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III. Market Analysis and Competition
Use this section to demonstrate to prospective investors that you've thoroughly researched the market you're serving. Discuss projected growth of the industry, the profile of the typical customer, technological, regulatory, and operational issues, and what the competition is doing now and may be likely to do in the future. In sum, you want to show your knowledge about the industry and give investors confidence that you really know what you're talking about. Solid research really counts in this section.

• Industry Analysis

This subsection should discuss the current state of your market and future growth prospects. It should also include analysis and descr iption of the dominant industry players and the typical customer.

Example:

iWidget's target market is the rapidly expanding online gaming industry and entrepreneurs seeking to set up gaming websites. Because of the advanced graphic cards and faster processors that are now installed in most new computers, online gaming is becoming one of the most popular hobbies among adults and teenagers. To capitalize on this opportunity, a growing number of entrepreneurs have been setting up web sites to provide online gaming services.

The typical iWidget customer is a highly Internet-savvy entrepreneur in his or her mid-twenties to early forties with roughly $20,000 to $100,000 to invest in a new online venture.

• Market Figures

Include numbers that would be important for your investors to know, such as the current size of the market and projected growth, number of customers, current and projected future market share, etc.

Example:

The online gaming industry is experiencing strong growth. The Interactive Digital Software Association estimates that the number of users of online gaming sites is growing 12 to 15 percent per month. In-Stat/MDR estimates that the total online gaming market will grow from just over $1 billion in 2003 to nearly $4 billion by the end of 2008.

• Competition

Discuss your competitors in terms of number, type of company, market share, size, reputation, and whether they're direct or indirect. Talk about how your product or service meets a need in the market that competitors do not serve. Discuss barriers to entry into this market.

Example:

There are currently no other companies designing and manufacturing desktop publishing software exclusively for the online gaming industry. BIG Software and other software makers have products that can be customized for the online gaming industry, but the software does not give their users the advanced technologies iWidget offers, technologies that allow gaming websites to run more efficiently and offer new games more quickly. Given the industry expertise and time needed for product development and testing (3 to 5 years), no competing products from BIG or other software makers are anticipated in the near or medium term.

 

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