How to Get Smart on a Market
Next to evaluating the founder, developing a market thesis is the most critical part of decision-making for an early-stage investor. But it’s not just investors. Business operators also rely on new market research to make core strategic decisions (e.g. if/when/how to enter an adjacent vertical).
At Vocap, we try to stay focused on our core sectors to benefit from an accumulating base of knowledge and network. Even so, work is always required to truly understand a particular corner of a given market as it relates to a prospective investment.
Think of the following as a toolkit, not a checklist, that I’ve developed over the years for quickly getting smart on a market. I hope it's helpful!
Draw the Lines
The first step in understanding any market is to clearly define its boundaries—where does it start and end? Begin by asking yourself some fundamental questions that will focus your research and help prevent scope creep:
Is this a new or existing product category?
Which geographies are most relevant?
What’s the size and composition of the relevant customer universe (industry verticals, demographics, etc.)?
Inside Work
I liken the initial desk work to parachuting into dark terrain and walking around with a flashlight. I usually begin with a few searches using good old-fashioned Google and throw notes and further reading onto a blank page before trying to make sense of it. After a few hours, I usually start to see recurring themes and key players.
Next, I might seek out certain sources more systematically:
Trade publications and industry associations
M&A banker reports and equity analyst reports
Company websites
Industry podcasts and YouTube videos
CEO interviews/keynotes
Interviews on Tegus and other platforms (paywall)
Product review sites like G2 or Capterra
Employee reviews of the key players (e.g., GlassDoor)
Reddit or Quora threads, especially if the market is more consumer or SMB-oriented
Data Analysis: Next, I might comb through certain datasets to start piecing together things like market size/spend, market share distribution, growth trends, industry sentiment, and more. Here’s a selection of (mostly free) data sources:
Macro data: Our World in Data, FRED, World Bank
Sentiment/awareness indicators: Google Trends (see what people are searching for), Subreddit Stats (spot emerging internet trends), Polymarket (check this prediction market for just about anything e.g. “will TikTok be banned in the US?”)
Other: ImportYeti (map a company's supply chain), Google Dataset Search (search this vast library of additional datasets).
Study the Competition: Dive deep into understanding the competition. What are their strengths? What’s the makeup and tenure of their leadership team? Examine their funding history and balance sheet composition. How quickly are they hiring? Look up video and written interviews with the CEO—what’s the core talk track (they all have one)? How has it changed over the last 2-5 years? What does it tell you about how/where the market opportunity has materialized?
Public Comparables: Consider public comps—where are they trading and why? When you’re short on direct comps, look at similar business models in other verticals or different business models in the same vertical.
Google Alerts and RSS Feeds: Set up alerts for key terms related to the market to receive real-time updates. Use RSS feeds to aggregate content from industry blogs, news sites, and trade publications.
Social Media and Blogs: Follow and engage with industry thought leaders on LinkedIn and Twitter. They often share up-to-date insights and trends. For longer-form content, check out forums like Medium and Substack.
Talent Movement: Track where talent is moving within the industry. Is there a dichotomy between the up-and-comers versus those in their twilight years? What does it tell you about where the market is moving in the next 5 years?
Outside Work
As Warren Buffett once said, “The really sensational ideas... have been heavily weighted toward the qualitative side.” The best way to gain qualitative insights is to get outside your office walls—both figuratively and literally. Once you’ve done enough inside work to have an educated conversation with industry insiders, it’s time to go talk to people.
Expert Interviews - the Usual Suspects: Reach out to your advisors, other investors (especially those with scars), M&A bankers, other vendors, operators at all levels (top, middle, frontline), beat reporters, trade show speakers and others. Quick tip: find the repeat speakers at the go-to industry conferences and reach out—they’re clearly well respected, and often flattered by thoughtful direct outreach. Try to parlay one conversation into another (i.e., "Who else might you suggest I talk to?"). Also, ask what they read, listen to, and who they respect in terms of thought leadership and competitive vendors. See note on third party interview services below.
Voice of Customer (VOC): Interview potential customers. What are their top priorities and pain points? See if they light up when you explain the concept. What are their objections or friction points? Better yet, call in a favor and ask them to take a demo or two and pose the hard questions.
Trade Shows: There’s no better bang for your buck than being a sponge at a big industry show for 48 hours. Ideally, you can arrange for one or two "sherpas" to guide you and make introductions. During diligence for our recent Yoursix investment, Mike Becker and I attended the ISC West conference in Vegas (essentially the super bowl of the physical security industry). We walked the floor for hours, talked to sales and product people of various vendors, held side meetings and listened to stage presentations and panels. Thankfully, we had a couple industry insiders showing us around and making intros, and they were more than generous with their time. We left the trip with a conviction level on our thesis we simply couldn't have gotten any other way.
Analysts (Gartner, Forrester, etc.): These analysts traffic in both the buyer and vendor side of a given category. They can provide a good read on the buyer concerns and the key players, especially the incumbents, but be careful not to overweight these conversations. Behind the curtain, they operate on a 'pay-to-play' basis, so the vendors who write the biggest checks get the most attention and promotion. This can also lead to some blindness to upcoming disruption.
A Note on Expert Interview Services: depending on budget, you might enlist a consulting group to conduct and synthesize a broad set of market interviews on your behalf. Price tag and insightfulness vary widely so proceed with caution when using third parties. I generally get higher fidelity with a DIY approach triangulating fewer but more in-depth, high-quality conversations. Emerging networks like Tegus offer a nice middle ground where you can curate and directly conduct relevant interviews at an economical rate.
Do the Work
These are simply tools in the toolkit—some will be more relevant than others depending on the situation. The creativity involved in finding unique insights is part of the fun! That said, there are no true shortcuts. My understanding has always been commensurate with the effort I put in, and in retrospect I never really knew which stone would reveal the greatest nugget before I turned it over. Do the work to earn an opinion. Good luck!
PS – what did I miss? What are some other great ways to find “signal” in your market research?