How should investors assess the size of a startup's market?

Martín Escobari · Nov 11, 2022

Assessing market size means simulating how the market, team and moat could dynamically expand, not just measuring today's addressable market

General Atlantic passed on Uber at a $2B valuation because premium black-car was a ~$2B market, and then Uber redefined itself with UberX and Uber Eats; great managers redefine their markets, so static TAM analysis misses winners

Scope: requires a leap of faith; some situations make such expansion easier than others

12:00 20VC: Why Market Size is Everything | Three Signs of a Bull Market and How To Remain Disciplined | Why Investing is a Young Person's Game | The Secret to Negotiation | Missing a $200M Opportunity in Nubank and more with Martín Escobari, Co-President @ Ge

Jeff Jordan · Jan 16, 2023

a16z strives not to base investment decisions on current market size, because many of the best businesses created entirely new markets

eBay's original plan targeted only collectibles and Benchmark underwrote a collectibles marketplace; the market it ultimately created was far larger than anything measurable at the time

Scope: firm-level aspiration

21:41 20VC: a16z's Jeff Jordan on The Ultimate Guide to Investing in Marketplaces, Two Core Features to Look for in All Marketplace Investments, Why Fragmented Supply is so Important & Lessons from Airbnb, Pinterest and Instacart on What Makes the Best Cohorts

Phin Barnes · Oct 2, 2023

Defining a startup's market narrowly makes investors miss the biggest outcomes — reasoning through why the black-car market isn't worth owning means missing that Travis would invent UberX

Uber wasn't really about black cars and Notion wasn't a note-taking tool; if you convince yourself it's a note-taking tool you pass because Evernote wasn't great, when the real question is whether the founder can earn the first dollars and build from there

36:15 20VC: The Services Model of Venture Capital is Broken, The Best Founders Do Need Help, The Most Important Signals to Assess When Meeting Founders & Why Kids Bring Less Happiness and More Joy with Phin Barnes @ TheGP

Pat Grady · Jul 8, 2024

Sequoia does not need clear line of sight to $10B or $100B outcomes to invest; it needs line of sight to good returns with an exceptional founder, and the founder is the tiebreaker when the market is unclear

The best founders surprise you by finding more TAM than you could see at the time of investment

54:37 20VC: The Sequoia Investment Process | Investing Lessons from Doug Leone, Roelof Botha & Alfred Lin | Sequoia's Framework for Analysing Founders | The True Benefit of Having Sequoia on a Cap Table & Sequoia's Biggest Threat with Pat Grady

Nick Chirls · Sep 6, 2024

TAM analysis would have rejected the best early-stage investments — Bison Trails' entire global market was a couple hundred thousand dollars at investment and $30M of revenue eighteen months later

Tezos proved proof of stake was far more efficient than proof of work, and within eighteen months 40-50 blockchains launched or converted to proof of stake, creating the market from nothing

Scope: he also credits luck

35:24 20VC: Why VC is a Ponzi Scheme Today | Why Most VCs are Bankers | Why Big VCs Ruin Startups | Why Incentives in VC are Broken | Why American Dynamism is a Tool for VCs to Raise Money with Nick Chirls, Asylum Ventures

David Schneider · Sep 11, 2024

Gartner's sizing of the ITSM market at a capped $1BN with no growth potential for ServiceNow was badly wrong

That business is now much, much bigger than a billion, and ServiceNow is worth $170BN today

24:08 20VC: Scaling ServiceNow to $5BN in ARR | Leadership Lessons from Doug Leone, Frank Slootman and Bill McDermott | VC Value Add: Is it Real and Why the Worst VCs are "Seagull VCs"

Shardul Shah · Sep 16, 2024

TAM analysis is a trap; market size estimates systematically understate what great companies become

Looking back at the S-1s of the biggest public companies today, their market caps exceed what people thought the total TAM was, because the best founders find and expand market opportunities

0:00 20VC: Index's Shardul Shah on Why Market Size is a Trap | Biggest Lessons on Pricing from Leading Rounds in Wiz & Datadog | Why Benchmarks & Averages in VC are BS | How Index Makes Decisions and Why Growth & Early are the Same Investing Style

Shardul Shah · Sep 16, 2024

The investable landscape is genuinely shifting: AI is both a tailwind for existing markets and an enabler of entirely new ones

Observed shifts in deal mix, including healthcare being ~25% of New York Series As versus a different mix in San Francisco, prompting Index to redouble its healthcare practice

44:58 20VC: Index's Shardul Shah on Why Market Size is a Trap | Biggest Lessons on Pricing from Leading Rounds in Wiz & Datadog | Why Benchmarks & Averages in VC are BS | How Index Makes Decisions and Why Growth & Early are the Same Investing Style

Eric Vishria · Sep 25, 2024

The famous academic taxi-market TAM analysis of early Uber was wrong because it measured the existing market rather than the market smartphones plus instant, cheap, low-friction rides would create

Once everyone has a smartphone and can request a ride instantly with shorter waits, easy payment and less cumbersome communication, demand expands beyond taxis

17:38 20VC: Benchmark's Eric Vishria on Where is the Value in AI: Chips, Models or Apps | Why Nvidia Will Not Be The Only Game in Town | The Commoditisation of Foundation Models | Which AI Apps Have Sustaining Value vs Hype and Short Term Revenue

Harry Stebbings · Aug 18, 2025

Framing Lovable as a website builder is the wrong analogy for sizing it; like Uber, its total addressable market expansion is unforeseeable — and that incomprehensibility is a common trait of the best venture investments ever made

The best venture outcomes come from markets whose expansion could not have been foreseen from the incumbent category

24:44 20VC: Lovable CEO Anton Osika on $120M in ARR in 7 Months | The Honest Truth About Defensibility and Unit Economics for AI Startups | The State of Foundation Models: Long Grok, Short OpenAI, Why | Replit vs Lovable vs Bolt: What Happens

Byron Deeter · Aug 25, 2025

Underestimating TAM in vertical SaaS caused Bessemer to invest with weak knees and leave large amounts of money on the table

They didn't yet see the payments expansion unlock, so they doubted Procore and ServiceTitan could be $50B businesses and let other investors take downstream ownership, unlike Twilio and Shopify where they held ~28% at IPO

Scope: they still remained large shareholders

48:28 20VC: Do Margins Matter in AI? | Is Defensibility Gone For Good? | Is Vertical SaaS Dead in a World of AI | What SaaS Rules Are BS and No Longer Apply in a World of AI | The Future of Venture: Why Chanel vs Walmart is BS with Byron Deeter

Harry Stebbings · Aug 25, 2025

Misestimating market size is the single greatest reason great investments are not made, and systematic underestimation is highly detrimental to investment decision quality

49:38 20VC: Do Margins Matter in AI? | Is Defensibility Gone For Good? | Is Vertical SaaS Dead in a World of AI | What SaaS Rules Are BS and No Longer Apply in a World of AI | The Future of Venture: Why Chanel vs Walmart is BS with Byron Deeter

Byron Deeter · Aug 25, 2025

TAM analysis fails for transformative early-stage companies, since a TAM analysis of Facebook as Harvard hot-or-not would have looked tiny

The starting market of a category-defining company bears no relation to its eventual size

51:23 20VC: Do Margins Matter in AI? | Is Defensibility Gone For Good? | Is Vertical SaaS Dead in a World of AI | What SaaS Rules Are BS and No Longer Apply in a World of AI | The Future of Venture: Why Chanel vs Walmart is BS with Byron Deeter

Harry Stebbings · Aug 25, 2025

The unwavering lesson is that truly great founders always find the second act that unlocks a business nobody underwrote

Toast's payments business created value that was never there before, and payments became ~28% of Shopify at IPO

53:38 20VC: Do Margins Matter in AI? | Is Defensibility Gone For Good? | Is Vertical SaaS Dead in a World of AI | What SaaS Rules Are BS and No Longer Apply in a World of AI | The Future of Venture: Why Chanel vs Walmart is BS with Byron Deeter

Des Traynor · Jul 18, 2022

Formal market sizing analysis isn't worth doing at the seed stage; instead assess what problem is solved, how many people have it, and how big a problem it is for them

Founders arrive with crazy projections and Gartner estimates that tell you nothing; a big problem is one that happens often and matters a lot, which is a proxy for people spending money on it

Scope: from the perspective of small seed-stage checks; he only needs roughly a billion of total revenue spend in the market for a seed check to work

10:24 20VC: Why Being First Does Not Matter, Why Defensibility on Day 1 Does Not Exist, Three Core Elements To Move into Enterprise Effectively and What Makes Truly Great Product Marketing Today with Des Traynor, Co-Founder @ Intercom

Wesley Chan · Aug 22, 2022

The best companies are ones where the founder says there is no Gartner report or McKinsey market sizing estimate because they are creating the market

0:00 20VC: Why Market Always Wins Over the Founder & Why I Do Not Do Market Sizing | Why it is not the Best Time to be Investing but it is the Best Time to Have a Fund & The Type of Deals to do Today | Why The Best Founders Have 100 Year Plans with Wes Chan, C

Wesley Chan · Aug 22, 2022

He does not do market sizing at all — the question is whether the founder has a unique insight into a market that doesn't exist yet or is about to expand.

TAM slides built on Gartner or McKinsey reports aren't believable; the best companies are ones where no such estimate exists because the market is being created.

17:40 20VC: Why Market Always Wins Over the Founder & Why I Do Not Do Market Sizing | Why it is not the Best Time to be Investing but it is the Best Time to Have a Fund & The Type of Deals to do Today | Why The Best Founders Have 100 Year Plans with Wes Chan, C

Brad Gerstner · Oct 10, 2022

The investment in ByteDance was driven by conviction that a continuous feed had huge tailwinds in China where no feed existed, not by any view on a market for news in China.

The mobile supercycle meant the device would replace entertainment, communication and interaction; TikTok did not yet exist so no market could be sized.

9:34 20VC: Altimeter's Brad Gerstner on Why Supercycles and the Powerlaw is the Most Important Thing In Investing, Why Portfolio Diversification is the Opposite of Risk Mitigation and The #1 Question Brad Asks All New Recruits

Vince Hankes · May 3, 2023

Investors get tripped up by demanding precision on TAM, defensibility and moats mapped to price, which is the wrong frame this early in a technology cycle

Early in a cycle there will be fifty reasons to say no and no answers to every question, so the venture mindset is to weigh what can go right

Scope: those factors are still important in the decision-making process; applies specifically when it is very early in a technology cycle

16:18 20VC: The OpenAI Memo: Why Invest? Is it too Late to Catch OpenAI? Are OpenAI's Models Truly Defensible? Does the Value in AI Accrue to Incumbemts or Startups - Application Layer/Infrastructure? What Happens with Regulation? with Vince Hankes @ Thrive

Eric Paley · Sep 20, 2023

Market size analysis is a dangerous investing model; the only useful question is the threshold one of whether a market of any meaningful size could exist

No one good at market analysis could have predicted how Uber and Lyft played out; the biggest analyzable markets are unbelievably crowded; and many of his best investments looked like uninteresting markets — detailed sizing would have talked him out of companies like Pinterest

Scope: acknowledges this is counter to industry practice

29:30 20VC Roundtable: Is the VC Model Broken? The Biggest Disconnect Ever Between TVPI & DPI, Why Market Size is Dangerous, Why "Go Fast" is Terrible Advice, The Dangers of Raising Large Rounds at High Prices & Why Next Year Will See the Biggest Hiring Spree i

Danny Rimer · Jun 17, 2024

Market size / TAM is noise and it is crazy to assess an investment based on the size of the market

You can't judge markets in advance; on Airbnb they asked how many hotel rooms it would cannibalize instead of seeing it would create an entirely new market and new inventory that never existed before

Scope: they still do market sizing to get comfort, but say it usually means little

17:23 20VC: Index's Danny Rimer on Investing Lessons from Hits like Figma, Discord and Etsy to Missing Snapchat, Airbnb, Facebook & Spotify | Why Valuation is a Trap and Market Sizing, Signalling and Sector/Geo-Specific Funds are all Noise

Kevin Hartz · Jul 22, 2024 · hedged

Brute TAM and market-sizing analysis is overdone; investors should make a qualitative assessment of the team instead

Great teams always find a way to slingshot from a small market into a big one, or the small market is the necessary entry point to the big one

Scope: in most cases

22:16 20VC: How I Lost Airbnb at Seed Because of an Exploding Term Sheet | Investing Lessons from Roelof Botha & Peter Thiel | Why VC is Less Collaborative Than Ever and Great Companies Are Being Destroyed by Too Much Cash with Kevin Hartz @ A*

Nabeel Hyatt · Apr 4, 2025

Market size analysis is not worth doing, except occasionally as confirmation that a market is too small

If you're creating a new market the size doesn't exist to be measured; the only screen needed is ruling out obviously small opportunities like an ice cream truck

Scope: applies to Spark's new-market-creation strategy

31:56 20VC: Why To Win in AI, Investors Need to Change Their Approach | Why VC is Run by Principals and Associates and is a Broken System | The Bull Case for Anthropic & Whether Deepseek Changes Their Strategy with Nabeel Hyatt @ Spark Capital

Bucky Moore · May 5, 2025

For companies doing something fundamentally new, sizing the market is so imprecise it borders on a fool's errand

The best founders set their own rules — they decide what market they're in and convince customers of a market they hadn't considered — and compound startups keep layering products so the market grows every quarter

Scope: he still says it would be crazy not to size the market for companies attacking an existing market

19:30 20VC Exclusive: Why Mega Platforms Will Win in VC | Why You Cannot Do VC If You Do Not Do Pre-Seed | Why Market Sizing is BS | Where Will Foundation Models Build/Buy Apps vs Where Will They Not with Bucky Moore

Harry Stebbings · Jun 20, 2026

His biggest investing mistakes all came from focusing on market analysis at all

Thinking he was smarter than the market led him to turn down great companies, which cost more than any money lost

Scope: mistakes framed as missed companies rather than losses

55:48 20VC: Why Remote Work is White Collar Fraud | Why Revenge and Patriotism are the Best Founder Traits | Two Questions Every Founder Needs to Ask | The Wild Story of Raising $1BN from Masa Son in an Hour Long Meeting with Ryan Peterson, Founder @ Flexport

Nico Wittenborn · May 22, 2023

At early stage it is better to underwrite to a reasonable chance of being big enough and be surprised by the upside than to pass because you judge something can't get big

The upside is what surprises you at early stage; aiming lower produces more surprising positives, whereas declaring a market too small produces wrong decisions and lost optionality asymmetry

Scope: early stage

19:59 20VC: Why Your Fund Model Should Not Rely on $10BN+ Outcomes, Why the Large Funds Got Too Large, The Rise of Solo GP's; The Pros and Cons & Is Consumer Subscription Even a Good Sector to Invest in with Nico Wittenborn @ Adjacent

Rob Go · Jun 23, 2023

Investors should never pass on a deal on market-size grounds without first deeply interrogating whether they are misunderstanding, misdefining, or underestimating the growth of that market.

NextView passed on DraftKings not over regulation but because they misunderstood the market size, despite knowing the founder was special.

49:04 20VC: How to Raise a Venture Fund from Deck to First Meetings to Final Close, Why Venture is a Young Person's Game and Why Multi-Stage Funds Have Not Ruined Seed with Rob Go, Co-Founder @ Nextview

Akin Babayigit · Jun 26, 2023

Published gaming market size estimates dramatically understate the real market

They exclude huge categories like Japanese pachinko, whose annual revenue exceeds the several-hundred-billion-dollar Japanese auto industry, and they exclude gaming ad tech, which is how companies like Tripledot make most of their money

45:23 20VC: Eight Pieces of Startup Advice that are BS: Why You Do Not Have to Love Your Space, It Is Ok To Do It For The Money, Focus Is Not Everything, Speed Is Not The Most Important Thing with Akin Babayigit, Co-Founder @ Tripledot Studios

Harry Stebbings · Jun 17, 2024

Market sizing constrains investor thinking because investors consistently and dramatically underestimate the size of their winners

Bessemer's published memos sized Twilio at $500M, Procore at $300M and Snap at $500M — all far too small

Scope: given as his reason for not doing market sizing himself

17:34 20VC: Index's Danny Rimer on Investing Lessons from Hits like Figma, Discord and Etsy to Missing Snapchat, Airbnb, Facebook & Spotify | Why Valuation is a Trap and Market Sizing, Signalling and Sector/Geo-Specific Funds are all Noise

David Frankel · Oct 14, 2024

Investors regularly make the mistake of undersizing TAM and passing on great companies, because market-sizing logic seems seductive and rigorous in the moment but misses where the product can expand.

Bessemer and others sized Media Radar against dying newspapers and magazines and passed; the company then expanded into Facebook, Google, Netflix, Apple and Amazon advertising and became worth billions.

75:02 20VC: Investing Lessons from FC Seeding Uber, Airtable and Coupang | Why Pro Rata is the Original Sin in VC | Why Liquidity Has Died in 2024 | Why LPs are Pissed with VCs | The Hard Truth About Seed Fund Economics with David Frankel @ Founder Collective

Ilir Sela · Aug 4, 2023

Founders told their TAM is unexciting should do the real industry work rather than inflate the number, and should analyze TAM in two parts: the current market and how their own product will expand it

TAM is one of the deciding factors in whether you can build a multibillion dollar company, so it's the last thing you want to be wrong about; made-up TAMs (e.g. calling pizza a trillion-dollar market by including frozen and global) are useless

30:55 20VC: Why "Hire Great People and Get Out of the Way" is Total BS, Why Your Upbringing Can Make You a Worse Leader & A Bentley, Two Nissan Cubes and Becoming One of Macedonia's Largest Employers; The Story of Slice with Ilir Sela

Alex Taussig · Feb 12, 2024

Addressable market should be assessed as surface area — how many people experiencing the problem you can uniquely reach through your strategic wedge — rather than as a dollar figure first

The best businesses take their surface area and keep building on top of it, so the surface area is where the eventual TAM actually comes from and is a better leading indicator than the final TAM number

44:50 20VC: The Ultimate Guide to Scaling Marketplaces, Why Rule of 40 and EBITDA Optimisation is BS, How Founders & VCs Should Approach Market Sizing and Outcome Scenario Planning and Why Europe is Failing with Vinted CEO, Thomas Plantenga & Alex Taussig

Victor Riparbelli · Jan 15, 2025

Synthesia's market is not video production but all of the world's text and slide-based communication, and capturing even 5% of it would build a company worth more than $100B

If all communication trends toward video — including software buying, onboarding and customer support, eventually interactive video — then the addressable market is all of the world's communication, which is effectively infinite

Scope: conditional on the video-first thesis being true

14:11 20VC: Why Scaling Laws Will Not Continue | OpenAI vs Anthropic vs X.ai: Who Wins and Why | How Far Will Model Providers Go Into the Application Layer | The End State for Models: Many Specialised or Few Generalised with Victor Riparbelli @ Synthesia

Byron Deeter · Aug 25, 2025

Team and TAM should still be heavily overweighted in investment decisions, but TAM should be judged as adjacency potential rather than a precise market size figure

You can't know exactly what the company will become, but you need to believe they're playing in a big enough pond with enough segment, product and user adjacencies that good things can happen

Scope: concedes investors are sometimes not imaginative enough and great founders break through anyway

51:58 20VC: Do Margins Matter in AI? | Is Defensibility Gone For Good? | Is Vertical SaaS Dead in a World of AI | What SaaS Rules Are BS and No Longer Apply in a World of AI | The Future of Venture: Why Chanel vs Walmart is BS with Byron Deeter

Miles Grimshaw · Sep 18, 2023

Figma should be understood as the nexus of collaboration for digital product — with design as the core stakeholder but copywriters, marketers, PMs and engineers orbiting it — rather than as design software sold by the design seat

The nature of the product and the workflow of digital product design inside a company pulls in many non-designer stakeholders, so adoption brought far more users into the product than a designer headcount would suggest

36:40 20VC: Benchmark General Partner, Miles Grimshaw on The Five Pillars of Venture Capital, Why Data Can Be a Trap When Early-Stage Investing, Investing Lessons from Missing Figma and Plaid & The New Business Model for AI & Why Co-Pilot is an Incumbent Strate

Everett Randle · Nov 10, 2025

Bottom-up TAM analysis based on price times the quantity of a product's initial user role systematically understates markets, because winning products expand into adjacent roles.

David George has said he understated Figma's TAM by counting the world's designers, and Figma went on to penetrate many other roles in the company.

54:21 20VC: Benchmark's Newest General Partner Ev Randle on Why Margins Matter Less in AI | Why Mega Funds Will Not Produce Good Returns | OpenAI vs Anthropic: What Happens and Who Wins Coding | Investing Lessons from Peter Thiel and Mamoon Hamid

Hemant Taneja · Sep 22, 2025

The 'capped upside company' framing is a mistake — markets expand and experts systematically misjudge the ceiling of their own industries; if a company is genuinely capped you shouldn't invest at all, which makes it a quality question rather than a price question

When he invested in Stripe, payments experts called it a niche thing; humility means admitting we don't know how markets will grow, and backing enduring very large businesses is a precondition of the job

55:46 20VC: General Catalyst CEO Hemant Taneja on The Future of Venture Capital: Chanel vs Walmart | Lessons Scaling GC to $40BN in AUM | Investing $5BN+ Into Stripe Over 14 Rounds | Investing Hundreds of Millions into Anthropic at $60BN Valuation

Ryan Petersen · Jun 20, 2026

Peter Thiel's Zero to One test favours markets small enough to monopolise, but Thiel himself said not to be dogmatic about it — a big market is fine

When Ryan tried to artificially frame Flexport as a small market to fit the framework, Thiel told him not to, and later asked to invest

54:43 20VC: Why Remote Work is White Collar Fraud | Why Revenge and Patriotism are the Best Founder Traits | Two Questions Every Founder Needs to Ask | The Wild Story of Raising $1BN from Masa Son in an Hour Long Meeting with Ryan Peterson, Founder @ Flexport

Guy Podjarny · May 24, 2023

The market size that matters is the value proposition itself — how many people need this multiplied by how much value you provide

For Snyk the calculation was the number of developers times the size of software development times the importance of security, all of which keep growing, which gave him conviction the market was never a concern

12:48 20VC: Why Being First To Market Does Not Matter, Why You Do Not Have Defensibility on Day 1, How to Analyse Market Size and Present it to Investors, Vitamins vs Painkillers; Do Vitamins Survive Recessions and Good vs Great Messaging with Guy Podjarny @ Sn

Guy Podjarny · May 24, 2023

At the earliest stage, market sizing should start from the magnitude of value you provide and only then convert it into dollars

You don't know how the market will evolve at the idea stage, so value is the only reliable starting point, with pricing benchmarks applied afterwards

Scope: applies to early stages when pitching the idea

14:25 20VC: Why Being First To Market Does Not Matter, Why You Do Not Have Defensibility on Day 1, How to Analyse Market Size and Present it to Investors, Vitamins vs Painkillers; Do Vitamins Survive Recessions and Good vs Great Messaging with Guy Podjarny @ Sn

Harry Stebbings · May 24, 2023

Market sizing pitches should segment the market and show growth and evolution within segments rather than quoting one huge headline number

Headline numbers like 'the security market is $2 trillion' say nothing because the market is heavily segmented and broad; segmentation is a chance to demonstrate depth of analysis

14:03 20VC: Why Being First To Market Does Not Matter, Why You Do Not Have Defensibility on Day 1, How to Analyse Market Size and Present it to Investors, Vitamins vs Painkillers; Do Vitamins Survive Recessions and Good vs Great Messaging with Guy Podjarny @ Sn

Gokul Rajaram · Mar 16, 2026

Top-down market sizing cannot be done; the only useful approach is bottoms-up sizing by customer segment, including talking to customers about budgets

Any customer base above a few thousand customers has distinct segments with different propensities to pay and different problems, so you have to do the segment-level work

43:43 20VC: The 8 Moats of Enduring Software Companies: How to Analyse for Durability and Defensibility in a World of AI | Why Dropouts are "AI Maxing" the World & Remote Early-Stage Companies are Dying with Gokul Rajaram

Craig Courtemanche · Dec 4, 2023

Building a product for one market's acute, locally-driven demand can pay off globally, because what one market demands the rest of the market often needs

Australian manslaughter liability laws forced their ANZ customers to demand quality and safety tooling; once built, global customers all valued it, letting them hyperscale the product

27:47 20VC: From Construction Worker to Billionaire CEO; The 21-Year Epic Journey of Procore to an $8.6BN Company, Advice from Tobi at Shopify on Being a Great CEO & Why The Idea of "Becoming an Entrepreneur" is BS with Tooey Courtemanche

Cem Sertoglu · Nov 20, 2024

Fast product uptake in one market driven by structural conditions is evidence the same adoption will occur in other markets

Japan's very fast UiPath uptake was explained by demographic-driven difficulty filling back-office clerical roles, so where market conditions were similar the same behaviour should follow

Scope: used alongside revenue trajectory (~$1M to $100M ARR in 21 months) to underwrite the $1BN round

42:27 20VC: Turning $16.5M into $2.1BN; Lessons from the Greatest Venture Investment in European History: UiPath | Why VC is Not Being Commoditised | Why Price Does Not Matter | Lessons on Loss Ratio, Selling and Signalling with Cem Sertoglu

Nico Wittenborn · May 22, 2023

Early-stage investors should bet on the relative development of markets - the magnitude of change in a segment, demographic or behaviour - rather than static market size

Growth investors need to understand current size and benchmarks to fit their formulas; early-stage investors' edge is underwriting the direction and magnitude of change

29:59 20VC: Why Your Fund Model Should Not Rely on $10BN+ Outcomes, Why the Large Funds Got Too Large, The Rise of Solo GP's; The Pros and Cons & Is Consumer Subscription Even a Good Sector to Invest in with Nico Wittenborn @ Adjacent

Nico Wittenborn · May 22, 2023

Outsized returns come from understanding what a market could look like in ten years rather than what it looks like today

30:32 20VC: Why Your Fund Model Should Not Rely on $10BN+ Outcomes, Why the Large Funds Got Too Large, The Rise of Solo GP's; The Pros and Cons & Is Consumer Subscription Even a Good Sector to Invest in with Nico Wittenborn @ Adjacent

Katherine Boyle · Oct 1, 2020

Market sizing is easy in government verticals because federal budgets are public, so the hard question is not market size but whether you can deliver a delightful product people will pay for and find the right entry point

Government spending is publicly visible so you can compute the market, and these are civic services people will pay for

37:17 Government vertical market sizing is easy via public budgets so the hard question is product delight and entry point

Alex Bouaziz · Oct 22, 2025

Deel can plausibly go from 1.5 million people paid on its platform to 10 million, and potentially payroll for 100 million people, because essentially every worker in the world gets payrolled

Payroll is universal, so the addressable market is close to every worker in the world; at over $1B ARR today, 10M people implies a large revenue multiple of current scale

30:42 Payroll tam is near universal because every worker eventually gets payrolled

Harry Stebbings · Oct 22, 2025

Payroll for 100 million people is hard to believe because the real TAM is not every worker in the world — the product doesn't fit all parts of all companies or all geographies

Coverage assumptions break down across company types and geographies, citing Japanese agriculture as an example, and market-take assumptions also need scrutiny

31:10 Real tam is narrower than headline because product fit varies by geography and company type

Lucas Swisher · Feb 23, 2026

To justify a $5B entry valuation on $50M of ARR you must believe the company can eventually reach $5B of revenue at 30%+ margins while growing fast, which implies a $50B revenue market to go get

The eventual earnings path has to support the price, so you back into the required market size from the required revenue

14:03 Back into required market size from the price paid

Lucas Swisher · Feb 23, 2026

Their doubling-down mistakes come from overestimating TAM and a company's ability to launch multiple products and expand into new TAMs, not from misjudging metrics, team, or growth rate

Reviewing where their investments have gone wrong, the failure mode is consistently the multi-product question, which is why they've raised the bar on that dimension

30:40 Multi product tam expansion is where underwriting goes wrong

Harry Stebbings · Oct 10, 2022

A focus on already-large markets risks causing investors to disregard category-creation and rapidly expanding markets, since companies like Airbnb, Uber and Twilio did not address big markets at the time of investment.

The biggest winners created or massively expanded markets that looked small when they started.

8:58 Focusing on already large markets risks missing category creating companies

Harry Stebbings · Aug 15, 2025

His biggest investing mistakes come from assuming a market is much bigger than it is, because vertical entrants progressively carve it up and a supposed $50B market fragments into something far smaller

Observed with portfolio company Solve in patents, where other players attack different verticals and the market fragments away

47:23 Vertical entrants fragment the market so headline tam shrinks

Kyle Harrison · Oct 21, 2022

TAM arbitrage — understanding a market better than anyone else and seeing it is bigger than others credit — lets an investor justify paying higher prices, tolerating more burn, and experimenting more

A more fundamental understanding of market size underwrites more aggressive behavior on price, burn and growth

6:38 Understanding true market size better than others justifies paying more and burning more

Jason Lemkin · Nov 30, 2022

In already-massive, obvious software categories you don't need a sophisticated TAM analysis — you just need to identify who in the next generation has the most traction

CRM was the largest category of software at the time, so the only real question was which SMB CRM was winning, which ended the TAM analysis

29:48 Already known huge categories need no tam analysis just identification of the traction leader

Gustav Söderström · Oct 12, 2022

The total addressable market for audio, including podcasting, is at least as large as social networking — two to three billion plus people — and the business is nowhere near scale yet.

Music and podcasting are core human behaviours like communication, so their TAM should match that of communication-based products.

52:38 Audio and podcasting tam matches social networkings since both are core human behaviors

Harry Stebbings · Oct 12, 2020 · hedged

Many VCs use market size as a mental escape hatch for not doing a deal

24:32 Market size objections are often a rationalized excuse to pass rather than genuine analysis

David Schneider · Sep 11, 2024

Market size deserves a lot of focus but is hard to estimate during on-prem-to-cloud transitions, because making technology easier for customers expands the market

Anytime you make technology easier for the customer, markets grow; the question is whether consumerizing something difficult grows the market

24:46 Consumerizing difficult technology expands the market during platform transitions

Adam Fisher · Jan 22, 2024

Investors and entrepreneurs often deceive themselves that they are in a large market when the segment they actually target is a small subset, which is no easier to win

The claimed large market isn't the market they're actually focused on, so market size doesn't reduce the difficulty

24:26 Actual target segment is often smaller than claimed market and just as hard to win

Shardul Shah · Sep 16, 2024

The cloud security market can support a winner of enormous scale, justifying repeated doubling down on Wiz.

Top-down: cloud is on a path to a trillion-dollar-plus transformation with ~$300B of cloud service provider spend accelerated by AI compute and data demand, comparable categories show 5-10% security attach rates, and functional software market leaders take north of 20-25% share; public comps like CrowdStrike ($50B+) and Palo Alto ($100B+) corroborate; bottoms-up, Wiz has grown faster than any company of all time in four years with strong productivity across segments and geographies and a strengthening team.

24:17 Top down analogous attach rate sizing justifies scaling conviction in a single winner

Mati Staniszewski · Sep 8, 2025

Investors who told them in 2022 that the market for AI voice was very small were wrong, and the founders strongly disagreed at the time

nobody was thinking about AI voice then, so the market read was based on absence of attention rather than fundamentals

17:33 No attention yet does not mean no market

Ryan Petersen · Jun 20, 2026

Investors who assess market size through consulting reports are using the wrong instrument — the real market is visible in the physical world around you

A firm brought its own report claiming Flexport's market was only $6B, smaller than the market for USB cables, when every physical object around them had to be shipped there

53:03 Observe the physical world not consulting reports