Total Addressable Market

The TAM Onion

Solution to the TAM / Niche Paradox

The TAM / Niche Paradox

When I tried raising money for my first startup, I was perplexed…

Investors, especially larger venture capitalists, wanted to see an enormous opportunity (in fact, it’s still commonly understood today that you need to show at least a $1 Billion market). But at the same time, investors prefer to see a startup tackle a small targeted niche, so the startup can better meet the specific needs of that market that also has fewer competitors, thereby increasing chances for success.

But how can you have a targeted niche and a big opportunity? Aren’t those trade-offs?

Problems with TAM / SAM / SOM

A common approach for pitching to investors is to show TAM (Total Available Market), a smaller SAM (Serviceable Available Market), and smaller still SOM (Serviceable Obtainable Market). You’ll see many early-stage startup investor pitches with a diagram something like this: