Idea · Lesson 2 · 12 min
Is the prize big enough?
A real problem can still be too small to build a company on. Size your market the honest way — bottom-up, from customers and price down to the share you can realistically win — and judge whether the prize is venture-scale.
A real problem can still be too small
You’ve found a problem worth solving. The next honest question is whether the prize is big enough to build a company on. Plenty of genuine, painful problems make fine lifestyle businesses but never venture-scale ones — and knowing which you have changes how you fund and build.
TAM, SAM, SOM — nested, not interchangeable
Three numbers, each inside the last:
- TAM — everyone with the problem, if you could reach them all.
- SAM — the slice you can actually serve (your geography, segment, channel).
- SOM — the share you could realistically win in the next few years.
Build it bottom-up, not top-down
The lazy way is top-down: “the market is ₹10,000 crore — we just need 1%.” That 1% is a fantasy with no mechanism behind it. The honest way is bottom-up: how many customers exist, times what each will pay, times the share you can credibly capture. It produces a smaller, truer number — and a number you can actually defend to yourself and to an investor.
The figure that matters is SOM: your realistic near-term revenue. Then ask whether it has a believable path to grow — more share, adjacent segments, higher price — into something large.
Now size yours
Put in the number of potential customers, what each would pay a year, and the shares you can serve and realistically win. Watch TAM narrow honestly down to SOM. Keep it — it’s saved privately to you, never posted anywhere.
Size your market, bottom-up
Your realistic near-term prize — SOM, about ₹5.8 Cr/yr — is the number that matters. The lazy version is “1% of a huge TAM”; the honest version is the one you just built bottom-up. A venture-scale company usually needs a believable path from SOM into the hundreds of crores — does yours, as you grow share and add adjacent customers?