The Deception that is Market Size

by Santosh

Myth: Size of Market is directly correlated to good/early results.

Good entrepreneurs know their Size of Market, Total Addressable Market and Share of Market (WTH is TAM, SAM, SOM). These metrics are important as they represent the cap on your potential Sales volume.

Size of Market has zero correlation to the probability of success of a venture. To be more precise, Size of Market has zero correlation with the true growth velocity of a Startup. Why growth velocity? Velocity, or how fast a Business can grow, is a function of its Gross Margin and Sales Volumes. Grow too slow, and there is a chance you might run out of cash too quickly leading to liquidity pressures later on.

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