In the world of entrepreneurship, there are plenty of missteps and mistakes on the way to creating a thriving venture, but there is one mistake you can put an end to today--getting your market size wrong.
As Bill Reichert, venture capitalist and Founders School expert said recently at one of our Founders School LIVE events, "I see too many entrepreneurs destroy their credibility by quoting the wrong market size." Entrepreneurs have been warned that VCs only go for a really large market size, so they grab the largest market size number they can that's vaguely associated with their business.
This is where Bill says, “they stop, instead of segmenting down to the actual size of the market they are truly going after.” Instead of the broad Google search, Bill suggests the bottom-up segmentation—start with your ideal customer and build out a profile from there that accurately describes your market size.
For example, if you are a business that helps universities proctor exams, your market is not the entire education market. It’s universities with a large exam taking population, possibly with a small or limited amount of faculty to proctor exams.
Often entrepreneurs try to grab too much of a market before really understanding if that entire market even applies to them. Don’t follow the big number for a big number’s sake. Think it through; get some feedback from a trusted adviser and save your credibility from being ruined by number you think investors want to hear.
This was part of Bill’s presentation “The Art of Enchanting Investors”. See his full presentation PowerPoint here.