How to Explain a Small Starting Market Without Making My Business Sound Small
A small starting market is easier to explain when you can show why those customers come first, what serving them could establish, and how that progress might support a larger business. Aka, we’re thrilled to tell you that you don’t need to pretend the audience is broader than it is. You do, however, need a reason to believe your ambition, and the audience you can reach, extends beyond the first group (and maybe a dash of honesty about what you haven’t yet learned).
At Coura, we spend a lot of time asking founders to narrow their audience. Generally, that involves:
- Choosing a specific customer.
- Understanding what happens in their day.
- Resisting the overwhelming temptation to build something for every person who has ever expressed mild annoyance at a spreadsheet.
The issue? Founders are terrified that if they put that focused customer description in a pitch deck, someone will say, “This sounds niche.”
Honestly, fair enough. We’ve asked you to make the business more specific, and specificity can make an ambitious company sound surprisingly modest. Now you’re wondering whether the problem is your explanation, your market, or the advice that got you here.
Those are different possibilities. Before broadening the slide (or commissioning features for three more industries), it’s worth finding out which one you’re dealing with.
Why are you starting with these customers?
“Because we were told to niche down” won’t carry you very far in an investor conversation, and tbh, even that framing shows you’re still hiding behind the recommendations of others. It won’t get you any points with investors, not to mention it’s a nonstarter for helping you decide what belongs on the roadmap.
The more useful explanation concerns why this group is a good place to build the business. Perhaps their problem is unusually costly, or your domain experience gives you a close understanding of it. You may have access to buyers who are otherwise difficult to reach, or a product capability this group values more than other customers do.
The Research on Niche Markets
Positioning consultant April Dunford recommends identifying the customers who care most about your differentiated value, then checking whether you can identify them, reach them, and sell to them. Adding demographic filters until the audience becomes tiny is a different exercise.
Paul Graham approaches the question through demand: who wants the product badly enough to use an imperfect version from a company they have never heard of? A small initial audience can be useful if strong enough need exists to give a founder something to work with while the product is still rough.
Clay co-founder Kareem Amin describes how uncomfortable narrowing can feel when a product has too many possible applications. Early Clay users included recruiters, salespeople, and engineers, whose needs pulled the company in disparate directions. When the team committed to outbound sales, it removed irrelevant features and messaging, so customer requests repeated and work done for one account became useful to another.
The takeaway here is you’re choosing customers whose shared needs let the company learn and improve in a coherent direction.
Imagine, as a fictional example, that you’re building software for independent med spas with multiple providers. “We serve med spas” gives us a category. A fuller explanation might be:
We’re starting with multi-provider med spas whose teams coordinate last-minute appointment changes across calls, texts, and separate calendars. We want to establish whether a shared schedule-change workflow can reduce missed updates without requiring them to replace their booking system.
The ambition for your product hasn’t disappeared, but you’ve finally made the first product question precise enough to investigate.
Can the starting market support the next stage?
A narrow customer description tells you precious little about the size of the revenue opportunity by itself. You’ll still need to know how many plausible buyers exist, what they could purchase, and whether you can even reach and serve them.
Michael Seibel’s YC guidance recommends bottom-up market sizing where you work from identifiable customers and potential spending rather than taking a large industry figure and assuming a percentage belongs to you.
For our fictional med-spa company, suppose there are 2,000 eligible organizations and the proposed annual price is $3,000. Those assumptions produce a $6 million annual opportunity at full penetration.
To be clear, you haven’t forecast $6 million in revenue.
You’ve described what the assumptions would imply if every eligible organization bought. The next questions concern how you arrived at the customer count, what supports the price, and how many accounts you could realistically acquire.
So what do you do?
Keep the addressable opportunity separate from your near-term sales plan. A founder who can identify 2,000 possible buyers may still struggle to reach the first 20. Another may have fewer buyers available but a credible route to larger contracts.
Toast’s original investment memo offers a useful example of this reasoning. In December 2015, Bessemer distinguished an estimated U.S. market of approximately 1 million restaurants and bars from an initial “sweet spot” of roughly 300,000–400,000 larger independents and mid-market chains. It also considered recurring revenue per location and the potential for additional products to increase that amount. These were historical investment estimates, not current market figures.
The memo examined customer references, churn, upselling, and pilots expanding into multiple locations alongside the arithmetic. The opportunity had to connect to how the business was actually behaving.
You may not have that evidence yet. That’s ok! An early estimate can still be useful if it exposes the assumptions you need to test before spending more.
What would make the business larger?
“We’ll expand later” leaves a lot hidden inside the word later.
Expansion might mean reaching more customers with the same need, in the same way it could mean solving additional problems for the customers you already serve. Larger deployments or a developing market have the potential to change the economics, which in turn call for different product and GTM decisions.
Selling more to the same customer group
Bessemer’s vertical-software research describes Veeva’s development from CRM for pharmaceutical sales representatives into additional life-sciences functions, including research and clinical operations through Vault. The company’s industry focus continued while its offering broadened.
For founders afraid growth requires leaving their niche, your current customer may have valuable problems beyond the one you’re solving first. So unclench your jaw. It’s going to be ok.
Those problems still need investigation. After all, a customer buying one product doesn’t mean they want you to build the next five.
Serving larger customers or deployments
Bessemer describes nCino’s move from smaller banks and credit unions toward larger banks and larger contracts. Toast’s investment memo shows another version of expansion: a restaurant trying the product at one location, then adopting it across several. Both offer ways to grow within an industry, though serving a larger customer can require considerably more work.
Naturally, this growth path has operational consequences. Larger buyers may require different product capabilities, implementation support, and sales processes. Bessemer cautions that moving upmarket can disrupt roadmaps and distract teams when those requirements are underestimated.
If you’re telling investors that you’ll serve larger organizations, be prepared to discuss what would have to change.
Moving into another customer market
For our fictional med-spa founder, an adjacent clinic category might look promising. Both groups manage appointments, but that similarity is only a starting observation.
- Who approves the purchase?
- What systems must the product work with?
- Does a missed schedule update create the same consequence?
- Would the next customer use the existing workflow, or need a substantially different product?
Clay’s Amin recounts rationalizing recruiters as “really just sales,” which allowed the company to drift toward another audience without fully confronting the differences. Our warning to you is that similar language can conceal different needs.
Before you call another customer group an adjacent market, ask whether they could buy and use the product you’re building now as it is currently being built. If they need different integrations, a new workflow, or months of hands-on setup, account for that work in your expansion plan.
Building for a market that is developing
Plaid offers another kind of story. Co-founder Zach Perret describes moving from unsuccessful consumer budgeting products to the bank-integration infrastructure behind them. An early Venmo engineer wanted to license the backend, and other companies followed, but some investors nevertheless questioned whether financial-services startups constituted a large enough market.
Plaid’s early thesis depended partly on that ecosystem becoming larger.
For a founder making a similar argument, “this market will grow” deserves supporting evidence. What behavior is changing? Who is already experiencing the need? What would delay the market’s development? Can your company make progress while it waits?
A forecast can be part of the ambition, but make sure it remains recognizable as a forecast.
Does the next market build on what you’ve learned?
Before adding an adjacent market to your deck, compare it with the one you serve today.
You don’t need every answer before discussing a possible future. You should be able to distinguish a plausible direction from an opportunity you have already established.
For the med-spa company, interviews with another clinic type might reveal a comparable coordination problem. That would justify further investigation. It would not yet justify treating every clinic as an addressable buyer—or adding their requested functionality to the current build.
A preliminary expansion hypothesis can stay off the delivery roadmap until you have a reason to commit resources to it.
What if the niche is the business?
This also absolutely deserves room in this conversation.
A focused product may become a worthwhile business without revealing the larger opportunity its founder originally imagined. Conversely, there may be more economic room within the original customer group than the founder expected.
In a December 2022 Indie Hackers discussion, a founder describing IWL Translate reported an eligible population of about 150 accounts. After examining financial scenarios and upsell and cross-sell opportunities, they chose to stay focused and reported a 150% increase in average customer spending over six months. That’s a self-reported result; it doesn’t establish profitability or how long the increase lasted.
Conductor founder Danny Nemer’s March 2026 Reddit account offers a different outcome. He reported reaching $25,000 in monthly recurring revenue from a specialized accounting integration product, while acknowledging that the related opportunities he originally hoped to uncover had not materialized. The business produced income, but had not fulfilled that larger aspiration.
Both accounts are worth considering. Neither gives you a formula.
Your assessment may lead you to revisit pricing, the offering, or the expansion hypothesis. It may also lead to a conversation about funding. Looker co-founder Lloyd Tabb describes waiting to raise until the team had enough evidence to believe it was building a venture business, observing that not every startup is one.
An investor’s return requirements and your definition of a successful company may differ. You don’t have to reshape the business around every investor’s preferences. Repeated, specific objections about the opportunity do deserve examination, especially if your plans depend on that kind of capital.
How to explain the starting market and the ambition together
By this point, the writing should be easier because you have something to say.
Dunford distinguishes current positioning from the company’s longer-term vision and the strategy connecting them. A customer needs to understand why the product is useful today. An investor also needs to understand the possible future business and the reasoning behind it.
Consider three explanations of our fictional company.
“We make scheduling software for med spas.”
That’s concise, but it leaves the problem and opportunity unexplained.
“We’re starting with med spas, then expanding to every appointment-based business.”
That’s broader, but it asks the listener to accept the expansion without a reason.
A more grounded early-stage explanation could be:
“We’re starting with multi-provider med spas that manage last-minute appointment changes across disconnected tools. Our initial goal is to establish whether a shared coordination workflow becomes part of their daily operations. We see a possible application in adjacent clinic categories, but still need to test whether their workflows and buying requirements are similar enough to support that expansion.”
This is an illustrative statement, not evidence that the opportunity exists. As the company learns, the explanation should change. Results from real use, purchasing decisions, and adjacent-market research can replace parts of the hypothesis.
To draft your own, work through these prompts:
- We’re starting with this customer because…
- Our evidence so far shows…
- The most plausible way the business becomes larger is…
- We think that path is worth investigating because…
- Before committing to it, we need to establish…
If the third sentence feels difficult, that’s information and feedback for you. You may need a better explanation of an existing strategy. You may need to investigate the strategy itself! A polished paragraph won’t tell you which.
At Coura, we help founders examine these connections across product strategy, GTM, and fundraising narrative. Sometimes the work sharpens the story. Sometimes it changes what the company plans to do next. The explanation should reflect those decisions rather than get ahead of them.
Frequently asked questions
Is a niche market too small for a startup?
It depends on the number of plausible buyers, what they will pay, the cost of reaching and serving them, and the founder’s goals. A specialized audience can support substantial revenue, particularly when the company can deliver additional value within that market. Some markets still have genuine economic limits.
How do I explain a niche market to investors?
Explain why the initial customer comes first, what evidence supports the opportunity, and how the company could become larger. Separate current results from the assumptions behind expansion. Bottom-up sizing can help make those assumptions visible.
Should I broaden my target audience before fundraising?
An investor’s objection is a reason to investigate, not automatically a reason to change the audience. Clay’s experience shows that narrowing can improve product coherence, while Bessemer’s research shows that broadening into larger customers can introduce substantial new requirements. Examine the specific objection before changing the build.
Can a startup grow without expanding into other industries?
Yes. Growth can come from additional products, larger deployments, or larger customers within the same industry. Veeva and nCino illustrate different versions of those paths, although their success does not establish which route will work for an early-stage company.