[luckyt]

Yeah, it's not clear how to estimate the market size or TAM of an idea even if there already is a market, like take random examples of a dog walking or podcasting app. You can easily find sources that claim the dog walking or podcast business are $1 billion dollar markets. But how does that translate to evaluating growth in a startup in this business, and how big can it realistically grow?

[jschveibinz]

There is an answer to this question, so I’ll give it a try in this context. Let’s assume “dog walking” as the example.

Assume the sales price of a dog walk is in the $25/session range, +/- $5 depending on location.

That walk has an underlying cost of labor and overhead. Assume 50-50 for each. That means the walker receives about $12.50 for the walk. The overhead pays for the transit time, the admin time (phone calls, scheduling, bookkeeping, insurance, etc.). It also includes marketing and sales.

For a local dog walker, the cost of marketing and sales is very low. It’s mostly done by word-of-mouth and referrals from good customers. So the salary is acceptable if they can get 2-3 walks in per hour.

Now, to scale this business from local to regional, some things have to change. More people are required. Training is required. And brand recognition is required.

The marketing costs must go up, the admin costs must go up, and ultimately the value to the customer must go up (to beat out the local provider), etc.

More customer value probably means a lower sales price (to compete).

And all of these extra costs doesn’t leave much of the pie left over for labor. So there is a lower labor salary-maybe only $5 per walk-which doesn’t attract very good talent.

In the end, you can see that it makes it extremely difficult to “scale up” a business like dog walking. It’s too labor intensive, the bar is too low for competitors, and it’s tough to create additional value for the customer.

You can do a similar analysis with other startup business ideas to test if there is really an opportunity for scale.

[luckyt]

Hmm, so is your conclusion that dog walking startups are not venture scale? But there are several dog walking startups that have received VC funding, and at least one that's IPO'ed. I agree with all your points that makes these types of gig economy businesses difficult to be profitable, but they similarly apply to many businesses like food delivery -- so this can't be right. (unless you believe none of these gig economy apps are successful, which some people argue, but is a bit of a stretch imo).