You Can Never Size a Market in Excel

Over the course of my career as a VC I’ve been involved with a bunch of fundraising. Raising money for our fund. Raising money for our portfolio companies. Advising friends on their fundraising. Lots. Of. Fundraising.

Some of that fundraising has been very successful. Some less successful. And some has been an absolute disaster.

Of the raises that have fallen into the latter category I’ve seen a common theme. At some point in the process, the investigating VC asks the question aloud “how big can this get”. The question itself is not the issues; rather, it’s how long that question persists and festers throughout the ensuing funding conversations.

I was reminded of this fundraising red flag while reading of Rand’s recent adventures. He was right to take note of this exchange (which occurred after their termsheet was signed):

In a phone call with Neil, she heard him comment that they “needed to do more digging into the market.” In her opinion, this was very peculiar, as investors typically have a thesis and great quantities of diligence long before talking to companies, nevermind prior to a signed agreement. In fact, when Neil approached us, it had been under the auspices of excitement about the SEO/inbound marketing field. One of the things we liked best about them had been their strong belief, passion and knowledge about the SEO landscape. Questions about “market size” and “opportunity” at this stage seemed peculiar.

Had I been advising him at the time I would have told him to stop everything and address that question. No single question has killed more fundraising discussions than this one. It can be framed as a VC wanting to get their arms around the “size of the market” or questioning “how big can this get” or “scale of the opportunity”. But there is a fundamental problem with this line of questioning.

In every single case that I’ve seen this question persist over more than 2 meetings, it has NEVER been resolved.


I’ve watched entrepreneurs go through Herculean efforts in building models to size markets, dissect competition and build analogous growth stories from other industries. And I’ve seen well intentioned VCs burn meeting after meeting with these entrepreneurs genuinely trying to resolve this nagging concern for themselves.

The problem with early stage investing is that markets can never be sized in Excel. If they could be reduced to a formula, we’d all be working at hedge funds. No, the essence of early stage investing is more instinctual.

An investor’s instinct around something as fundamental as whether your business can reach the scale needed for venture capital returns is one that won’t be found scouring the latest market forecasts from Forester or Goldman Sachs. It won’t be found in endless meetings and it won’t be found in detailed financial forecasts or market sizing exercises.

It will be found in the connection an investor makes to you, your product and your vision. Either they will believe it or they won’t. If they do, they’ll want to invest. If they don’t, they’ll simply keep wrestling with the question of “how big can this get” in an unresolvable circle of swirling doubt. All of the Excel wizardry in the world won’t resolve it.

Originally posted to