The Trickle-Down Model: Is it Time to Go Mass Market First?
Many fast-growing companies in Silicon Valley have one thing in common: they cater to a small, affluent, urban population – the 1 percent. Residents in high-cost cities like San Francisco, New York, and Los Angeles can order an array of goods and services from their mobile phones.
These startups, including companies like Uber and Airbnb, have built their businesses by targeting the wealthy and privileged few who are willing to pay a premium for convenience and luxury. However, as the tech industry continues to evolve, it’s becoming increasingly clear that this approach may not be sustainable in the long term.
The Limitations of the Trickle-Down Model
While catering to the 1 percent can deliver revenue and high margins in the short term, it has several limitations. For one, it creates a narrow and exclusive market that is not representative of the broader population. It also ignores the needs and desires of the middle class, who are often priced out of these luxury services.
Moreover, relying on a small, affluent customer base can make it difficult to scale and achieve true growth. As companies expand their reach to new markets, they may find themselves unable to replicate the same level of success among more price-sensitive customers.
The Mass Market First Approach
In contrast, going mass market first can provide several benefits for startups looking to build a sustainable business model. By targeting the middle class and lower-income consumers, companies can tap into a much larger and more diverse customer base.
This approach also allows businesses to focus on providing essential services and products that are affordable and accessible to everyone. By doing so, they can create a loyal customer base that is willing to pay for value, rather than just luxury.
Examples of Mass Market First Successes
There are already several examples of startups that have successfully taken the mass market first approach. Companies like GrabTaxi in Southeast Asia and Didi Dache in China started with low-cost ride-hailing services that catered to the middle class, before expanding into luxury offerings.
Meituan, a daily deals site in China, also took this approach by offering affordable services to the mass market first. Similarly, Boxed, a US-based company that delivers low-cost "club store" shopping experiences, has found success by targeting price-conscious consumers.
Why Going Mass Market First is Not Just an Asian Phenomenon
While it’s perhaps more natural to build a mass-market startup in China and even India, it’s far from impossible in the US. In fact, many startups have successfully taken this approach without being based in these countries.
Companies like Boxed and Walmart’s Jet.com have shown that it’s possible to go mass market first in the US by focusing on affordability and accessibility. Moreover, with the rise of e-commerce and digital platforms, it’s easier than ever for startups to reach a global audience and build a loyal customer base across borders.
The Global Vision: Succeeding Beyond the 1 Percent
Founders who take the mass-market-first approach know that they must go global from day one. Catering to the 1 percent in San Francisco and New York may deliver revenue and high margins in the short term, but it’s not a sustainable strategy for building a billion-dollar company.
By focusing on serving the world’s middle class, startups can create lasting growth potential and build a truly global business that is not limited by geography or demographics.
Conclusion
As the tech industry continues to evolve, it’s clear that going mass market first is an increasingly attractive option for startups looking to build a sustainable business model. By targeting the middle class and lower-income consumers, companies can tap into a much larger and more diverse customer base, create lasting growth potential, and achieve true global success.
Hans Tung, Managing Partner at Notable Capital, is a seasoned investor with over 14 years of experience in fintech and related AI applications. With a background spanning Wall Street in New York, Silicon Valley startups, and eight years of investing in Asia before returning to Silicon Valley in 2013, Hans has partnered with top founders from everywhere in e-commerce and fintech where US is a key end-user market.
Hans’ consumer internet portfolio includes notable companies like Airbnb, Coinbase, Ibotta, Peloton, Poshmark, Quince, StockX, and TikTok. As a dedicated fintech and related AI applications investor, Hans has invested in over 14 fintech firms worldwide, including Affirm, Aven, Novo, ADDI, Clara, Rupeek, Slope, and Stori.
He and his team launched the Fintech Innovation 50 List with NASDAQ in early 2023, highlighting emerging leaders in fintech. Globally recognized, Hans has been on the Forbes Midas list for 12 years, consistently in the top 10 for five years, and is among the Top 100 Asian Americans by Gold House.
Hans earned a B.S. in Industrial Engineering from Stanford and his career spans Wall Street in New York, Silicon Valley startups, and eight years of investing in Asia before coming back to Silicon Valley in 2013 and joining Notable Capital.
Bio: Hans Tung is a Managing Partner at Notable Capital with over 14 years of experience in fintech and related AI applications. He has partnered with top founders from everywhere in e-commerce and fintech where US is a key end-user market.
Contact: For more information on Hans Tung, please visit his website or LinkedIn profile.
This article was written by [Author’s Name] and edited by [Editor’s Name].
