When planning a serious start-up, TAM or Total Addressable market is one of the most important factors which needs to be considered.
Ideally it is preferred that the TAM(total addressable market) is at-least a billion dollars. It is because when an investor will value the start-up, he will evaluate it on the basis of 5-10% of TAM which one can capture. Lets say, If the product is very good and the service is much required in a niche. But the TAM is only a hundred million or so. What are the chances of making profits where the maximum earning is only a 10 million or so(Considering 10% of market share.)why would I risk a million or two where the best case earning is only a $10 million.
So it is very important to check if the TAM of the idea is something that would interest an investor.
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