cap on the potential for your business. So you guys have probably heard people talk about Lean Startup and failing fast, wanting to have theories, test them, and fail as quickly as possible, move on to the next thing. The worst thing in the world as an entrepreneur that I've experienced is something we kind of call startup purgatory. It's where your business is kind of operating, you've got existing commitments, you've got employees, you've got something that's running and operating but isn't quite what you had hoped it would be. And so I've been there, my second startup, something called SnoCap, it was a digital music company and it was a company that basically found itself in that state, this sort of purgatory where you've got friends you're working with, you've taken investment, but you've kind of lost the sense that it would become that great big success that you had hoped. So one of the best ways to figure that out or to ensure that that doesn't happen is picking a really big market, an area where there is a huge opportunity to explore, potential business opportunities and experiment. And if you are successful, there's a wealth of opportunity there.