Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Market Sizing 101

7,390 views

Published on

Published in: Business, Economy & Finance
  • Awesome slide...GET FUNDING NOW...Instantly send your startups pitchdeck to over 5700 of VC's and Angel's with just 1 click. Visit: Angelvisioninvestors.com
       Reply 
    Are you sure you want to  Yes  No
    Your message goes here
  • WONDERFUL JOB!.... STARTUPS...Send your pitchdeck to over 5700 of VC's and Angel's with just 1 click. Visit: Angelvisioninvestors.com
       Reply 
    Are you sure you want to  Yes  No
    Your message goes here
  • Wonderful points .. thanks
       Reply 
    Are you sure you want to  Yes  No
    Your message goes here

Market Sizing 101

  1. 1. Market Identification and Analysis Gautam Gupta General Catalyst Partners Entrepreneurs Investing in Entrepreneurs Follow me @gRamblings www.generalcatalyst.com
  2. 2. <ul><li>A market is the set of all actual and potential buyers of your product </li></ul><ul><li>A market need drives the definition of the market </li></ul><ul><ul><li>Consumers need to get from Point A to Point B </li></ul></ul><ul><ul><li>Horse carriage and Car both exist in the transportation market </li></ul></ul><ul><li>Market definition should be broad yet specific </li></ul><ul><li>Start with a need, pain point, or fascination then worry about the market </li></ul>Proprietary & Confidential What is “the market”?
  3. 3. How specific <ul><li>Consumer: Demographics, Geography, Spending habits </li></ul><ul><li>Enterprise: Industry, Company Size, Geography </li></ul><ul><li>TAM – target addressable market defines the size of the market if you had 100% market share of all customers served by your product </li></ul><ul><ul><li>Pet food market -> Dog food market -> Puppy food </li></ul></ul><ul><ul><li>Implies that market is sized by product price / pricing model (ex. If your product is 1/10 price of competitors or billed on a subscription basis) </li></ul></ul>Proprietary & Confidential
  4. 4. <ul><li>Top-down </li></ul><ul><ul><li>Use research reports / analyst data to start with a large market estimate </li></ul></ul><ul><ul><li>Cut the market size down to TAM by making key assumptions </li></ul></ul><ul><li>Bottom-up </li></ul><ul><ul><li>Start with the potential number of customers and work up from there </li></ul></ul><ul><ul><li>Users – frequency of usage – transaction price </li></ul></ul>Proprietary & Confidential Sizing up
  5. 5. <ul><li>Sizes the problem you are going after </li></ul><ul><li>Investment decision based on: </li></ul><ul><ul><li>Size of Market </li></ul></ul><ul><ul><li>Growth </li></ul></ul><ul><ul><li>Potential Market Penetration </li></ul></ul><ul><ul><li>Competition </li></ul></ul><ul><ul><li>Exit value </li></ul></ul>Proprietary & Confidential What it is used for
  6. 6. Proprietary & Confidential Examples – Top Down Via Lightspeed Ventures Blog
  7. 7. Proprietary & Confidential Examples – Bottom Up
  8. 8. <ul><li>Must be easy to understand and logical </li></ul><ul><li>Most VC’s look for +$1B markets </li></ul><ul><li>Assumptions are critical – don’t hesitate to use high, low, base case scenario’s </li></ul><ul><li>Market size should not be without context (growth, structure of the market, adjacencies) </li></ul>Proprietary & Confidential Rules of Thumb
  9. 9. <ul><li>Cite your source and context for data </li></ul><ul><li>Many free sources of data – don’t pay Gartner unnecessarily </li></ul><ul><li>Apply a reality check and measure the market in multiple ways </li></ul><ul><li>Market size is always optimistic but based on reality </li></ul><ul><li>Don’t assume large market means a large market share </li></ul><ul><li>Don’t over think market sizing – it is important but not a perfect science (needs to be directionally correct) </li></ul>Proprietary & Confidential Do’s and Don’ts
  10. 10. <ul><li>Explosive new categories / markets can create compelling returns (social gaming) </li></ul><ul><li>Large fragmented markets underscore challenges to building a big business (language learning) </li></ul><ul><li>Market segmentation and understanding much more important than size (data center software) </li></ul>Proprietary & Confidential Examples

×