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I have to disagree. An auction website that everyone in America can use? A marketplace for small crafts that is nation wide? A social network that connects a la

I have to disagree. An auction website that everyone in America can use? A marketplace for small crafts that is nation wide? A social network that connects a large creative community and show cases brands and products? It's not hard to imagine any of these having huge TAM's. On the flip side, there are tons of ideas that just don't have the market size - an app that helps students memorize the latin numeral system is unlikely to have a large market. I agree it's not easy to predict if a startup will succeed - but that's different from seeing if there is a market worth going after.

gizmo 3y ago
It's easy to imagine those marketplaces having huge TAMs /today/. With the benefit of hindsight, it's easy. And it's easy to extrapolate to similar businesses. It wasn't obvious then, not even to the founders. eBay started as a hobby project. Only after it took off did Omidyar realize he might have stumbled onto something important, and started taking it seriously. TAM itself doesn't tell you anything. Take flying cars. Huge TAM and yet the space is uninvestable. An app that helps students learn a single thing won't get huge. But the educational software space is huge, and it's fine to attack a big market by starting out in a tiny and unprofitable niche. An app that helps students learn a single subject isn't an obviously worse business than helping collectors find their last missing Beanie Baby (which was the big growth driver for eBay back in the day).
- unusualmonkey 3y ago
  Let's say your correct and the founders didn't know ebay could scale (even though this was during dotcom bubble and raised millions of dollars in investment) so what? That doesn't mean it's not possible or that a savvy entrepreneur shouldn't estimate market size today. The flying car example you give is correct. Yes, I fully agree that a flying car (at right price point and specs) would have a huge TAM. That doesn't make it inherently investible (though I nite a number of companies have received investment in this space). There is a huge difference between a huge TAM is desirable, maybe even necessary and a huge TAM is all you need. You seem to think people are arguing for the latter, when they are arguing the former. I fully agree that the educational software space maybe huge. As such building an app to capture a portion of that might well be worth doing! I think you just demonstrated the power of thinking in terms of TAM - while X doesn't look huge on the surface, it's actually just the first steps to Y which is.

gizmo 3y ago

It's easy to imagine those marketplaces having huge TAMs /today/. With the benefit of hindsight, it's easy. And it's easy to extrapolate to similar businesses. It wasn't obvious then, not even to the founders. eBay started as a hobby project. Only after it took off did Omidyar realize he might have stumbled onto something important, and started taking it seriously. TAM itself doesn't tell you anything. Take flying cars. Huge TAM and yet the space is uninvestable. An app that helps students learn a single thing won't get huge. But the educational software space is huge, and it's fine to attack a big market by starting out in a tiny and unprofitable niche. An app that helps students learn a single subject isn't an obviously worse business than helping collectors find their last missing Beanie Baby (which was the big growth driver for eBay back in the day).

unusualmonkey 3y ago
Let's say your correct and the founders didn't know ebay could scale (even though this was during dotcom bubble and raised millions of dollars in investment) so what? That doesn't mean it's not possible or that a savvy entrepreneur shouldn't estimate market size today. The flying car example you give is correct. Yes, I fully agree that a flying car (at right price point and specs) would have a huge TAM. That doesn't make it inherently investible (though I nite a number of companies have received investment in this space). There is a huge difference between a huge TAM is desirable, maybe even necessary and a huge TAM is all you need. You seem to think people are arguing for the latter, when they are arguing the former. I fully agree that the educational software space maybe huge. As such building an app to capture a portion of that might well be worth doing! I think you just demonstrated the power of thinking in terms of TAM - while X doesn't look huge on the surface, it's actually just the first steps to Y which is.