Are you ready to launch a bajillion dollar startup? Before you start: Are you planning to build a centaur, a unicorn, or maybe a decacorn?
Pitching to startups has become an existential drama, in part because so many founders exaggerate the size of the total addressable market (TAM) in which they hope to compete.
At australiabusinessblog.com Disrupt, I spoke to three investors about how they are using TAM to guide their decision-making. Everyone agreed that the song itself is far less important than the process that produced it.
“The way it is calculated and the way the founder thinks about it doesn’t necessarily tell us about the company or its future, but how the founder feels about starting a company,” said Deena Shakir, a partner at Lux Capital .
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“It’s almost certain that you’re wrong,” said Aydin Senkut, the founder and managing partner of Felicis Ventures. “It’s either going to be too big or too small.”
Kara Nortman, a managing partner at Upfront Ventures, said the TAM numbers given in a pitch don’t determine whether she’s likely to invest.
“I would say [it is] more important to be able to articulate how big something can get and to show that you have a thought process around TAM, if it’s early,” she said.
Choosing a mythical TAM will not bring dollar signs in the eyes of investors as unrealistic numbers reflect unrealistic expectations, a red flag for any VC.
As Senkut said, “the plan doesn’t have to be accurate – the plan has to be directionally correct.”
Thank you so much for reading TC+ this week!
Walter Thompson
Editorial Manager, australiabusinessblog.com+
@yourprotagonist
3 investors explain how finance-focused proptech startups can survive the recession
Image Credits: Kuzma (Opens in a new window) / Getty Images
How are financially oriented real estate tech investors responding to the ongoing downturn in public markets?
Senior reporter Mary Ann Azevedo interviewed three VCs to learn more about how they advise the companies in their portfolios, what types of startups are best positioned to weather the recession, and how they manage risk:
- Pete Flint, General Partner, NFX
- Zach Aarons, Co-Founder and General Partner, MetaProp
- Nima Wedlake, Director, Thomvest Ventures
How Metafy Founder Josh Fabian Got The Attention Of 776 By Building In Public
Image Credits: Kelly Sullivan / Getty Images
At australiabusinessblog.com Disrupt, Josh Fabian, CEO of the video game coaching platform Metafy, explained why he is committed to “building in public,” or sharing aspects of his founder’s journey with an audience.
“Consumers don’t trust companies; I don’t trust companies,” he said. “I don’t think any of you do that, even if you run your own business.”
Katelin Holloway, one of the founders of 776 (an investor in Metafy), said Fabian’s approach was a breath of fresh air. “We were able to just talk and talk like people, and Josh told us his story in a very different way,” she said.
“Not only was it incredibly compelling from a business perspective, it was incredibly compelling from a human perspective,” she said.
Is the modern data stack just old wine in a new bottle?
Image Credits: Mikhail Dmitrievi (Opens in a new window) / Getty Images
Before joining Thomvest Ventures, Ashish Kakran was a data engineer transforming disparate consumer data points into optimized consumer telecom offerings.
“Part of my job was extracting encrypted data feeds, removing rows or columns of missing data, and mapping the fields to our internal data models,” he writes in a TC+ guest post. “Our statistics team then used the clean, updated data to model the best offering for each household.”
Because today’s data sets contain exponentially more information, “the rules are being rewritten about how data will be used for competitive advantage, and it won’t be long before the winners emerge,” he says.
In a deep dive, he compares modern and legacy data stacks to identify key business trends and opportunities for founders and investors.
“Practitioners are spoiled for choice when building business data pipelines,” says Kakran.
Investor advice during a recession: don’t panic
Image Credits: Kelly Sullivan / Getty Images
Fewer investors are writing checks these days, but what advice have they given their portfolio companies in recent months?
Mary Ann Azevedo spoke to three executives at australiabusinessblog.com Disrupt to learn more about the strategies they’re promoting for preserving the runway and their peace of mind.
- Eric Glyman, CEO, Ramp
- Thejo Kote, CEO, Air Base
- Ruth Foxe Blader, partner, Anthemis
“It behooves everyone to be really clear about the macro-environment we’re entering,” Blader said. “It’s probably going to be long-term, and it’s very important to be judicious, but not lose sight of your goals and the reason you started the company in the first place.”
6 key metrics that could help SaaS startups weather this downturn
Image Credits: Andy Ryan (Opens in a new window) / Getty Images
The most successful companies I’ve worked for fostered parasocial relationships with customers in much the same way many of us invest emotional energy while following the lives of celebrities.
During a downturn, “the goal is to pick up early warning signs and do course-correct, and those signals are often hidden in the breadcrumbs,” writes Sudheesh Nair, CEO of ThoughtSpot.
“Not all industries are equally affected, so don’t assume your customers will cut spending this year just because the headlines are bleak.”
Image Credits: Justin Sullivan (Opens in a new window) / Getty Images
Santa makes a list and checks it twice for each holiday season. Can your ecommerce startup claim the same?
“Consumers are now living with inflation and an unofficial recession, and we can expect more selective and price-conscious shopping behavior,” writes Guru Hariharan, CEO and founder of CommerceIQ.
With people “pressurizing their daily essential purchases” and the holiday shopping season kicking off earlier, “businesses need to be ready to change their strategy for discounts, inventory planning and ad marketing spend as the environment changes.”
Dear Sophie: How can students work or start a startup while maintaining their immigration status?
Image Credits: Bryce Durbin/australiabusinessblog.com
Dear Sophie,
I am studying bioinformatics at a university in the US
What options do I have to work on my student visa before and after graduation? Can I start my own startup with one of these options?
– Want to work
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