workshop market size

#avatechWiFi Pass: buildfuture

Market SizeCycle #1 – October 2014

• All actual and potential buyers of your product/service

• The need drives the definition of the market. (Car vs.

Horse)

• Be Specific:

– Consumer? (X2C) Demographic, Behavior, Geography, …

– Enterprise? (X2B) Industry, Size, Geography

Market?

• TAM (Total Available Market) ~ When you get 100% of

the market share (Pet Food / Mobile Apps / Elearning)

• SAM (Served Addressable Market) ~ Part of TAM

which receives your main VP. (Dog Food / Healthcare

Mobile Apps / Mobile Learning)

• Target Market ~ Where do you start? Demographic?

Geographic? (Puppy Food / Healthcare mobile App

for Elder Female / Mobile Learning for Engineers)

TAM, SAM, Target Market?

TAM, SAM, TARGET MARKET?Exercise 1

IRAN KHODRO

TAM, SAM, TARGET MARKET?Exercise 2

LINKEDIN

TAM, SAM, TARGET MARKET?Exercise 3

YOUR STARTUP

• Top-Down

– Research Report / Industry Report / From

Universe Cut down to TAM by key

assumption ($ spent eating food outside)

Example: 1B Chinese* – 70% eat outside daily**

- Average Meal Size *** => Estimated market

size!

Size Up: Top-Down

UNIVERSE

Filer 1

Filer n

Estimated TAM

• Bottom-Up

– The problem with Top-down: it includes different customer segment,

ignores variables (e.g operational constraint)

– Start with your numbers and do calculations (It is about your

product/traction)

Size Up: Bottom-Up

• Because you live once!

• To know business viability (go vs. no-go)

• Key Marketing Decision (Pricing, Marketing Tactic)

• Estimate level of required operation over time to serve the market

• Your investor cares about:

– Market Size

– Growth

– Potential Penetration

– Competition

Why Market Sizing

• Feel Lucky? Find the industry or market report

• Not? Build a model

• Run different scenarios

• Time Frames (Now? / in 5 years?)

• Start Projecting and keep updating

• Market Sales Potential

– Potential Buyers (B) * Quantity Sold (Q) * Price (P)

Quantify, Come up with number!

• Make it understandable and logical

• Investors look for big numbers (min +20B IRT in 5 years)

• Clarify Assumptions (Worse – Best Scenarios)

• Cite resources

• Use multiple ways

• TAM should be optimistic & based on reality

• It is not a science! It should be directionally correct!

Rules

SIZE UP THE MARKET SIZEExercise 4

YOUR STARTUP