Essay · ~20 min read

16 More Startup Metrics

Anu Hariharan, Frank Chen, Jeff Jordan · Andreessen Horowitz Free Intermediate

When there is no category report to point at, you have to build the number yourself, and this is the essay that teaches you how. It walks through bottoms-up sizing (start from your actual customer, their willingness to pay, and how you will reach them) and shows why the top-down 'we just need 1 percent of a huge market' story falls apart. Treat it as the method for a defensible estimate, not a promise about how big you will get.

  • Build TAM from the bottom up: real customer profile times realistic price times how many you can actually reach and sell to.
  • Top-down percentages inflate the number and hide the hard part, which is distribution and go to market.
  • Some of the best companies (eBay, Airbnb) started against a market that looked small, then expanded the use case, so a modest starting number is not a dealbreaker.
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It answers 9 questions

  1. How big does my market need to be for this to be a real business?
  2. What are TAM, SAM, and SOM and how do I actually calculate them?
  3. How do I size a market for India specifically when data is messy?
  4. How do I estimate a market size when the product I'm building doesn't have a category yet?
  5. How do I know if a trend is big enough to build a company on, or just a small niche?
  6. How much of the market do I realistically need to capture for this to be a real business?
  7. What are the most common mistakes founders make when sizing their market, and how do I avoid faking a big TAM?
  8. How do I research market size and timing when I can only spend a weekend and have no budget for reports?
  9. How do I actually measure whether a launch worked, beyond the vanity upvotes and traffic spike?

Read with it

  1. The single best thing ever written on customer conversations. It teaches you to ask about the customer's life and past... momtestbook.com Book · ~130 pages The Mom Test Rob Fitzpatrick
  2. Most market sizing advice online is generic TAM SAM SOM filler. This one is written by an investor, backed by a survey of 30... Pear VC Essay · ~15 min read Market Sizing Guide Ian Taylor
  3. Video · ~50 min How to Evaluate Startup Ideas Kevin Hale, Y Combinator
  4. The definitive essay on where good ideas come from: notice problems you personally have, don't force it. Use it as the lens for... paulgraham.com Essay · ~20 min read How to Get Startup Ideas Paul Graham
  5. The essay that put 'product-market fit' into the startup vocabulary. Read it for the gut-level description of what PMF feels... pmarchive.com Essay · ~15 min read The Only Thing That Matters Marc Andreessen
  6. Before you sweat which side to seed, Gurley helps you judge whether your marketplace is even structurally worth building. He... Above the Crowd Essay · 20 min read All Markets Are Not Created Equal: 10 Factors to Consider When Evaluating Digital Marketplaces Bill Gurley
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