MADEUP Billion Dollar Markets for Your VC Pitch

Are you stuck in a measly $250 million market?  Venture capitalists about to reject your business plan because you can't show them the billion dollar market they need for their returns?  Can't check the box on that billion dollar market slide you need to get funded?

As an experienced technology marketeer, I can help.  Using my Market ADvancEment & UPward Estimation (MADEUP) Method, you can muscle up your puny $250 million market into a $1 billion, $3 billion, $5 billion, even $10 billion dollar market!  Just follow MADEUP’s six simple steps.

Step 1:  Present TAM not SAM – Present your market in terms of Total Available Market (TAM) not Served Available Market (SAM).  While SAM is the actual product and substitutes being purchased by users today and for which there is hard data, TAM represents the SAM plus potential users of your product.  After all, your 80 year old Aunt Edna could be interested in the latest social networking site for extreme skiers….

Step 2:  Define “market” as people who want your stuff  -  While traditional marketing defines a market as customers who want and will pay for your products, with MADEUP you include all the people who might want your products once they’ve been exposed to it.  (After all, your product is new and revolutionary! Of course they’ll buy once they see it....)

Step 3:  Redefine the market scope - Tell me what market size or share you want, and MADEUP can give it to you just by adjusting boundaries.  Current market for light sabers limited to the number of Jedi Knights and Paduans in training?  Not if you include all the loggers on Endor (or the rest of the Empire for that matter) looking for fast, precision tree cutting  tools!

Step 4:  Harvest the most favorable data from multiple sources – There are usually multiple market studies out there all with different assumptions and therefore different data.  As long as the data descriptions are close enough, just cherry pick the most favorable estimates into one summary study.  With MADEUP, go ahead and combine the linearly extrapolated 2009 estimate for PDA's from that old 1999 study with this year's estimate for smart phones to get the TAM for handheld productivity devices!  This method has the added benefit of giving your estimate multiple footnotes for added credibility!

Step 5:  Stick to dollars not units – Always estimate the market in dollars (or euros or yen) never in units.  That way, you can tweak your estimate by adjusting the unit average selling price (ASP).  Need to bump the estimate by 20%?  Just change the ASP from $1.00 to $1.20!  After all, your product’s so hot that customers will gladly pay extra for it!

Step 6:  Finally, extrapolate! – Convert a small today market into a billion dollar market  of tomorrow by carefully adjusting compound annual growth rates (CAGR).  And don’t confine yourself to linear extrapolations.  With MADEUP, you can experiment with exponential or power law growth curves!  Get a little extra boost by combining this with favorable ASP trend assumptions.

DISCLAIMER:  MADEUP estimates should not be used for top down projections of revenue.  (This is where your business plan states that if you just get 1% of the TAM, you’ll be a $100 million company.)  Some of the more experienced VCs are onto this and likely to point out that (1) a market is not the same thing as a customer and (2) competitors aren’t likely to let you just waltz in and take their share.  The more difficult VCs may even accuse you of not understanding the market at a deep enough level!  This may lead them to dig deeper into some of the assumptions behind the MADEUP estimate.

For more information about MADEUP, call 555-1515.  Operators are standing by!

P.S. Even if you don’t have a billion dollar market, you might still have a great business which may or may not be VC backable.  Not everything is or needs to be funded by VCs.  Consider looking for alternative financing versus dressing up your business as something it's not.