043. TAM Defined

Let's talk about TAM.The massive returns needed to succeed in venture capital is one of the key drivers of the TAM obsession.Bigger markets offer bigger opportunities for growth and bigger exits.Or at least.That's the commonly held belief.When you have an investor hammering on TAM.They might be talking about Total Addressable Market on the surface,but what they're really thinking about is a different TAM:That Aspen Money."Hmm.Is this opportunity,big enough for me to buy that house in Aspen?"The irony of TAM is that the most iconic companies of our lifetime turned a small TAM into an entirely new,massive category.Microsoft in the eighties,AOL and eBay in the nineties,Amazon in the aughts.More recently,LinkedIn New Relic,Twitch.Slack.I could go on and on.I try not to get TAM obsessed.Or more likely,I try to take deep breaths when others get TAM obsessed.It's important.But what's more important is selling an investor on the vision about how your Total Addressable Market becomes That Aspen Money.Here's some questions that you can ask to investors.Have you invested in any companies that are creating their own category or expanding a market category?What worked for them?We see the opportunity to expand our market,what have you seen from your experience that worked or didn't work when doing this?Notice,I'm not talking about exits.I'm talking about the revolutionary work of creating an entirely new segment of business.Of opening up a category for people that are not using these products to start using these products.If you can get an investor to think that your TAM equals their TAM,then you're in business.