Undoubtedly one of the most critical slides in your pitch deck (not your pitch) is your TAM slide and there are confusions around how to estimate one. For starters it needs hard work unless you want to go for the Top Down model relying on industry reports and external estimates and simply aim for 1-2% of market share.
If you take the bottoms up or value based routes it would need ground work, analyzing or extrapolating available (but limited) data to arrive at a calculation. For starters, take a look at the analysis by Jared Sleeper (of Coatue Management) of TAM slides from successful pitches by 8 companies
A more detailed piece is written by Amanda Kiyomi Uyesugi in the Discoverorg Blog. She writes –
“Calculating TAM for business means asking questions like:
– What industries are we likely to sell into?
– What size of companies buy our solutions?
– Where is growth expected?”
In the bottoms up model the formula for calculation would look something like:
TAM = (Total # of Accounts) x (Annual Contract Value [ACV])
The crux is ensuring you have real data generated through your own efforts, mapped or access quality data from sources that you can validate.
Where I learnt this #408
How eight successful startups explained their addressable markets to investors
How to calculate your total addressable market and make a great TAM slide for investors
HOW TO CALCULATE TOTAL ADDRESSABLE MARKET SIZE AND PERFORM TAM ANALYSIS
Best Way to Do a Market Analysis?