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  • Chandler Malone

Market Sizing Before You Press Go

Building off of the last post "Finding the Sweet Spot for Your Idea", it is important that the problem you are solving is large enough to command venture funding. At the end of the day, venture capital is reserved for companies that can hit "home runs" and generate early stage investors 50x to 100x returns.


It is impossible to generate a return this large if your problem isn't massive and the easiest way to determine this before you get started is via quick market-sizing. Understanding your Total Addressable Market (TAM), Serviceable Addressable Market (SAM), and Serviceable Obtainable Market (SOM), is a simple way to quickly figure out how much potential your solution has.


TAM: This is the overall market demand for the problem that you are solving. If this number is under $1 billion, it would make sense to search for another larger problem.


SAM: This is how much of the market your solution serves. While the overall market problem you are solving may be vast, there are typically a number of sub-problems that need specific solutions outside of what you are able to offer.


SOM: This describes how much of the market you can realistically capture. There are competitors and incumbents who will already have market share. As a startup you will have production and customer acquisition scaling limitations.


Understanding the size of your market is important to take into account as you decide what problem you are setting out to solve and imperative before you begin putting money into your project.


Let me know what you think/shoot me any questions you might have at chandler@undergroundventures.info.





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