1. The Lean LaunchPad
Presentation examplesused in
Class 2 - Market Size and
Hypothesis Testing
07/02/12

2. Market Size
How Big is This Opportunity?

3. Market/Opportunity Analysis
How Big is It?: Market/Opportunity Analysis
– Identify a Customer and Market Need
– Size the Market
– Competitors
– Growth Potential

4. How Big is the Pie?
Total Available Market
• How many people would want/need
the product?
• How large is the market be
(in $’s) if they all bought?
Total Available Market • How many units would that be?
How Do I Find Out?
• Industry Analysts – Gartner, Forrester
• Wall Street Analysts – Goldman, Morgan

5. How Big is My Slice?
Served Available Market
• How many people need/can use product?
• How many people have the money to
buy the product
Total • How large would the market be (in $’s)
Available Served if they all bought?
Market
Available • How many units would that be?
Market
How Do I Find Out?
• Talk to potential customers

6. How Much Can I Eat?
Target Market
• Who am I going to sell to in year 1, 2 & 3?
• How many customers is that?
• How large is the market be
(in $’s) if they all bought?
Total Served
• How many units would that be?
Available Available
Market Market
Target
Market How Do I Find Out?
• Talk to potential customers
• Identify and talk to channel partners
• Identify and talk to competitors

7. Market Size: Summary
• Market Size Questions:
– How big can this market be?
– How much of it can we get?
– Market growth rate
– Market structure (Mature or in flux?)
• Most important: Talk to Customers and Sales Channel
• Next important: Market size by competitive approximation
– Wall Street analyst reports are great
• And : Market research firms Like Forester, Gartner

8. Market Size
Examples

9. The Opportunity
Global Catalyst
Market =
Chemical $29.5 B
Catalyst
Hydrogen- Pd/C • Emissions
ation Catalyst
Market Catalyst = $1.1 B
• Refinery
= $7 B = $1.5 B • Chemical

12. MARKET SIZE
A m e r i c a n s L o v e t o Ea t M e a t a n d S n a c k
 Giant Markets
> Meat: $160B / Snacks: $70B 2009 US Snack Food
> Meat Snacks: $4B Retail Sales
 Varying Growth Rates Salty
> Meat: + 5% $30B
> Snacks: + 15%
>Jerky: + 5%
 Mega Consumer Trends Converging Sweet
>Healthy, More Flavorful, Higher Quality $35B
 Snacks Driven by Innovation / News
Meat
 Meat Snacks / Jerky Generally Sleepy
> Limited Innovation $4B
> “Gut Stuffer” Image Source: US Package Facts
 Change Underway Driven by New Entrants
>All-Natural
> 10% Growth Latest 52 Weeks Nielsen F/D/M

13. $50 Billion Dollar
Protein Therapeutic Market
$1.4 Billion Dollar
Cell Line Sales Market
$140 Million
Dollar Target

15. Nitrate Sensor Market
SAM: $1.5B/yr
TAM: $6 B/yr Assumptions: Target Market: $50-75M/yr
>100K systems 25K pivots w/ Assumptions: 3-5% licensing
worldwide 1 sensor/acre Recurring consumable costs
(125 sensors/pivot) would add to revenue

16. Market size - Landlords & Rental Units
Units by Landlord Portfolio Size in % of Units, by Landlord Portfolio
USA (millions) Size, Owned by a Single Individual
100% 92%
90%
77%
0.06 80%
0.46
70%
Small: 1 to 4
60%
50%
Medium: 5 to 49 40% 32%
2.20 30%
Large: 50 or More 20%
10%
50% of the “Small” landlords own just one unit. 0%
Small: 1 to 4 Medium: 5 to Large: 50 or
49 More
Rental Real Estate is the Largest “Mom and Pop” business in America: The vast majority of properties are
owned by a single individual that owns only one property.
Source: US census data

17. The market size for metastatic cancer diagnostics in the
U.S. is estimated to be $805M p.a.
Methodology: Value: Explanation: Source:
U.S. population size 313M  Total U.S. population in 2012  U.S. Census
x Bureau estimate
U.S. incidence of all cancers 0.512%  Treatment is typically given in  ACS Cancer Facts
the first year following diagnosis & Figures 2011
=
Total U.S. cancer incidence 1.6 M
x
% diagnosed with regional  Cancers that spread to local or  NCI SEER 2011
39.4%
or distant cancers distant lymph nodes or organs data
=
Patients w/ regional or
628,420
distant cancers
x
Cost of diagnosis and  Weighted avg. patient cost p.a.  JAMA. 2010;
$1,285
monitoring (annually) for imaging procedures (2008) 303(16):1625-1631
=
Market size for metastatic
$805M
cancer Dx / monitoring

20. Linear Lighting Market Size
20

22. Hypothesis Testing
Examples

23. • Hypotheses to test
Hypothesis Test
There is strong Interest in facilitating Interviews (landlord and providers), web
rental maintenance support ad conversion
Service providers are willing to pay for Interviews (need to determine
lead generation through our site consensus willingness to pay)
There will be a higher response rate Interviews (tenant and landlord), survey
amongst tenants and landlords for an (tenant), web ad conversion of different
“exclusive” community messages
Tenants are willing to pay a nominal fee Interviews (tenant), survey (tenant),
($1-2) for convenient rent/utility online web ad conversion.
payment service (Need at least 0.08% CPM conversion to
be profitable)
Real Estate agents are willing to help Interviews
push this offering to their customers
23

28. Week 1  Week 3
Hypothesis Test Results
• Existing prepaid cards add value  Interviewed supermarket  User acquisition is critical 
to a subset of the population executives, payment user engagement is everything
– Underpenetrated processors, private label card
opportunity manufacturers, prepaid  Underpenetrated opportunity
– We can find a better program managers, loyalty because people:
channel to reach this consultants, and data analytic  Don’t understand the value
customer segment and firms of the card
convert them  Don’t know about the card
 Haven’t bought one yet
• Existing prepaid cards are flawed
and can be improved  Potential customers are aware of
– We can do something clever and understand prepaid, but:
to shake up the fee  Hate the fees
structure and/or build in a  Haven’t bought one yet
new feature (e.g., rewards)
• Solution = prepaid + loyalty card
– Distributed at retail POS

29. Week 3  Week 4
Hypothesis Test Results
• Existing prepaid cards add value  Interviewed end users at End Users see value:
to a subset of the population Walmart, food banks, bus  More likely to sign up for
– Underpenetrated prepaid via assisted POS sale
stops, payday lenders, their  Active vs. passive sale
opportunity homes, and supermarkets hypothesis validated
– We can find a better  More likely to keep and reload
channel to reach this  Interviewed execs at Green cards with ongoing cash
customer segment and Dot, Rush Card, and NetSpend rewards
 Higher retention via loyalty
convert them hypothesis validated
• Existing prepaid cards are flawed Retailers see value:
and can be improved
 New revenue opportunity is
compelling
– We can do something clever  Access to purchasing data
to shake up the fee outside the store is compelling
structure and/or build in a
new feature (e.g., rewards) Industry Trends
 Loyalty + prepaid programs
are the future
• Solution = prepaid + loyalty card
 Industry execs like this idea a
– Distributed at retail POS lot and are actively exploring it

30. Week 4  Week 5
Hypothesis Test Results
• Customer awareness and  $5 for 5 minutes campaign  20 preliminary signups
education are key obstacles to  Speak to as many potential
customer acquisition and customers as possible ask for  Built empathy around customer
retention an actual commitment prepaid needs
 Immediacy
• Channel: Assisted sale at POS  Security fears
trumps current passive j-hook  Fees
sale  Channels
– Active sale enhances  Discovered other needs
awareness & education  Job-seeking
 Saving for kids’ education
 Understood observed behaviors
• Product: Combining prepaid +  High churn
loyalty  Lack of reloading
– Cash rebates improve  Lack of regular usage
retention and incentive to
reload  Loyalty component not required
if you can service the true pain
points

31. Team Deliverable by Tomorrow
• Hypotheses for each part of business model
• Test for each of the hypotheses
– What constitutes a pass/fail signal for the test (e.g. at
what point would you say your hypotheses
wasn’t even close to correct?
• Plan to get out of the building to test the hypotheses
• Summarized in a 5 Minute PowerPoint Presentation
– Business Model Canvas
– Market Size
– Getting out of the building plan
Don’t Over Think Your Hypotheses

33. Backup
Idea
Business Model
Size Opportunity
Customer Development