For seed investors, overfocusing on TAM (total addressable market) can be a trap. It causes founders to think that displaying a generic sizable dollar stat (“$150 billion is spent on Education annually”) is sufficient versus really spending time understanding important characteristics about the problem they’re solving. Namely,
- Is the problem large?
- Is the problem urgent?
- Is the problem valuable?
One of three and you don’t have a business. Two of three and you have a business, perhaps just not venture-scale (nothing wrong with that!). Three of three and I’m interested.
Here’s my presentation on this topic from LAUNCH Festival earlier this month. It doesn’t hold up as well if I’m not ranting and gesticulating.
