What markets can be won with “just” $3M?

What would you do differently at your startup if you planned to raise “only” a few million dollars?

The jigsaw puzzle industry generates ~$700M annually. It’s a great business to own a piece of, but not so large that it would make sense to use traditional venture capital — $50-$100M over multiple rounds — to disrupt it. But what if you only planned to raise $3M — total?

I bring up the puzzle market because last week a $3.4M Kickstarter concluded for a reimagined jigsaw puzzle brand that features twee graphics and the promise of a “magical twist” when finished. Think of it as a DTC startup for die-cut diversions.

The project comes from the creator of Cards Against Humanity, the ribald board game which emanated from Kickstarter in 2012 with a $15,570 haul. It has since generated tens of millions in sales and often outpaces Monopoly/Clue/Catan in terms of retail shelf space.

The project’s success got me wondering if it would be possible to take over a ~$1B market with “just” a few million dollars of investment?

I looked up the market leader in puzzles — Ravensburger, which was founded in 1883. The company has ~$500M/year in revenue, but much of it comes from the sale of toy trains and kid’s books. They’ve seemingly taken their eye off of the puzzle prize.

They’re even unable to process online orders in the face of COVID-increased demand, likely due to a commitment to channel partners who provide the bulk of their revenue. Given CAH’s capital efficiency/brand strength, I wouldn’t be shocked to see it “solve” the puzzle market.

Ravensburger sold 21 million puzzles in 2019, and this Kickstarter had 62,284 backers, so there’s still a sizable gap to be closed. However, it’s worth thinking about how many other billion-ish dollar markets could be won with a few million bucks?

This approach isn’t limited to puzzles. ButcherBox is quietly one of the most successful ecommerce startups of the last 5 yrs and has become a major threat to 103-year-old Omaha Steaks — and has only ever raised $210K in funds, also via Kickstarter.

CarGurus became the #1 car shopping site on the internet with $4M in VC, while also earning a $3B market cap. There are literally dozens of other companies that got big with little to no capital — we compiled a list:

It’s an interesting thought experiment to ask what you would do differently if you planned to raise only $1M?

🧭 What product features would you prioritize?

♻️ Could your business model be more efficient?

🛒 How would you think differently about customer acquisition?

The natural question to ask is why you’d want to take less capital if more was on offer? Ownership is the key reason. Raising less money means you control the company and can’t have strategy foisted upon you, implicitly or explicitly, by your investors.

The other reason is that it can make you *fabulously* rich. It’s possible to make more money selling a lightly-funded company for $25M than a heavily-funded one for $300M.

Bootstrapping and blitzscaling are both viable approaches, but in-between those edges is an opportunity for a more organic, small-batch approach to VC. It takes a while to get a few million pieces lined-up, but when done, the whole can be greater than the sum of the parts.

Director of Content & Community Joe Flaherty recently shared this as a tweetstorm. We collected the tweets as a post for your convenience.

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