Unattractive or morbid business ideas, such as cemetery management software, often face less competition. This lack of saturation means entrepreneurs willing to enter these "grim" niches have a higher probability of financial success and market capture.
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Focusing only on trendy sectors leads to intense competition where the vast majority of startups fail. True opportunity lies in contrarian ideas that others overlook or dismiss, as these markets have fewer competitors.
Unsexy markets like plumbing or law have less competition, higher profit margins, and customers who are more receptive to expertise. This creates an environment for faster growth, akin to driving on an empty road.
Instead of popular but saturated local services, focus on high-value, overlooked niches. Examples include smart home automation, closet organization, and garage renovation. These markets often have fewer competitors and high-value customers, presenting a significant opportunity.
Ideas can be mapped on a 2x2 of "feels good/bad" vs. "is good/bad." While most focus on "feels good, is good," the "feels bad, is good" quadrant contains necessary but uncomfortable duties like national defense. These areas are often less crowded and hold significant value.
Don't overlook seemingly "boring" industries like cybersecurity or compliance. These sectors often have massive, non-negotiable budgets and fewer competitors than glamorous, consumer-facing markets. Solving complex, high-stakes problems for large companies is a direct path to significant revenue.
Figma's market initially seemed too small to attract major VC interest or intense competition, giving them space to build a defensible product. Founders can gain a significant advantage by working in overlooked spaces, provided they have genuine passion to sustain them for a decade or more.
Well-funded startups are pressured by investors to target large markets. This strategic constraint allows bootstrapped founders to outmaneuver them by focusing on and dominating a specific niche that is too small for the venture-backed competitor to justify.
YC Partner Harsh Taggar suggests a durable competitive moat for startups exists in niche, B2B verticals like auditing or insurance. The top engineering talent at large labs like OpenAI or Anthropic are unlikely to be passionate about building these specific applications, leaving the market open for focused startups.
Top compounders intentionally target and dominate small, slow-growing niche markets. These markets are unattractive to large private equity firms, allowing the compounder to build a durable competitive advantage and pricing power with little interference from deep-pocketed rivals.
Many founders fail not from a lack of market opportunity, but from trying to serve too many customer types with too many offerings. This creates overwhelming complexity in marketing, sales, and product. Picking a narrow niche simplifies operations and creates a clearer path to traction and profitability.