Market Sizing

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Market Sizing

  1. 1. Market Analysis<br /><ul><li>What is market analysis
  2. 2. Identifying target customer
  3. 3. Customer segmentation
  4. 4. Sizing: Determine “Total Available Market” for your product - today & growth rate
  5. 5. Factors driving this market, trends in the market that make it ripe for your product/disruption; assumptions to believe it’ll take off
  6. 6. Also factors inhibiting it
  7. 7. Structure of the market
  8. 8. Competition (separate session), substitutes
  9. 9. Why is it important
  10. 10. Helps you define your customer
  11. 11. Is there a big enough opportunity: Depends on market size, driving factors & market structure</li></li></ul><li>Where Market Analysis Fits in <br />Most Important things VCs look for<br />Market – “How big is the market”<br />Multi $B<br />Growth rate<br />Product - “How much of the market can you capture”<br />What problem does it solve<br />Competition – Tech differentiation, barriers to entry<br />How does it make money<br />Management Team - “Can you capture that”<br />Passion & Drive!<br />Experience<br />Worked together before<br />Next level - execution <br />Go-to-market: Channels, distribution<br />Current product status<br />E.g. Consumer Internet Series A: product, B: growth, C: revenues<br />Financials<br />Margins, CapEx<br />Technical Diligence<br />Deal Terms – not the deciding factor in early stage <br />
  12. 12. Market Sizing<br /><ul><li>What is Total Available Market (TAM)
  13. 13. $ (or Rupee) value of total product/service that could be sold if every person for whom product is applicable would buy it at the price point you envision
  14. 14. It’s the full pie – sum of revenues of all players in the space (existing & new)
  15. 15. So TAM =/= your company’s revenue projections. But your revenues should be a believable % of the market
  16. 16. Common market sizing patterns
  17. 17. Comparable – Look at adoption curve of other similar products; VCs love analogies
  18. 18. Top down – Look at how many households…
  19. 19. Subset – Total market for cars is X, we go after hybrid cars first…
  20. 20. Bottom up – Good way to project your sales</li></li></ul><li>Example-1 Server Virtualization – Top-Down Approach<br />
  21. 21. Example-1 Server Virtualization – Bottom up Approach<br />
  22. 22. Example-2 PHEVs – Comparable method<br />Exhibit A: Comparison between Normal car, Hybrid and PHEV (and later how different)<br />
  23. 23. Example-2 PHEVs – Comparable method<br />
  24. 24. Example-3 eLearning – Segment by segment<br />
  25. 25. Market Sizing – Wrap ups<br /><ul><li>Hard with startups : Defining a new market, Revenue model not yet nailed down
  26. 26. But is good discipline to get you to think & investors will ask
  27. 27. Where to get data?
  28. 28. Google is good but trust reliable sources
  29. 29. Market research firms like Gartner, Forrester: Expensive !
  30. 30. Lots of free sources: CIA Fact Book
  31. 31. Do’s
  32. 32. Mention the sources of the data
  33. 33. Size the market in more than one way to convince yourself
  34. 34. Do a sniff test
  35. 35. Projections should be for optimistic, yet realistic/likely case
  36. 36. VCs will give it a haircut anyway
  37. 37. Dont‘s
  38. 38. Don’t be too broad – doesn’t help to say healthcare is a $T market – that’s not your applicable TAM
  39. 39. DON’T fill your slides with numbers from industry reports
  40. 40. Don’t try to solve every problem in the world
  41. 41. Don’t assume large market means a large market share
  42. 42. “The market is $60B for this product, so even if we get 2% of this market, we have a large company”</li>

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