Ask a Seed VC: How can I answer market size questions about a nascent industry?

Eniac Ventures
3 min readJul 29, 2021

by Anthony Ha and Kristin McDonald

Image:Unsplash/Frank Busch

Welcome back to Ask a Seed VC, Eniac’s advice column about startup fundraising and investing. Today’s question comes from a founder who requested that they remain anonymous:

My startup has seen some very strong growth recently, having gone from $0/mo -> $50k/mo in revenue in the past 6 months but as we bring a new model (content licensing) to what is still a nascent industry (digital wellness) we often get questions around market sizing.

Although some investors just get it, I have struggled to consistently answer these questions due to a lack of data around the content side of digital wellness. I’d love some advice on how you feel this could be answered well?

Broadly speaking, there are two ways to approach calculating your total addressable market — top down and bottom up.

Limited industry data can make this a challenge, with higher degrees of uncertainty. But even so, both approaches are still applicable. We’ll point out a few ways they might apply in the digital wellness example, and hopefully it will be helpful for readers in other sectors as well.

As a refresher, the top down approach involves looking at the total size of the market and estimating how much of that market you might reasonably capture. In this case, there may not be any studies about content licensing and digital wellness — and to an extent, you may be trying to create the market yourself.

Still, you can try to find other data points that might not tell you the exact market size, but can help to illustrate the magnitude of the opportunity. For example, how much money is spent on digital wellness advertising? How much money are big players like Calm spending on their content? How many articles are being published about these topics, and what kind of audience do they reach? And so on.

A bottom up approach, on the other hand, involves trying to calculate your potential sales and revenue in a more granular way. You could use your own data here: If you’re already starting to license content, you could just project how much of that content you’d have to sell to hit your revenue targets.

If you don’t yet have enough data of your own to extrapolate , you can still find ways to make similar estimates. For example, you could see how much time is being spent on digital wellness content, estimate how much you could monetize that time, then back into a potential market size — multiplying the total number of customers by the amount of content they consume and the amount you could charge for each piece of content.

Either way, you’re definitely going to have to make some assumptions. The key is to be transparent about those assumptions, and to err on the side of being relatively conservative. These should be assumptions that everyone can agree with, rather than requiring investors to share your optimism or wishful thinking.

Good luck!

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