Sizing the market for a disruptor based on an incumbent’s market is like sizing the car industry off how many horses there were in 1910.
— Aaron Levie (@levie) June 8, 2014
Over the years, at various times we have talked with potential acquirers or VC firms. Some of these asked us to size the market opportunity. For a new technology area like ours, it is super difficult and sort of ridiculous to attempt a market sizing exercise.
No one knows how big heterogeneous computing will become. It is big enough for us and it is growing. It could permeate every aspect of computing. Probably not. I’m happy that it has become a permanent fixture in computing and is growing rapidly across many industries.
Yet, business development heads like to crunch numbers and want to know the market size. Here are my thoughts on this:
- Market sizing is mostly a silly mission; much like attempting to write a 5-year business plan for a new startup
- However, much of the underlying data that you would need to collect to do a market sizing exercise is valuable: 1) who are the largest customers?, 2) what do they want?, 3) will they need more?, 4) how many other customers are there out there like them?, etc. Information about the customers and buying habits is wonderful information.
- Which market segments are growing the fastest? Which have the best margins? Which are the easiest to sell into as a startup, as a new entrant, as someone needing a relatively short sales cycle?
- It is good to right-size market focus.
- You don’t want to think about capturing just a few percent of the market.
What are your thoughts on market sizing exercises?