"Our TAM is $50 Billion"
Every VC has heard this. It screams: "I haven't done my homework."
Real Definitions
TAM (Total Addressable Market)
Total market if you had 100% share. Ex: "Global productivity SaaS = $200B"
SAM (Serviceable Addressable Market)
Portion you CAN address (geography, segment, price). Ex: "US SMBs = $4.2B"
SOM (Serviceable Obtainable Market)
What you can REALISTICALLY capture in 3-5 years. Ex: "1% of SAM = $42M"
Method 1: Top-Down
TAM × % segment → SAM × % capturable → SOM
Example:
- • TAM: AI for startups = $15B (Gartner 2024)
- • SAM: Early-stage startups = $600M (15B × 4%)
- • SOM: 2% of SAM Year 3 = $12M
Method 2: Bottom-Up (More Credible)
Number of clients × ARPU × Realistic penetration
Example:
- • 460K startups created/year in US (Census 2024)
- • 15% need fundraising help = 69K
- • ARPU: $79/month × 12 = $948/year
- • SAM = 69K × $948 = $65M
- • SOM (5% penetration Y3) = $3.25M
Accepted Sources
✅ Accepted
Gartner, Forrester, IDC, Statista, IBISWorld, Census, Eurostat, Crunchbase, PitchBook, SEC Filings
❌ Rejected
"Our internal estimates", blog articles, "Everyone knows the market is huge"
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