It’s 2011. You’re a New Yorker visiting San Francisco, and your friend tells you about this magic new app called “UberCab.” You press a button, and a driver shows up within minutes. Amazing! A few days later, you’re back in New York. You open the UberCab app and... it doesn’t work! You become the physical embodiment of take-my-money.jpeg. Why won’t they take your money??

The same pattern repeats itself over and over:

• Facebook started only at Harvard
• Airbnb started only in San Francisco
• Opendoor started only in Phoenix
• DoorDash started only in Palo Alto
• The Athletic started by only covering the Cubs

This strategy—solely focusing on serving the needs of one niche first before expanding to others—is a market wedge. And although it might seem simple (“gotta start somewhere!”) getting your market wedge right is anything but.

Although startups have been using market wedge strategies since the beginning of time, the term “wedge” was first made popular by Chris Dixon’s article “The ‘thin edge of the wedge’ strategy.” As a whole, wedges are under-theorized, underutilized, and yet are vital for startup founders to understand.

A wedge is a method for spending limited resources strategically. You pick one thing, do it well, then use that momentum to expand later. In our first post on wedges, we focus on “product wedges,” where you make your initial product as easy to adopt as possible—even to the point where you sacrifice profitability and defensibility. A good example is TikTok, which got its initial traction in part by allowing users to add music to videos and export them to share with their friends elsewhere (come for the tool), and later developed staying power by focusing on the “For You” page experience (stay for the network).

A market wedge, on the other hand, is basically the inverse of a product wedge. Instead of sacrificing power for growth, you sacrifice growth for power, and focus on a small niche within the larger market you’d eventually like to reach. By limiting who you aim to serve, you have a better chance of developing some power within that market early, like network effects, brand, economies of scale, etc.

For example, in order to get a local marketplace like Uber to work, it was critical that they launched in a constrained area to start. Imagine Uber had launched globally on day one: 99% of people would not have been able to successfully hail a ride. Picking a wedge is about making a promise you know you can actually deliver on. But that constrained start wasn’t the only benefit to Uber. It also allowed them to:

• Learn from early mistakes in a relatively easy-to-fix environment.
• Take the time they need to prepare for later expansion.
• Create a pool of drivers (this is vitally important, I’ll get into this later).
• Build up their brand and drum up investor interest.

Two years later, Uber had only expanded to five other markets: New York, Chicago, Paris, Toronto, and London. Two years after that, Uber was in over 100 cities well on its way to becoming the behemoth it is today.

Many companies like Uber have followed the market wedge strategy and have seen great success (we’ll go through 17 more in this article, but I’m sure you’ll be able to think of plenty others).  However, just as with the product wedge, the market wedge isn’t for everyone. It’s simply another tool in the toolkit for building momentum around your idea. We aim to help you understand how and why a market wedge works so you can use its principles as you grow.

The roadmap for this post is:

1. List the main types of market wedges (geography, topic, product category, community, demographic) with a few good examples for each—and some counter-examples.
2. Explain the key mechanics that make market wedges work.
3. Explore what makes a good initial niche to choose.

Ready? Let’s dive in!

The types of market wedges

1- Geographic

A geographic market wedge focuses on one physical area first, like a city, before expanding to other areas.

• Opendoor, a home-buying startup, launched in Phoenix in 2014, then expanded to Dallas in 2015, and now is available in 44 markets in the US. By concentrating their resources on just one market to start, Opendoor was able to more easily educate potential home sellers and build local brand power and economies of scale.
• Uber started in San Francisco, focusing on making the experience as seamless as possible for a group that was more likely to buy into their new idea. Once established in that market, they expanded to other cities like New York, Paris, and Toronto. They added cities steadily until they reached 100 total cities in 2014, four years after their initial limited launch.
• Doordash started in Palo Alto, delivering to Stanford students. This allowed them to work out the kinks in their process (they began as Palo Alto Delivery and took actual phone calls to place orders) and expanded once they had the funding and means to do so.
• Airbnb started in San Francisco and eventually expanded worldwide. This constrained start was critical, because it was difficult to get people to become hosts, and it took everything they had to make even one city have enough inventory to satisfy guests.

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