🎯 Determine Your Market Size

👋 Hi there - it’s Egemen. Thanks for reading this edition of Scalable.

In today’s edition, we are covering the backbone of every business idea, every pitch, and every value proposition out there: market sizing.

When life gives you lemons, you make lemonade and make sure the juice is worth the squeeze. At some point, you should also consider how many lemonades you can sell, how many lemonade enjoyers are out there, and so on.

So it all comes down to determining your market size at some point. Today, I’m sharing a comprehensive deep-dive on how you can achieve that, along with a cheatsheet - enjoy!

Here’s a snapshot of what’s on the menu today:

☝️ Scaled this past week: Dutch Operator Fund

In quite a tough 2024 for early-stage startups and funds, there is some good news in Europe - Dutch Operator Fund is the scale of the week!

The Dutch Operator Fund, an Amsterdam-based investment fund targeting tech-focused Dutch startups at the pre-seed and seed stages, has launched its first fund, Dutch Operator Fund I, to offer initial financing opportunities to these startups.

With a total of €2 million raised for this first fund—sourced from the founders and supported by a loan from RVO’s Seed Business Angel scheme—Dutch Operator Fund I plans to invest between €75,000 and €200,000 in startups, with the possibility of additional funding rounds.

🧠 Deep-dive: Determine Your Market Size

When you start a new pitch deck or ideate around a startup, one of the first things you need to understand is your market size. It’s essential for planning your growth strategy.

I’m sure you heard of the TAM-SAM-SOM breakdown before, let’s touch on it:

• Target Available Market - TAM

• Serviceable Available Market - SAM

• Serviceable Obtainable Market - SOM

Think of TAM as the entire pie.

It’s the total demand for that group of products or services if you could sell to every single person who might ever want or need it. To calculate it, I have come across 3 different approaches:

SAM is essentially when you take your total market and apply a bit of reality to it, focusing on those you can actually serve given geographical and logistical limitations. It’s a smaller piece of the pie - specifically, the piece you could reach based on your business's location and capacity.

SOM is your realistic target as a business - it’s the part of the SAM that you can capture considering your current resources, competition, and market strategies.

You can use your research to decide who you want to target and how to engage them with your products. Asking these questions will help:

• How is the market currently behaving?

• What are your competitors' strengths and weaknesses?

• Are there any unmet needs or gaps in the market?

• Are there specific market segments that still need to be addressed?

Keep in mind - these figures will largely be estimates to inform your strategy. The more market research you do and the more historical data you build up, the more precise your planning will be.

🗺️ Method: Market Estimation Cheatsheet

I’ve compiled a cheatsheet with formulas and examples so you can use it for your own startup.

This one has applicable examples. I hope it comes in handy - it’s yours!

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