Market Validation

In this and the next few entries, I will share some learning from a series of startup workshops. I will start with marketing sizing and segmentation.

Imagine a VC sees 2000+ business plans a year, schedules 200+ meetings, puts ~20 term sheets together, and closes <10 deals, there is no question that the first meeting is very important. One of the things to do well to stand out in that first encounter is to show that you've carefully thought through your addressable market, and that big markets with high growth rates are in the horizon.

There are six areas to consider, six T's:

Theme: what is the product you are selling (e.g. independent third party verification for ads)?

Team: who are in the founding team (two or three people, their perseverance, domain expertise)? VCs like opportunity and shy away from risks. The more experienced the team is, the clearer the market, the better. Experienced teams plan for the what Ifs? They perform SWOT analysis. A players hire A players and people they trust. Trust among team members is very important.

Terrain: what is the total available market and the addressable market? The first second and third players in the market get most of the shares, about 65%. Where are you going to be?

Timing: Is the market too early too late?

Technology: How will your technology work?

Terms: What is the right exchange for a part of the company? What can the VC firm contribute with beyond money?


Market estimations:
Bottom up: Start with a user, see how much that customer would pay after year one.
Top down: Look at the size of your market.

Next time, a few different paths around making money.