Business
Understanding Market Size
Discover what market size means and why calculating your Total Addressable Market (TAM) is crucial for your startup's business plan and funding.
What is it?
Market size refers to the total number of potential customers or the total revenue that could be generated from a specific product or service within a market. For startups, this is often broken down into three key segments: Total Addressable Market (TAM), which is the total demand for a product; Serviceable Available Market (SAM), the segment of the TAM targeted by your products; and Serviceable Obtainable Market (SOM), the portion of SAM you can realistically capture.
Why is it trending?
Understanding market size is a fundamental requirement for any startup seeking investment. Investors scrutinize market size calculations to gauge a company's potential for growth and scalability. In today's competitive funding environment, a well-researched and convincing market size analysis is no longer optional—it's a critical component of any pitch deck. It demonstrates that the founder has done their homework and that a significant opportunity exists.
How does it affect people?
For entrepreneurs, a clear understanding of market size validates their business idea and informs their go-to-market strategy, pricing, and sales targets. For investors, it's a primary metric for assessing risk and potential return; a large, growing market suggests a venture has a higher ceiling for success. This analysis directly influences which startups get funded, shaping the future of industries and determining which new products and services reach consumers.