Can You Predict TAM?
The elusive pie in the sky term that everyone seems to have different thoughts on
I want to start off this post with a few screenshots using the Wayback Machine. I have purposefully obscured the names of the companies mentioned so we can do a fun exercise with the screenshots.
The companies listed above are Snyk, Salesforce, and AWS. Now what’s the point of all these screenshots besides the fact that the Wayback Machine is so freaking cool?
Look back at the screenshots above and try and tell me how big that company would be. “Find and fix vulnerabilities in Node.js dependencies”….hmm maybe a few million developers?
“Online sales force automation that makes software obsolete”…I guess pretty much every company has a sales team, but not sure how many teams were ready to change the processes that were already working for them. There also happened to be a fair amount of competitors in the space as well. Likely made the number of companies in the 5-10M range but not sure how many were actually addressable?
The point being, all of these companies turned out to be very successful but in the beginning there was no way to tell the eventual TAM from their products and messaging.
What all of these companies did have in the beginning was targeted, end user specific messaging and clear call to actions “Create your free account”, “Take the Tour”, “Sign up with Github”.
Too many times, founders think investors want to hear how big the market is. For the most part, if you’re focused too much on the market education, then you probably have not found the right investors for your business. Over time the actual addressability of any market will reveal itself through execution, product adjacencies, and customer feedback/usage.
In the beginning of any new product though, regardless of the company’s maturity, the focus always needs to be on the end user pain, getting the first 5-20 users that use the product as part of their core workflow, and then iterating from there.
Great teams executing on their core product will then find adjacencies that customers either start using the existing product for or provide feedback on and figure out the differentiation that they can provide given their initial beachhead into the customers’ workflow. This is how the TAM expands over time.
Across all 3 you can see the significant TAM expansion that no one could’ve predicted. First solve for specific user pain and then use that user love to expand into other areas of pain over time. Sooner or later, everyone will look back and see a company that has a TAM 10x larger than when it first started.
My colleague Ed Sim has a great quote that sums up all of this - “It’s not the TAM you start with, it’s the TAM you end with.”
Stuff I enjoyed this week:
Fun read on how the Michelin Guide works
Datadog’s report on AWS Security - All about the complex issues with IAM policies and the benefits of having multiple AWS accounts
Super excited about this! Kudos to the team for putting this together! Let us know your thoughts.We are proud to release Datadog's first security study: "The State of AWS Security - A Look Into Real-World AWS Environments" Read the report to learn about key mechanisms to secure AWS environments and how organizations worldwide are implementing them. https://t.co/xBiNKgdizg
Datadog, Inc. @datadoghqScott Belsky, Chief Product Officer of Adobe giving a comprehensive and clear interview on why Adobe acquired Figma - link here
Serverless confidential computing released by Cape Privacy!
What’s the different between Platform Engineering and DevOps?
Proactive Security Alerts before the attacks happen! Much needed to make use cases in crypto stick by Hypernative as you need more user trust.
I've once had a thought on market leaders. I thought that leading companies have the biggest market share (% of SAM). But true leaders expend the TAM for all SAM players. They are the educators and demand generators.