Total Addressable Market (TAM)
Also known as: TAMTAM SAM SOMMarket SizingMarket SizeAddressable Market
💡The Concept
Total Addressable Market is the total revenue opportunity for your product if you achieved 100% market share. It's broken into three layers: TAM (total market), SAM (Serviceable Addressable Market — the segment you can reach), and SOM (Serviceable Obtainable Market — what you can realistically capture). Investors use TAM to assess if a market is worth entering. VCs typically want a $1B+ TAM to justify their fund economics.
⚠️The Trap
The most common TAM mistake is 'top-down' sizing that inflates the number. Saying 'the global CRM market is $80B, so our TAM is $80B' is nonsensical if you only sell to 500-person tech companies in North America. This 'TAM fantasy' is the #1 reason investor pitches fail — it signals the founder doesn't understand their actual market.
🎯The Action
Use bottom-up TAM calculation: count the number of potential customers you could serve × what they'd pay annually. Start with SOM (what you can realistically get in 3 years), then SAM, then TAM. Be specific: '12,000 mid-market SaaS companies × $30K/year ACV = $360M SAM.' VCs respect founders who demonstrate precise market understanding over inflated claims.
⚡Pro Tips
The best TAM analysis includes the existing alternatives. If customers currently spend $0 on your category, your TAM is real but your GTM is harder — you're creating a new market, not capturing share of an existing one.
TAM should EXPAND over time if your product is good. Slack's initial TAM was enterprise chat tools (~$2B). They expanded TAM by replacing email, making their effective TAM $20B+.
🚫Common Myths
✗Myth: “Bigger TAM is always better”
✓Reality: A $50B TAM with 0.01% market share is worse than a $500M TAM with 10% market share. What matters is your path to capturing meaningful share, not the ceiling.
✗Myth: “TAM is fixed”
✓Reality: Great products expand their TAM. Uber's TAM wasn't 'the taxi market' — they expanded the market by making car-free living possible, growing the total market 3-5x.
📈Industry Benchmarks
SAM Size for Venture Backing
Minimum SAM for institutional VC investmentMega
> $10B
Large
$1-10B
Medium
$300M-1B
Small
$100-300M
Niche
< $100M
Source: a16z Market Sizing Framework, 2023
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