Startup Fallacies - Market Size

 

Every investment deck I’ve seen always claims a massive market size for whatever industry a business is addressing. These usually involve using cut and paste stats from some consultancy, market research or investment research company. Heaven knows how often I've prepared decks in the past that have been guilty of this.

The trouble is that market size and addressable market size are two very different figures and the latter is usual a fraction of the former. The global TV market is easily worth $1 trillion. The market for rights management software, which underlies the whole industry, is probably £500m, or 0.05% of the market size. Then this is taken up by competitors, so the addressable market size is considerably smaller. Factor in churn and the volatility of the TV market thanks to mergers and you suddenly end at a very different figure for the actual addressable market. You can apply the same metrics to online streaming technology or asset management software for the industry.

But there are times when your market is much bigger than your realise. You develop a product for one market and then realise that it has applications in many other markets. That’s where we’re at with Project Q: we started out with a niche product and then realised that it has so many other applications.

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