It is also important to understand the candidate industry life cycle. And when we look at the life cycle, we'll look at it in the context of the state of the industry. And its impact on your success as an entrepreneur.
When we explore the industry, we talk about the industry conditions of the and specifically the factors of knowledge and demand.
Now we'll turn to the state of the industry, and think about life-cycle impact and structure.
This gives us some ideas about the rules for that industry, as well as some of the obstacles we might encounter.
Within the Opportunity Analysis panel, this will introduce our discussion of the 5th component of the State of the Industry.
What is the life cycle stage of your industry?
It is similar to what you would expect. It is the stage of industry development. And the lifecycle will affect your success because it affects the way existing and new competitors will behave and react to your entry.
It comes in several categories:
1. The first stage is Research and Development You may have a limited monopoly if you are an early participant.
2. The second stage is growth, you start to launch your product in the market, other competitors enter the market as well.
3. The third stage is maturity, you have reached the peak of competition. And you yourself may experience somewhat lower production, and somewhat lower returns than you would have, when you were in that stage of growth.
4. The fourth stage is the decline, where there are simply too many options for the market.
There are too many competitors for everyone to survive, and you see some disappear from the opportunity.
Now you may divide the other elements when looking at the life cycle into young, middle-aged and old as well.
The curve is very similar. And we want, as startups realize, there's tremendous value in being on top of that curve. This does not mean that if you are not the first participant there will be no chance.
But I would argue that if there are 10, 20, 30 other companies that are already in the market, they might be trying to do the same thing that you're trying to do, and especially if they're trying to make it the same way, it might not be the product opportunity, which I would at least pursue.
So let's look at this. You are familiar with Hollywood, you may be familiar with Bollywood, you may or may not be familiar with Nollywood.
So we'll take a look at this and the element we're addressing here is the realization that as industries are born and mature and decline, there may be an opportunity for that industry to re-emerge in other geographies.
The impact of the industry lifecycle on the cost of entry and the rules of competition
This is the case we will talk about here. So, one of our main points here, is that the life cycle affects the cost of entry, the rules of competition within the industry.
Depending on maturity, if you're early on, this can be affordable, and it can be relatively easy financially.
It is more cost-effective for entrepreneurs to enter and compete successfully, if they are beginners in the industry.
Conversely, if it is a middle or late stage industry, it may already be under the control of large and well-established competitors.
They may have economies of scale already established. They may have branding, partnerships, and distribution already built in.
A startup in that environment can be very expensive, very complex, and potentially not very profitable. So we want to prefer being an early participant, and to share the benefits of being at the front of that life cycle.
What that means in context, when you look at a few Nollywood metrics, is that the estimated annual revenue of the Nigerian film industry is $590 million.
There are more investment mechanisms and lending mechanisms that are funded by the government to try to increase and develop it.
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| Estimated annual revenue of the Nigerian film industry |
We see that there are 50 films produced in Nigeria per week, and the average cost of these films is between 25 and 70 thousand dollars.
In contrast, the best movie in Hollywood, 250 million. The average Hollywood movie might be around 50 million.
So you're still comparing thousands to millions when you look at the relative cost of getting in and operating in these different areas.
And the opportunity of online distribution, may also bring in a very attractive audience. So production in a country in no way limits its market and customer base in that country.
I want to take a different look at another company, a company called FiscalNote.
So, FiscalNote uses a proprietary database it has developed, of advanced predictive legislation and analytics, to sell to businesses and organizations, to research, discover, and forecast state and federal legislation.
This allows them to monitor trends in different industries or situations in which those companies or organizations are interested.
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| FiscalNote Database |
It takes advantage of machine learning algorithms developed by FiscalNote (Wikipedia) to discover new developments relevant to your company or organization, as well as to anticipate what might happen, and what it means to you.
So when you think about the life cycle, one way to think about it is how many companies are out there, doing the same thing? How many companies out there are using some big data, machine learning, and analytics? For me, not many.
What allows them to do that, being at the front, is building a strong team. Other than the three co-founders, including chief technology officer Jonathan Chen, they were able to build a very strong advisory team.
An advisory team from some companies such as Elsevier and LegalZoom. An advisory team of federal expertise. People who worked in the White House.
Persons who worked in the Ministry of Foreign Affairs. People who understood the market they were seeking, and had connections to help facilitate that.
They also managed to secure some prominent investors. Mark Cuban, and Jerry Yang, co-founder of Yahoo, as well as venture capital.
So as students, as full-time students in the fall of their last year, they were able to raise 1.2 million in project funding from NEA and seed capital.
That way, by being new, by being at the forefront of the industry lifecycle.
They were able to attract and bring in talent and funding that if they were the 10th company, or the 20th company to do it two or three years from now, they might not have been able to get the consultants or get the funding, that they had access to as early participants.
New projects offer the best performance in emerging industries
So what we're seeing there is that new ventures are doing better, in emerging industries there's a lot less competition, by definition.
And the company, competition is often small, giving a more level playing field to new entrants.
It also gives you somewhat a common learning curve, when everyone is new, there are no old competitors.
There are no known leaders, and no decades of experience. There are no exclusive partnerships and agreements already in place.
No distribution channels are already locked. It is a fairly open playing field, with which you can compete and compete on a fairly equal footing.
Summary
When we think about the life cycle, it affects the competitive environment of the enterprise, and your overall success in a significant way.
Young industries offer multiple advantages to new entrants. And while it's unknown, while you have to give a lot of consideration to what might happen, and how to establish it, there isn't much precedent for what will work.
I will argue that although this is the challenge, there is still more of the ultimate upside to getting into and participating in the emerging industry. and industries that are very early in these life cycles.