Why investors and entrepreneurs should be careful entering the on-demand economy

When one investor makes some money on a venture, it’s safe to assume that many more will flock to a similar investment, if not the same one. Uber came on the scene as one of the first on-demand economy businesses and now there are hundreds of businesses in the gig economy, and investors are capitalizing on the trend.

However, this quick growth in one concentrated area may be at risk of being a part of the book and bust cycle.

The U.S. market is already highly saturated with on-demand startups that serve consumers in designated geographic markets and across the country. For example, TaskRabbit, Airbnb, Uber, and its main competitor Lyft are all examples of companies operating in the on-demand space. Many of these startups are already getting multi-million-dollar valuations, but the ship may have sailed for many investors and entrepreneurs to get involved.

It is never a good idea to jump in on the end of a business trend and usually does not pay off. To make the best investment as an investor or as an entrepreneur looking to enter a new market should focus on young, growing markets.

The best method is to focus on consumers’ needs and frustrations and go for business ideas that alleviate these issues and has recurring customers (for example, in the on-demand economy, people need rides and food several times a day, and these needs are repetitive).

This does not mean that you can apply any business model to the on-demand economy. Dry cleaning delivery and dog walking businesses satisfy recurring needs, as does getting your shoes shined. However, a shoe shine app probably won’t get you your next big business break.