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One of the primary considerations for investors is market size.

The size of a company’s TAM (Total Addressable Market) is a proxy, for many, of the potential upside. It’s nice to know that, if a startup executes well and has its share of good fortune, that there is gold at the end of the rainbow. A small TAM, meanwhile, creates a mathematical limitation on the exit valuation.

Source: Gary Larson, The Far Side

(For an excellent discussion of the role that TAM plays in investor decisions, check out this article.)

So, the thinking goes, you need to find a large TAM if you’re going to be successful in fundraising. But, like a lot of things, calculating TAM is not always straightforward, particularly for new markets where the goal is for technology to radically change the status quo.

How will a startup know when it’s found a TAM that is both real and sufficiently large? One hint might be that there are many others chasing the same opportunity.

Ironically, for many investors, this is a good thing: a lack of competition in a market can be a signal to that the market opportunity is actually not attractive enough to warrant investment. As experienced and well-regarded seed-stage investor Christopher Mirabile articulated:

Competition is not bad per se. In fact, I am fond of saying “if you show me an entrepreneur with no competition, I will show you a company with no market.”

Big market opportunities that attract competitors and capital are, obviously, fraught with risk. These conditions necessitate moving fast, scaling quickly, and fending off other market entrants – as if simply creating a startup out of whole cloth to build a new product wasn’t hard enough.

If, however, you do succeed in this environment, you (and your investors) will be handsomely rewarded. But the odds, as described in this previous post, are long.


From Gain’s standpoint, it’s far better to hunt smaller game. The TAM of our initial market is modest by venture capital standards, yet it’s still big enough to stand up a company.

The problem we are solving – data quality for insurance compliance reporting – is already hard enough without additional challenges. Extrinsic pressure, whether from investors or competitors, to move and scale fast would simply create more risk.

And, most importantly, our first market is only limiting for our first product. It’s far from unprecedented for a company to grow from modest success, and that’s our intended goal. 

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