Right-to-Win Adjacency Filter
Enter adjacent markets only when you hold an edge and can scale quickly
- Difficulty
- Moderate
- Time to result
- ~weeks to results
- Steps
- 6
- Confidence
- 98%
Carta evaluates expansion with two criteria. First, the company must have a right to win: an asset, capability, record, relationship, or structural advantage that competitors cannot easily reproduce. Second, it must be able to win quickly, usually through an aggressive acquisition model that becomes stronger as more customers join. The filter rejects markets that merely look adjacent and can reveal opportunities that appear unrelated by industry classification. Carta's cap-table data created an advantage in 409A valuations, fund administration, and compensation benchmarking even though those services historically belonged to different industries. The framework therefore shifts analysis away from superficial category proximity and toward transferable advantage, customer impact, speed, and flywheel dynamics.
Origin
Henry Ward described this as Carta's strict framework for selecting expansion markets after the company grew beyond cap-table management.
Core principles
- 01Visual adjacency matters less than a transferable competitive edge
- 02A market can be attractive yet unsuitable for a growth company
- 03Fast acquisition requires a reinforcing growth mechanism
- 04Existing data, workflows, or relationships can create non-obvious adjacencies
How to run it
- 1
Define the candidate market
Specify the customers, problem, incumbent alternatives, economic value, and market boundaries. Avoid treating a vague product category as a market.
Pro tip Describe the first reachable customer cohort separately from the eventual total market.
- 2
Establish the right to win
Name the existing asset or capability that lets the company perform meaningfully better than competitors. Explain why the advantage is difficult to copy.
Pro tip Look for proprietary workflow position, trusted records, distribution, or connected systems.
Watch out Brand confidence or executive enthusiasm is not a right to win.
- 3
Validate customer impact
Test whether the claimed advantage creates a result customers value, such as lower cost, greater speed, better accuracy, or reduced risk. Seek evidence before scaling investment.
Pro tip Compare the proposed offering against the actual incumbent workflow.
- 4
Test speed to victory
Estimate the time and resources required to reach meaningful share or strategic relevance. Reject markets whose sales, regulation, or switching dynamics conflict with the company's growth requirements.
Pro tip Model a conservative case rather than assuming immediate cross-selling.
Watch out A market can be winnable in theory but too slow for the company's mandate.
- 5
Find the acquisition flywheel
Show how each additional customer makes subsequent acquisition easier, cheaper, or more valuable. Identify the mechanism rather than merely labeling growth a flywheel.
Pro tip Track the metric through which adoption reinforces adoption.
- 6
Make the binary decision
Proceed only when both the right-to-win and win-quickly tests pass. Record why rejected adjacencies failed so they can be reassessed if conditions change.
Pro tip Require explicit evidence for both criteria in investment proposals.
Watch out Do not average the criteria together; a strong score on one does not compensate for failure on the other.
In the wild
Cap-table management and valuation services appeared to be separate industries. Carta recognized that possessing the cap table allowed it to perform valuations faster, more cheaply, and more intelligently than providers working without that integrated record.
→ A non-obvious adjacency passed the right-to-win test and became a viable expansion.
A cap-table platform considers entering general payroll because the buyer overlap looks attractive. It finds no unique data advantage, faces entrenched competitors, and cannot identify a reinforcing acquisition mechanism, so it declines the market.
→ The filter prevents an expensive expansion based only on superficial adjacency.
Common mistakes
Following category labels
Products in neighboring industry categories may share customers while offering no transferable competitive advantage.
Ignoring time to win
A market may eventually be conquerable but still be incompatible with the company's growth horizon and capital requirements.
Naming a flywheel without a mechanism
A forecast of rapid growth is not a flywheel unless each customer causally improves future acquisition or value.
Is it for you?
Best for
It is best for established software companies evaluating product, customer, or industry expansion opportunities.
Not ideal for
It is not ideal for patient capital strategies where deliberately slow market development is acceptable.
From the transcript
“We have a really strict framework on it”
“So one is do we have a right to win?”
“And second is can we win that market quickly?”
From the episode
Carta CEO Henry Ward on Private Credit & Private Markets
Henry Ward