Index Ventures’ Jahanvi Sardana: Rethink TAM – What Founders Should Focus On
▼ Summary
– Many successful startups emerged from markets that were initially nonexistent, like Google with search or Amazon with cloud computing.
– Jahanvi Sardana compares TAM to surfing, emphasizing the need to ride major technological waves like AI to achieve product-market fit.
– TAM can be categorized into three buckets: known markets (replacing incumbents), emerging markets (potential for mainstream adoption), and invisible markets (creating demand).
– Founders should avoid over-relying on industry reports for TAM and instead demonstrate unique insights about their market and customer needs.
– Investors prioritize evaluating founders’ ambition and understanding of their customers over just market size or product details.
Early-stage founders often fixate on total addressable market (TAM), but Index Ventures partner Jahanvi Sardana argues that groundbreaking startups frequently emerge from markets that didn’t exist before. Speaking at TechCrunch’s All Stage event, she challenged entrepreneurs to rethink conventional wisdom, pointing to industry giants like Google, Microsoft, and Amazon, companies that didn’t just capture existing markets but created entirely new ones.
Sardana likens market opportunities to surfing waves. The internet, mobile, and cloud computing were massive shifts that reshaped industries. Today, artificial intelligence represents the next transformative wave, and founders must ask themselves: Is my product built to ride it? That alignment, she emphasizes, is what defines true product-market fit.
The Three Faces of TAM
- Known Markets – These are established industries where startups compete against incumbents. Here, differentiation is key. “Everyone brushes their teeth,” she says. “The question is, why is your toothbrush better?”
- Emerging Markets – Sectors with early adopters but untapped mainstream potential. Think non-alcoholic beer before it became trendy. Founders here must demonstrate how their solution will cross into broader adoption.
- Invisible Markets – The most elusive, and risky, category. These markets don’t yet exist, requiring founders to invent demand. Smartphones in 2006 were a prime example; consumers didn’t know they needed them until they did. “Sometimes, you have to show people what’s possible,” Sardana notes.
The Pitfalls of Over-Reliance on TAM
One attendee asked how to size TAM in complex marketplaces, prompting Sardana to reflect on Index Ventures’ missed opportunity with Airbnb. Initially dismissed for its seemingly small market, the company later proved that unlocking new supply can redefine entire industries. “Marketplaces are tricky,” she admits. “The real question is: What behavior are you changing?”
What Makes a Founder Stand Out?
Her advice? Don’t let TAM constraints stifle innovation. Some of the most successful companies began where markets were invisible, and built them from scratch.
(Source: TechCrunch)
