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Market Analysis - How to Do it Yourself

Legal/ tax and helpful subjects

Tips for a market analysis from an investor’s perspective

By André Jasch
8 minute read

Investment opportunities should always be assessed case by case. Each opportunity has its own unique characteristics – the equation consists of more than just a few variables. However, there are a few key questions that investors should always consider when analyzing investment opportunities. One of these includes looking at the market that the startup is active in. We will show you what to pay attention to in a market analysis and where you can quickly find the most important information.


A company’s founding starts with a business idea. The founders have an idea for a product or service that is new to the market in that form. They want to occupy a market niche that no one else is serving yet. But is this niche big enough to ensure a future for the company? Market analysis aims to answer this question.

Market analysis, an element of market research, is conducted by founders of a company before market launch. It serves to explain whether or not the target market offers enough potential to secure the company’s sustained existence. Furthermore, it is supposed to show the market’s potential for growth and profitability. All available data about the target market and a specific point in time are brought together in the market analysis.

The structure of a market analysis differs by company and time of market entry. The following points are generally a fixed part of market analysis: industry analysis (“How is the industry developing?”), competitive analysis (“What is the competition doing?”), target audience analysis (“Who is part of the core target group?”), and sales analysis (“How high is the sales potential?”).

Equity crowdfunding is one of the investment opportunities where a startup’s founders present their market analysis to potential investors. Not only should the information provided be backed by thorough research, it should also be easy to understand. After all, market analysis is an important factor for investors’ decision-making process. Next to the team and product, the market is one of the most important criteria on the Checklist for Investments in Startups.


A core element of market analysis is the so-called industry analysis. It should provide a brief overview of the way the industry in which the startup wants to operate has developed so far and the forecast of its future development. First, one determines the framework conditions of the market. The market should be defined clearly rather than being too broad.

The market size is given great importance, as it shows whether or not it is worth it for the company to enter the market. Next to market volume – the size of the market measured by total turnover – several factors that market participants cannot control can play a defining role for the market. This includes market entry barriers that make it difficult for new competitors to secure shares of the market.

One example would be the current state of the art in process engineering and its respective patent rights, as are the government market regulations. The founders may already foresee trends in technological development or planned legislative changes. Investors can independently enquire about a market’s framework conditions from industry associations and chambers of industry and commerce. These associations represent companies’ interests in politics and have extensive data about their sector at their disposal.

The forecast developments play an additional role to developments so far. This is called market dynamic. A good example is the market for software products that operate with artificial intelligence (AI). Currently, the market is rather small, especially because the technology is not fully developed yet. However, its market potential is huge since AI can be applied in nearly all areas of the economy. According to a recent McKinsey study, AI products will generate around USD 130 billion per year in ten years.

It is always difficult to estimate future trends; however, there are specialized service providers for these forecasts. The most known are business consulting firms like McKinsey and Roland Berger. The auditors at PricewaterhouseCoopers (pwc), Ernst & Young (EY), KPMG, and Deloitte are also expert market analysts. All of these companies have their own market research departments and regularly publish industry-specific studies.

These companies’ websites are a good starting point for investors who want to get an idea of the market. Beyond that, there are government authorities that can provide information for certain industries. One of these is the German Federal Statistical Office. Several private service providers, such as Statista, also specialize in statistical reports for market data. Furthermore, there are numerous market research institutes that have focused on market observation and usually offer their data against payment.


Competition is known to stimulate business. However, too much competition can stifle even the best business idea. Therefore, a competitive analysis should also be an important part of a market analysis, in addition to evaluating the industry. Founders should identify their main competitors and derive their market chances accordingly.

Startups often orient themselves along competitors in order to see what growth potential the market holds and what revenue (and later exit proceeds) can be generated. Beyond that, the founders should clearly outline how they will differentiate themselves from their competition. Some of these opportunities are the product’s unique selling proposition or unique features of the business model.

If the competitors are well-established companies, it is easy for investors to gather their own information. You may be able to view and draw conclusions from recent balance sheets in the German Federal Gazette (Bundesanzeiger) and various credit agencies like Creditreform. Are the startup's market forecasts realistic when considering the sales generated by its competition? Have competitors performed positively, making it possible to draw conclusions about the overall market potential?


The market should be large enough to have room for another competitor while still remaining attractive in the long-term. Therefore, an evaluation of sales also plays an important role. In it, the company outlines how it plans to generate revenue in this market. The company should develop a forecast of how sales could develop in the foreseeable future. Beyond that, investors should be able to recognize the distribution channels through which the startup intends to generate sales.

For a reliable comparison, investors should take a look at the competition here, too. What sales and revenue figures have competing companies achieved? What are the marketing and sales costs? Investors can find information for established companies in the public balance sheets of the Bundesanzeiger. Other sources are industry associations and relevant financial forums like Finanztreff, Wallstreet Online, and Godmode Trader, where industry experts can be consulted.


Sales targets can only be met when founders know their target audience. In a target audience analysis (also known as customer analysis), the startup should outline its core target audience and explain their selection process. The target audience alone should have the potential to generate the necessary turnover for the company. One should reasonably be able to anticipate growth in size and an increase in purchasing power in the near future.

The investor is interested in the target audience’s purchasing power and how it will develop in the upcoming years. Is the target audience large enough and is its purchasing power great enough to carry the targeted sales?  Here, too, it can be helpful to consider the competition in order to determine whether the target audience is too broad or narrow. Market research institutes and industry associations can provide additional information on the customer’s purchasing behavior.


Creating a market analysis: Strategy for Market Entry

Once the market is clearly defined, the competition and target audience are identified, and the targeted sales estimated, the last item remaining is the strategy for market entry. How do the founders want to establish themselves on the market? How do they intend to overcome barriers for market entry? Do they prefer organic growth and focus on their customers? Or do they challenge the competition head-on and heavily invest in marketing and sales initially in order to quickly secure market share?

In their market analysis, the founders should be able to outline and explain their strategy clearly and logically. Should investors have additional questions, they can pose these directly to the founding team during the financing round. In the discussion area, investors can ask any questions regarding the market analysis and generally receive quick and thorough replies.

Status as of 13.05.2024 14:45



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