As you may know, Hustle Fund looks at 5 pillars of a startup to decide whether or not to invest. Those 5 pillars are:

• team
• problem
• solution
• market
• traction

Today we’re going to dig into the market part of your pitch. Specifically, we’re zooming in on Total Addressable Market (TAM) and Serviceable Addressable Market (SAM).

Why are these so crucial? Because VCs are hunting for unicorns. They need to believe that you can deliver a 50x or 100x return on their investment.

And to do that, you need more than a great idea, a game-changing solution, and eye-catching traction.

You need a big fat market to sell to.

Let’s dig in, shall we?

TAM: Go big or go home

Let's start with TAM – Total Addressable Market. This is the big kahuna, the whole enchilada, the... well, you get it. It's the total size of the market you're aiming to serve.

TAM is your startup's theoretical ceiling. It's like saying, "If we captured every single customer in our market, this is how big we could be."

For our ride-sharing app example, the TAM would be the total dollar amount spent on transportation globally. We're talking billions of dollars.

Pro tip: When a VC asks about your TAM, you’re gonna need to show your work. Don’t rely on Google alone.

Tools like Gartner, Statista, and Clearbit to can help you calculate your TAM.

Remember: VCs want to see TAMs measured in billions of dollars. Ideally, tens of billions or higher.

Why? Because VCs are swinging for the fences. They're not interested in a 2x or 10x return – they want grand slams. A massive TAM indicates that your startup could potentially IPO or get acquired for billions. That’s the kind of return that VC are looking for.

Angels may not be looking for as high of a return, so if you find that your TAM indicates that your company isn’t “vc-backable”, you may want to consider raising from Angels instead.

Last note here – there may be a world in which you create your own market. This is what Vinovest did. Just be sure to discuss how you plan on creating this market if you take this route.

SAM: Keeping it real(istic)

Now, let's talk about SAM – Serviceable Addressable Market. This is where we bring things back down to earth a bit.

In a nutshell, SAM is the portion of your TAM that you can realistically reach and serve.

Going back to our ride-sharing app example… your TAM might include every person on the planet who needs transportation.

But your SAM should be more focused. Maybe you're starting in Canada, targeting urban areas with high smartphone penetration.

The key here is to show that while you're starting with a smaller piece of the pie, it's still a pretty darn big piece. VCs want to see that your initial market is still measured in billions.

Many companies often start by addressing a very local SAM, then use that as a foothold to grow into larger markets.

Start local, prove your model, then expand.

So you might launch your ride-sharing app in Toronto, then expand to other Canadian cities, then to the U.S., Latin America, and beyond.

This approach shows VCs that you have a realistic growth strategy while still aiming for that massive TAM.

Positioning TAM and SAM to investors

Now let's talk about how to present TAM and SAM in your pitch. Focus on clarity.

Here's a framework:

1. Start with your TAM: "The global ride-sharing market is projected to reach $220 billion by 2025."
2. Narrow it down to your SAM: "We're initially targeting urban areas in Canada, a $5 billion market."
3. Show your growth strategy: "As we prove our model, we'll expand to major U.S. cities, increasing our SAM to $50 billion within three years."

Visuals, like a simple chart, might be helpful to illustrate your market size and growth potential.

Pretty pretty please – be prepared to back up your numbers. Investors will ask where your data comes from, so have those sources ready.

Finally, strike a balance between ambition and realism. Your TAM should be huge, showing the massive potential of your idea. But your SAM should demonstrate that you understand the challenges of market penetration and have a solid plan for growth.

Size matters to VCs

When it comes to VC pitches, size really does matter.

TAM and SAM are more than buzzwords – they're key to showing investors that your startup has the potential for massive growth.

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