The Startup Velocity Question: Overestimating TAM

Accurate estimation of Total Available Market (TAM) is an essential component of a high velocity startup. 

I see a chronic overestimation of TAM in my work with startups.

First, bottom-up TAM is the ONLY kind of TAM analysis that matters to investors.

Top-down, 30,000 ft TAM is irrelevant.

The problem I see is that almost all entrepreneurs claim to be working on a business with a billion dollar TAM.

An acute lack of understanding of Ideal Customer Profile (ICP) and an inadequate Market Segmentation result in artificially bloated TAM.

Key Takeaways:

• Accurate TAM estimation is crucial for high-velocity startups.
• Many entrepreneurs chronically overestimate their TAM.
• Bottom-up TAM analysis is the only type that matters to investors.
• Top-down, high-level TAM estimates are generally irrelevant.
• Inadequate market segmentation results in artificially inflated TAM estimates.

My Question to You:

Can you credibly defend your bottom-up TAM model or are investors skeptical? If you think you need help, consider 1-on-1 Private Consulting with me. I will fix your TAM model in an hour. And I will derive your Funding and Exit strategies accordingly.

Photo Credit: Janine Bolon from Pixabay

This segment is a part in the series : The Startup Velocity Question