How Startup Investors Evaluate Market Potential
When startups go out to pitch investors, the first question they are asked is how big is the market they intend to tap. A concept can be groundbreaking, but if there is no solid market potential, then it will never get financed. Startup investors are not just interested in knowing if the idea works today but whether it can expand in the future as well. The Importance of Market Potential Market potential provides investors with a sense of scope. It tells them if a startup has the possibility of success over the long term or if it will be a small niche company. A promising product in a tiny or declining market is rarely enough to secure investment. What excites investors is the possibility of growth, sustainability, and the chance for a startup to expand beyond its early customer base. Looking at the Total Addressable Market Investors often begin their analysis by looking at the Total Addressable Market, commonly called TAM. This numb...