Companies are talking about total addressable markets (TAMs) more than ever. Why?

Projecting a massive total addressable market (TAM) is an easy way to boost a firm’s growth prospects.


October 8, 2020

According to the Financial TimesJamie Powell, more and more investment theses are forecasting massive total addressable markets (TAMs).

In fact, research from data firm Sentio shows that “September saw a record number of companies using the term [TAM] in their pre-IPO S1 filings.”

TAM is going HAM

Per Powell, here are some of the notable TAM projections:

  • Uber claims that the ride-sharing industry is a $5.7T opportunity
  • Virgin Galactic — Richard Branson’s baby — forecasts the commercial space travel industry is worth $1.5T.

The definition of TAM is changing, too. Typically, TAM refers to the revenue opportunity of an industry.

In a new spin, Bank of America recently pegged the TAM for Russia’s finance industry at $2.2T, including “retail wealth.” The problem is that the actual revenue opportunity for managing retail wealth is a small % of the total dollar amount. 🤷

Big TAMs are a way to justify lofty valuations

The classic move being: “If we can just capture X% of this huge $Y market, we’ll all be richer than MacKenzie Scott.”

Professional investors (including the Shark Tank crew) have an adverse reaction to the phrase, which comes off as 1) wildly optimistic; and 2) demonstrates a crude understanding of one’s actual business prospects.

With equities continuing to reach lofty heights, though, the hyperbolic nature of these TAM projections are kinda working.

Daily briefings, straight to your inbox

Business and tech news in 5 minutes or less

Join over 1 million people who read The Hustle

Psst

How'd Bezos build a billion dollar empire?

In 1994, Jeff Bezos discovered a shocking stat: Internet usage grew 2,300% per year.

Data shows where markets are headed.

And that’s why we built Trends — to show you up-and-coming market opportunities about to explode. Interested?

Join us, it's free.

Look, you came to this site because you saw something cool. But here’s the deal. This site is actually a daily email that covers the important news in business, tech, and culture.

So, if you like what you’re reading, give the email a try.