Inane Market Sizing

June 15, 2014

in Acquisition, Fundraising, Marketing

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?

 

  • http://blog.weatherby.net lance

    As a business development type I have a couple of thoughts on this.

    1. The underlying data is indeed very valuable. People that are asking market size questions sometimes want it so they can 1) understand how you think, and 2) use it as a basis to do their own market analysis if they are prone to do so.

    2. If they do not want the info for the above reasons they are asking for market size figures because they believe it to be small and want to know the extent of your delusion.

    3. All large market sizing is apparent to an informed market participant regardless of if the technology is disruptive or not. As an example about five years ago my son showed me Netflix on his PS3. My immediate thought “everyone is going to want to do this.” I bought the stock. : )

    • melonakos

      Haha, I wish I would have bought Netflix stock! Great points; thanks Lance!

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