What’s up, Startup Investor?

It’s Daymond again.

Today, I want to break down one of the biggest myths you’ll likely face in your journey as an angel investor: the myth of the crowded market. Hear me out.

Crowded markets, or saturated markets, exist when there’s a bunch of competition between companies producing similar products and services. It means that consumers have many options in the same space… And for some companies, that kind of competition can damage their sales, revenue, and growth.

But here’s what I think. No market is too crowded for the right startup.

It is completely possible for a company to disrupt a saturated market, and investors shouldn’t shy away from investing in a startup simply because it belongs to a crowded space. The tricky part is figuring out exactly what makes that company stand out from the crowd.

In other words, what does that startup do better than all the rest?

One of my favorite examples is the Snuggie. I’m sure you’ve heard of it, but if you haven’t, it’s essentially a blanket with two holes cut out for your arms.

It came out in 2008, and it was an immediate smash hit. That was during the Great Recession, one of the worst financial eras in the history of the country… yet the Snuggie made around $13.2 million between 2008 and 2009 alone.

Today, the Snuggie has raked in over $500 million in total sales. But if you’d looked me in the eye in 2008 and told me that the Snuggie would make hundreds of millions of dollars by 2021, I honestly wouldn’t have believed you.

There are plenty of similar products out on the market. The Snuggie wasn’t even the first sleeved blanket to hit the stage. But with the help of an infomercial, the Snuggie built a global brand and a loyal following that launched it straight to the big leagues.

I’ve seen this time and time again in my own career, and if you watch the show, I’m sure you have too. Every single season, I see entrepreneur after entrepreneur walk through the doors with what they believe is the next market-crushing product to take on the competition in their space.

Of course, that’s not true for every single product. Many startups just don’t have the kind of potential necessary to dominate a tough market.

But some do have that potential… And they all share similar characteristics, no matter how different their businesses are. Each and every successful startup I’ve seen has been smart, customer-obsessed, honest, and knowledgeable about their product and its market.

(You can catch my breakdown of the most important pitch questions here.)

They should be able to tell you exactly what sets them apart from the competition, what pain points their product solves, and why they have a better shot at success than anything else on the market.

At the end of the day, I don’t want you to see an amazing product or service and ditch it because it belongs to a crowded space. Instead, take your time to dig into exactly what makes that startup unique.

If that startup can answer each one of these questions well, then it just might have a shot at making its way to the very front of the crowd.

That’s all from me for today, but have a great weekend.

We’ll talk soon,

Daymond John