If your pitch includes “And if you think of all the people who currently have a pet, that’s $80 GAZILLION DOLLARS of TAM,” you don’t even have to say “if we get only 1% of that we’re a unicorn,” before I start rolling my eyes. For me, at seed stage, there are so many more important questions about a market’s attractiveness than its current overestimated size. Such as your understanding of customers and their needs, is the market growing or shrinking, how urgent is the problem you’re solving to that market. Besides if it’s a non-incremental concept, we’re probably underestimating the market size anyway. Airbnb? Big difference if you sized their TAM as “hostels” vs “hospitality.” Uber? Yeah, not just limited to the spend on black cars. And so on.
On top of that it’s actually not the total size that gets me most excited, it’s the Addressability. How are you going to acquire your customers and what insights or unfair advantages do you have in doing so? I know SMBs are a large market but how are you going to efficiently sell into them? Yes there are lots of retail stores which could benefit from your commerce and loyalty program solution but where do the first 1,000 customers come from? You want to sell into hourly shift workers? Excellent, give me the plan to reach them (Even did, that’s why we invested).
So tip for seed founders, when you’re pitching investors focus on the A in TAM. It’ll help make your strategy more tangible, expose the depth of thought you have and differentiate you from the people who just claim a large market and wave their damn hands on the gap in-between some aggregated numbers and actually selling something people want.
Reblogged this on Entrepreneurship 102 and commented:
Sage advice from Hunter Walk.
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