The See Bear, Shoot Bear Test
This is one that applies to investors, entrepreneurs, and job seekers — it’s another tenet (like the One trick pony filter) that can help filter out most bad investments (of money, or time).
While I believe strongly that only monopolies win (whatever the micro-market they serve), there’s no simple way to identify one. In fact, monopolies might constantly try to hide the fact that they’re a monopoly (read this article for Peter Thiel’s examples on the topic).
Here’s a good, simple way to identify a potentially disruptive company:
Can the company identify all the customers of an incumbent player/competitor , and capture market surgically? In other words, can the company steal clients from competition easily in (at least) a segment of the market?
In simpler words, can they follow a “see bear, shoot bear” strategy?
If a company can ‘see a bear, shoot a bear’ consistently — even if it’s within in a small niche segment in a larger industry — there’s something in there to be interested about. However, this method is a filter, so: If a company can’t see a bear, shoot a bear, best stay away from investing time or money.
P.S: Recently got this wisdom from the COO of a fast-growing SaaS company here in San Francisco.
Originally published at www.srinivaskc.com.