The High-Barrier Opportunity Filter
Choose defensible markets where sophistication meets an unmet customer need
- Difficulty
- Advanced
- Time to result
- ~months to results
- Steps
- 4
- Confidence
- 96%
Michael Cohan evaluates an industry on two linked dimensions: how difficult it is for unsophisticated competitors to enter and whether customers need a product, development, or advancement the operator can provide. Regulation and high setup costs can create a defensible field, but complexity is not sufficient by itself. The opportunity becomes attractive only when the entrant can overcome those barriers and solve a specific market need. Cohan applied this logic to title and escrow, where licensing and capital requirements limited entry while the industry still lacked serious technology. The filter therefore moves from market structure to customer need and then to operator capability. Its output is a defensible opportunity where difficulty protects a useful solution rather than difficulty becoming the entire thesis.
Origin
Cohan explains why the heavily regulated title industry attracted him after his earlier credit-reporting business was acquired.
Core principles
- 01Complex entry requirements can deter casual competitors
- 02A barrier alone does not create customer value
- 03The market must need a product or advancement you can provide
- 04Capability and unmet demand must exist together
How to run it
- 1
Map the entry barriers
Identify the capital, licensing, regulatory, and operational requirements that make entry difficult. Decide whether those requirements genuinely screen out casual competitors.
Pro tip Separate durable structural barriers from temporary inconvenience.
Watch out Difficulty does not automatically make a market valuable.
- 2
Find the unmet need
Look for a specific product, development, or advancement customers still need. State the gap in terms of a customer outcome rather than the industry's complexity.
Pro tip Cohan looked for technology and automation that the title industry lacked.
Watch out Do not treat regulation itself as customer demand.
- 3
Test operator fit
Assess whether your team has the sophistication, capital, and experience to cross the barriers and deliver the missing value. Include the ongoing cost of maintaining compliance, not only initial entry.
Pro tip Use prior operating capabilities that transfer into the new market.
Watch out Entering without the required capability turns defensibility into a liability.
- 4
Select the intersection
Proceed only where meaningful barriers, a real customer need, and your ability to serve it overlap. Reject opportunities that satisfy only one or two conditions.
Pro tip Define the first concrete improvement you can deliver before committing.
Watch out A protected market with no useful differentiation can still be a poor business.
In the wild
After exiting credit reporting, Cohan entered title services because the regulated industry had a complex and costly path to entry while lacking serious technology. He used his technology background, invested in licences state by state, and built Unisource's infrastructure rather than buying a national title company.
→ Unisource developed direct operations in approximately 43 or 44 states and a technology-led national platform.
Common mistakes
Confusing difficulty with demand
An expensive or regulated market is not attractive unless customers also need an improvement you can provide.
Ignoring maintenance costs
Licences and regulatory obligations become harder to maintain as well as obtain.
Entering without operator fit
The same barriers that deter competitors can overwhelm a team without relevant capital and capability.
Is it for you?
Best for
It is best for experienced operators evaluating regulated, capital-intensive, or technically demanding markets.
Not ideal for
It is not ideal for founders without the capital, licences, expertise, or patience needed to cross the identified barriers.
From the transcript
“we do like an industry that is regulated because uh there are some Industries out there that are anyone can come into and anyone can…”
“you have to be sophisticated to go into such a business”
“you want to get into a business business that has a need for a specific product or development or advancement that you can provide to…”
From the episode
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