Case Study – HeatCheck Group | First Mover Disadvantage

HeatCheck group is a bootstrapped startup that is in the sports tech space. My goal with HeatCheck was to find the key opportunities in the college sports recruiting space to see if technology, specifically artificial intelligence, could be utilized in a meaningful way.

It became clear right away they there was some low hanging fruit as virtually nobody had entered the market leveraging tech in the recruiting process. It was a legacy space based on human relationships but had a serious scale problem: Too many athletes to really get a sense of talent and fit. AI was perfect for this as it handles large, fast moving, and disparate data very well in enabling human decisions.

The Fact That Nobody Is Doing This Always Worries Me

There are many signals that will let you know you shouldn’t enter a market: No clear need, over saturation, price sensitivity, lack of differentiation, or low margins. HeatCheck’s offer cleared all of the usual red flags. I’ve listed the core ones we use when doing market research.

But the one very few talk about when everything looks like a go yet nobody has entered the market with an offering yet? This can be a scary blue ocean as you venture into this unknown as you will discover why nobody has entered it along the way.

Here’s what we found along the journey.

Reason #1 – It is really difficult to build. For data products this is often the case when the data either doesn’t exist or needs to be gathered from sources spread out all over to build a meaningful dataset. For HeatCheck there isn’t a single source of good data for college or high school sports. It needed to be created. That makes what appears to be a red flag an opportunity. Just by creating the dataset a competitive advantage is garnered.

Reason #2 – The space is technologically illiterate. We found right away that those who worked in the space and built businesses simply didn’t even consider the fact that technology could enable what they do. Legacy companies in the sports recruiting space where doing nothing interesting with technology. First mover advantage is baked into this…green flag!

Reason #3 – A niche of niches. The sports recruiting economy is a niche with niches inside of it. Individuals and companies who work in the space generally focus on a single sport and still more focus on a single gender within that sport. So even if someone is technologically capable their market is just too small to afford the sunk cost to build anything meaningful.

This market study created one of the most unique opportunities I have seen in terms of a new market and a new product. HeatCheck is poised to hit $15 million in revenue 18 months after launch all with incredibly good margins and truly serving a need for prospective athletes. This a true rarity; building an incredibly healthy business that is really doing good things for customers.

So next time you see a market that is untouched; beware of the invisible red flags and hope, like with HeatCheck, they turn out to be green flags with their HeatCheck Recruiting product.

Oh and here’s that list I mentioned earlier.

1. No Clear Customer Need: If there is no evident problem that your product solves or if customers seem satisfied with current solutions, this is a significant red flag.
2. Over Saturation: If the market is already flooded with similar products and there is high competition, it might be challenging for a new entrant to gain market share.
3. Price Sensitivity: If consumers are not willing to pay a price that would make the business viable, it’s a sign that the product might not be suitable for the market.
4. Low Search Volume/Interest: If there is little to no online search volume or interest around the problem your product solves, it could indicate low demand.
5. Poor Feedback from Market Testing: Negative results from surveys, focus groups, or beta testing indicate that the market does not respond well to the product.
6. Regulatory or Legal Challenges: If there are significant barriers to entry due to regulations or potential legal issues, the market may not be suitable.
7. Unfavorable Trends: If market trends are moving away from your product type or industry, it can be a red flag.
8. High Customer Acquisition Cost: If the cost to acquire a customer is prohibitively high compared to the lifetime value of a customer, it can be a sign of market unsuitability.
9. Lack of Differentiation: If the product does not offer a unique value proposition compared to competitors, it may struggle in the market.
10. Low Margins: If the market dynamics force extremely low profit margins that make it hard to sustain the business, it’s a bad sign.
11. Negative Social Media Sentiment: High volumes of negative sentiment around a product type or industry on social media platforms may signal market rejection.
12. Slow Market Growth: A stagnating or shrinking market can be challenging for new products, especially if the product doesn’t have a clear competitive advantage.
13. Technology Adoption Barriers: If the market is resistant to adopting new technologies or innovations, a technologically advanced product might struggle.
14. Economic Downturns: Economic instability or downturn in a specific region or globally can result in reduced consumer spending and investment, impacting the viability of a product.
15. Changing Consumer Behavior: Rapid or significant changes in the way consumers behave can be a red flag if your product does not align with the new behavior patterns.