Inc - What To Do if Your TAM is Too Small

TAM (Total Addressable Market) is a tricky concept. 

On the one hand, to build a decacorn or a unicorn, you need to tap into a large market. TAM matters, and if you aren’t playing in a $20B-$50B+ market … it’s hard to get to $1Bin ARR. 

In the end, this is why 70% of leading SaaS companies are really just new entrants in old, large markets.

For example, Okta today is a $30B+ cloud leader.  But it’s much larger in ARR than all its pre-Cloud vendors in its space combined. 

Still, many VCs just didn’t get it at first, as CEO Todd McKinnon noted. Which frustrates him almost to this day.

And VCs need to hunt unicorns and decacorns to survive. More on why that’s true here. So they are looking for large TAMs. 

Very large TAMs.   Often, $100b+ TAMs.

So what do you do to get VCs excited if you see a $100m+ ARR / $1b+ unicorn in a space, but the nominal TAM just isn’t that big today?  A few thoughts, which can be combined.

So we just wrapped our first trifecta year of major events between: SaaStr Annual in SF Bay Area, Europa in London, and APAC in Singapore.

Earlier this year, we shared how the big theme from a Sponsorships perspective leads from SaaStr Europa 2023 were up 153% from 2022. So, we took a lot of the learnings from London and amplified them 10x for the much larger SaaStr Annual.

The result? 

• We hosted more than 10K attendees across 3+ days 
• Indoor/ outdoor festival style 
• 25,000 attendee connections were made
• 3,200 hours of workshops and braindates hosted
• 289 speakers, 52% women, 53% less represented
• 159 sponsors
• 213 zipline rides
• We had attendees from over 100+ different countries(!)
• And 1 Big Party with Cheat Codes and Anabel Englund

But much more than that, we dig into the data even more to uncover the latest event trends prevalent at SaaStr:

First, on the attendee side, 34% of attendees attended as a team.

Up Next: Wednesday, October 4th @ 10AM PT

Topic: The Path to Series B: Scaling Beyond Founder-led Sales with Atomico 

Speakers: Andreas Helbig, Partner at Atomico and Laura Connell, Partner @ Atomico

Workshop Wednesdays is new series where we’ll be bringing some of the best SaaStr speakers to you LIVE, every Wednesday. 

Each workshop will be hosted in a live, interactive 30-minute format at 10am Pacific each and every Wednesday. This workshop will be 100% LIVE, not pre-recorded, and will be hosted in an, interactive 30-minute format, including Q&A.

So this is a very specific post, but I’m hoping it helps just a few.

We’ve all gone though so much change since March 2020. 

From lockdown, to shutdowns, to market explosions, to the Bloom of 1,000+ Unicorns, to Market Crash, to a Semi-Downtown, and back to a few IPOs now again in the back half of 2023. 

So, so much change.

As part of that, the very way we build SaaS companies has changed multiple times.  We’ve gone from somewhat efficient through 2018 or so, to less efficient into 2020, to incredibly inefficient in late 2020 and 2021, to layoffs seemingly everywhere in 2022, and now to Efficient Growth. 

It’s so much change. 

To OTEs, to job specs, to how teams are staffed, and more.

And if as part of that, your job stinks, well I get it.  Make a change.  Even now, find a way.

But what I’m also seeing is a big unforced error:  folks unhappy at home … taking it out on work.

There’s a metric the very top founders track quietly, but ruthlessly, that I find other founders either don’t track, or sort of hide from.  That’s % of marketshare.  And importantly, if it’s growing, or shrinking.

Why does it matter?

Well, your growth, or lack thereof, of market share is the #1 sign of potential decay in your product.

And potentially also, of the need to upgrade the team.

Think about the basic math for a moment:

• The #2-#5 players should be growing faster on a percentage basis than #1.  You’re starting from a smaller base, with a unique competitive advantage of some sort.  You have to be growing faster on a percentage basis than they are.  They should be adding more new bookings than you in most cases.  But growing more slowly.
• In a fast-growing market, it’s important to not be quietly left behind just by growing more slowly.  If you got to, say, $10m ARR this year, growing 70% … that’s pretty good, if not quite world-class.  But if your similar competition is growing 100% at $20m ARR, that’s a problem.  It compounds.  If that delta remains that way for a while, you’ll fall further and further behind.
• In a slower-growing market, it’s important to not let macro challenges be an excuse to fall behind.  If your growth has fallen from 100% to 50%, but the competition is still growing 80% … the problem is you. Not just the market.

There are only two reasons to raise Venture Capital:

• You need it. If the only way you can get to the next level is to raise capital, then do it. I needed to for both my start-ups, up to a point, for different reasons.  Whatever the dilution, cost, headaches — if you need VC to thrive, and you can raise it, then raise it.  And don’t look back.

or

• It’s “cheap”. Venture capital is very expensive in the early days, in terms of dilution. But later, it gets pretty cheap. It can either be cheap in that the ROI is high — e.g., you make $5 back for every $1 you invest. That usually is incredibly accretive for your founders’ stock. This is the ideal reason to raise a Series “B” or “C” round. And in later stages, if you can raise money at huge valuations, the rounds literally can be very cheap in terms of dilution % for $ raised.
• But … but … even if it’s “cheap”, it’s not free.  Many of today’s unicorns likely wish they’d never raised, and spent, it all.  These new investors will be looking to 3x-10x their money.

The real trap is raising in other scenarios.

“My App Stack” is a new series where we dig in with top CMOs, CROs, CTOs and CEOs on just what apps they’re really using to run their business.  I always learn a lot from these — they are in essence a best practices list from each leader.  Last week we had a great one with Jessica Gilmartin, Chief Marketing Officer of Calendly, check it out here.

This week we have Sean Falconer, Head of Marketing of Skyflow!

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