Hi HN,<p>I'm working on a healthcare startup targeting doctors, hospitals, and clinical trials. I've built a bottom-up approximation of market size and have estimated my Total Addressable Market (TAM), Serviceable Available Market (SAM), and Serviceable Obtainable Market (SOM).<p>I have two questions for the community:<p>What SOM is considered attractive to VCs investing in startups?
Is there a threshold (e.g., $100M, $200M, etc.) that investors typically look for?<p>What percentage of SOM should a startup aim to capture within 5 years to be viewed as a good investment opportunity?<p>I’d love to hear from founders, investors, or anyone who’s been through this journey in healthcare or similar industries. Any benchmarks, advice, or resources would be greatly appreciated!<p>Thanks in advance for sharing your insights!
I think SOM is more of a narrative tool that helps you explain part of your market approach rather than a binary classifier that either leads to or away from fundability. Specifically in healthcare, there's a great passage [1] in an article by Steve Kraus, who's one of the most well regarded startup healthcare investors that I think has stood the test of time and at least expresses part of Bessemer's thinking on this pretty insightfully:<p>```<p>Healthcare represents approximately 18% of US GDP or, in other terms, $3.6 trillion of annual spending, and continues to grow by low, single-digit percentages each year. Despite the impressive scale of the US healthcare industry, not a single healthcare company has a $3.6T total addressable market (TAM).<p>Instead, healthcare looks a lot more like several thousand billion-dollar markets that include everything from healthcare technology, commercial and government-sponsored care to drugs, medical equipment, home health services, out of pocket costs, and more, all of which together comprise the $3.6T industry figure.<p>```<p>[1] <a href="https://www.bvp.com/atlas/roadmap-10-laws-of-healthcare" rel="nofollow">https://www.bvp.com/atlas/roadmap-10-laws-of-healthcare</a>
That's a daunting endevour not sure SOM will cut it. Many tried and failed or had to cut back. Oscar Health springs to mind <a href="https://en.m.wikipedia.org/wiki/Oscar_Health#:~:text=Oscar%20Health%2C%20Inc.%20is%20an,easier%20for%20patients%20to%20navigate" rel="nofollow">https://en.m.wikipedia.org/wiki/Oscar_Health#:~:text=Oscar%2...</a>.
Even the combination of big players called Haven with very deep pockets ( Amazon & Buffett & JPMorgan) eventually flagged.
<a href="https://www.cnbc.com/2021/01/04/haven-the-amazon-berkshire-jpmorgan-venture-to-disrupt-healthcare-is-disbanding-after-3-years.html#:~:text=Coming%20just%20three%20years%20after,mostly%20concentrated%20in%20different%20cities.&text=The%20move%20comes%20after%20Haven's,and%20locations%2C%E2%80%9D%20she%20said" rel="nofollow">https://www.cnbc.com/2021/01/04/haven-the-amazon-berkshire-j...</a>. Not to discourage you but this market is so lukrative for existing participants (hospitals, health care providers etc.) they will fight new ideas tooth and nail. VCs know that.
Not healthcare specific but generally $100M ARR in 10 years tracks many of the current unicorn darlings, but you’re competing with startups of today not 10 years ago so you’ll want to figure out a way to get there faster. Clock really starts at the seed, though it really gets serious at the A where you have a board which maybe can fire you. TAM can expand, i think VCs focus more on how you will grow quickly, if you get summarily rejected based on TAM it just means you didn’t get very deep into their process<p>One comp is a HIPAA compliance vendor which took a while to get the first $1M but then grew 10x in a year once they cracked it