Focusing on a niche market rather than the broader market? A good idea?

We are a start up just building our website and are considering whether to focus on a niche market or to sell to the broader market.

Does anybody have any experience of being in a similar dilemma and what was the outcome of your decision?

Did you decide to target a specific niche? And if so, are you happy you did so?

My startup is planning on doing that, launching on in one U.S. state first and then growing from there, because our business needs to adhere to laws on a state level as do our customers, so it's a natural way to start focused. The functions are more tailored, and the marketing can be more targeted.

Facebook also started with an audience that was naturally constrained, Harvard students, and then grew following that pattern: Ivies, colleges, high schools...

StreetEasy did something similar in real estate, starting in New York City and nailed that first before expanding into other markets.

You might ask, Can I build general functions that are applicable to a large audience, but first serve a niche that is naturally constrained within that audience first, and does buy me anything in terms of more tailored service, more targeted marketing, or something else?

An answer to this greatly depends on your project.

But generaly speaking, I would say that most start-ups are building products for niche markets. There is just no place for a new Facebook or Google every week. And it is much more harder to create a product for everyone than creating something for a specific group of people.

Try to take a niche with enough people to make money. And be the first in your niche.

My background is in software architecture which means I'm good at building 'flexible' systems and it completely screwed me.

I've been trying for over 7 years to get my file auditing/DLP product any traction with little luck because I couldn't pick a niche. My marketing was broad based and since I didn't have a million dollar budget, it was pretty useless.

Even after we got some customers, they were from all over the place so I couldn't pin down one to focus on.

I suggest that you find an niche that has a real need and take it. Then after you're up and profitable, expand into another related niche (hopefully leveraging what you already have).

That's my experience.

HTH

Gene