Agree and disagree.<p>Agree: Early-stage investing is rarely about accurately sizing a market. And nothing can be boiled satisfactorily down to an Excel model.<p>Disagree: But you still have to do it. For <i>yourselves</i>, if not for VCs. Presumably, VCs want to see that you've thought long and hard about the market opportunity, about the competition, and about your marketing plan and business model. And you should have. Your market sizing will never be pitch-perfect, but you can't just wave your hands in an investor meeting and declare that the entire exercise is bunk.<p>I would argue that, if you're being asked to "dig deeper" into market sizing, or even if you're being questioned <i>at all</i> about the market size in your meetings, it's really a proxy question for something else. Maybe they find the idea narrow, and they want to be convinced it can broaden to other segments. Maybe they think you're being insufficiently ambitious. Maybe it's the opposite; they think you're being wildly naive. Whatever the case, "What's the size of this market?" is a question their analysts can probably guesstimate in a few days' worth of Excel monkeying. That's not really what they're getting at. What they really want to know is how you think about the business side of your startup (or indeed, whether you do).
> <i>Woz: Don had come to the garage and I ran the Apple II through its paces and he said, “What is the market?” I said, “A million units.” He asked me why that was and I sad, “There’s a million ham radio operators and computers are bigger than ham radio.”</i><p><a href="http://www.realdanlyons.com/blog/2011/10/11/a-conversation-with-woz/" rel="nofollow">http://www.realdanlyons.com/blog/2011/10/11/a-conversation-w...</a>
I remember once sitting with the company CEO and going over my spreadsheet estimates of project timelines, sales projections, and department growth. At the end of it all I said to him that I didn't know if any of this was really worth looking at, since it was all just guesses.<p>His response was that in the early days of the company they had tried doing things without plans, and that bad plans were much better than no plans.<p>I learned something that day.
Market sizing is a Fermi problem - that doesn't mean it's not quantitative or even that you don't need to think about it, it just means a back of a napkin calculation will do (to a first approximation). It's more important how you think through the problem of market sizing than how precise the end number is.<p>The thought exercise will reveal weaknesses in your strategy.
To paraphrase from "Jurassic Park": this is Heidegger. I know this.<p>Although it doesn't ruin his short essay, "instinct" is unfortunate. Executive knowledge about the kind of nascent industry the article (and HN typically) discusses isn't "natural", or a mere knack like playing music by ear. It's tacit knowledge: it can't be codified.<p>In Heidegger-speak: market potential can't be reduced to a stockpile of "presence", of something that's stared at and analyzed like a tool on a shelf. Rather, it's always already operational, "ready-at-hand": what's needed is neither in the tool nor in my theory of the tool, but in the operational-skill-in-action.<p>Moreover: the skill to size a market doesn't live in any particular brain. "Sizing a market" can't be disentangled from the general problem of capitalism -- capital allocation in order to yield more capital. It's not like hammering a nail, it's like building a house. No single person can build a house: house-building, as nascent industry-building, lives in a community of practices. This is the crux of processes like YC "schools" and focal points like the Silicon Valley.
The answer to this question may tell you something about how an entrepreneur thinks about their market and their place in it. Can they see the big picture? It can also serve as a sanity check. Ultimately markets just need to be big enough, but I've seen investors disengage when you can't give them a clear authoritative number.
The link to Rand's blog is 404'ing. It appears to have been moved to the Moz site:<p><a href="https://moz.com/rand/misadventures-venture-capital-funding/" rel="nofollow">https://moz.com/rand/misadventures-venture-capital-funding/</a>
Investors should and do make their own estimates of market opportunity.<p>Investors should and do demand help in making those estimates.<p>A common way to help is to provide a full estimate plus the inputs you used to make that estimate.<p>Now, I think a BETTER way to help is to provide ranges and discussions of the inputs, rather than point estimates. And it's rare that I've encountered an investor who didn't find that acceptable. But some version or other of the exercise is worthwhile.