Sizing the Market
In diligencing the market, look for a market that is large and has strong growth potential.
If a new technology has spurred the growth of the market, then this may be a good time to invest.
Markets that are behind on the latest technology are ripe for growth.
The Total Available Market for venture-funded deals needs to be at least $1B in size.
This is referred to as the TAM, which is everyone who could ever buy your product.
The Service Available Market or SAM is the target market within your geographical area.
The Beachhead Market is the first 20 customers you are targeting.
The TAM and SAM are top-down numbers you find through research.
The Beachhead Market is a bottoms-up number you find through your sales and marketing efforts.
The presence of competition verifies the market. If there are no competitors, then there’s most likely not a market there.
The presence of acquirers is another key verifier of the market. If no one is buying companies in that market, then there’s no reason to build a business to be sold.
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Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.