| name | market-research |
| description | When the user needs to estimate market size, understand market dynamics, or validate that a market opportunity is large enough to pursue. |
| related | ["competitive-analysis","prd-writing"] |
| reads | ["startup-context"] |
| tags | ["nontechnical","startup-founder-skills","market-research"] |
|---|---|---|
| TAM | $X | $Y | Top-down + Bottom-up | High/Med/Low |
| SAM | $X | $Y | Filtered from TAM | High/Med/Low |
| SOM | $X | $Y | Penetration model | High/Med/Low |
Sizing Methodology
Top-Down: Step-by-step calculation from industry totals to target segment. Show every filter and assumption applied.
Bottom-Up: Step-by-step calculation from unit economics up. Show: (number of target customers) x (expected conversion rate) x (annual contract value).
Reconciliation: Comparison of both approaches, explanation of any gaps, and reconciled estimate. If they diverge by more than 3x, investigate the assumptions driving the gap.
Growth Drivers & Trends
Key factors that could expand or contract the market -- technology shifts, regulatory changes, demographic trends, behavioral changes, and emerging adjacent segments.
Key Assumptions & Risks
| Assumption | Impact if Wrong | Confidence | Validation Method |
|---|
| Description | What changes in the estimate | High/Med/Low | How to test this |
Strategic Implications
Numbered list of what the market data means for product, pricing, and go-to-market decisions.
Frameworks & Best Practices
- Always do both top-down and bottom-up. Top-down is fast but abstract. Bottom-up is precise but assumption-heavy. The truth is where they converge. Providing both triangulates and builds credibility with investors.
- Beware vanity TAMs. "The global software market is $500B" is not useful. Define the market narrowly enough that you can name the buyer persona, their budget line item, and what they pay today.
- The "who writes the check" test. Market size should be based on the actual budget your product replaces or claims. A $50/month tool's market is (number of buyers) x ($600/year), not the total revenue of the industry you serve.
- Growth rate matters more than current size. A $500M market growing 40% annually is more attractive than a $5B market growing 3%. Investors and founders should optimize for tailwinds.
- Distinguish value-based from volume-based sizing. Revenue-based (dollars) and volume-based (users/units) tell different stories. Be explicit about which you are using and why.
- Assumption sensitivity analysis. Identify the 2-3 assumptions that most affect your estimate. Show what happens if each is 50% lower. If the market is still attractive at the pessimistic end, the thesis is robust.
- Source hierarchy for credibility: (1) Government statistics and census data, (2) Public company filings and earnings calls, (3) Industry association reports, (4) Analyst reports (Gartner, Forrester, IDC), (5) Startup databases (PitchBook, Crunchbase), (6) Your own primary research and customer data.
- Cite sources for market data. Avoid unsupported numbers. Label what is an estimate vs. what is sourced data. Flag where estimates have wide confidence intervals.
- Geographic specificity. Global TAMs are meaningful only if you plan to sell globally from day one. Start with the geography and segment you will actually target first.
- Adjacent market expansion. After sizing the core market, identify 1-2 adjacent markets you could expand into. This shows a growth path beyond the initial wedge.
- Consider currency and purchasing power parity for international market sizing.
Related Skills
competitive-analysis -- Pair market sizing with competitive landscape analysis to understand both the size of the prize and how contested it is.prd-writing -- Use market segment data to ground the Market Segments section of a PRD in real numbers.roadmap-planning -- Use growth trend analysis to time roadmap investments. Build for fast-growing segments first.
Examples
Example 1: Market sizing for a pitch deck
User: "Help me size the market for our developer productivity tool. We need the TAM/SAM/SOM for our Series A deck."
Good output excerpt:
TAM: $[X]B -- Global developer tools market (source: [industry report], includes IDEs, testing, CI/CD, monitoring, and productivity tools).
SAM: $4.2B -- Code review and collaboration segment, filtered to teams of 10-500 developers at companies with >$5M revenue in North America and Europe.
SOM: $85M -- 2% penetration of SAM over 4 years, based on current growth rate of 15% QoQ and average ACV of $18K.
Bottom-up cross-check: 23,000 target companies x 12% expected conversion at maturity x $18K ACV = $49.7M.
Example 2: New segment validation
User: "We're thinking about expanding from SMB to mid-market. Is that market big enough?"
Good output should size the mid-market segment separately, compare unit economics (higher ACV but longer sales cycle), estimate the investment required to serve the segment (enterprise features, sales team), and calculate whether the segment-level SOM justifies the investment within the planning horizon.
