Financial Modeler's Corner
Special Bonus Episode: Run the Numbers by CJ Gustafson
Nov 30, 2023
Sebastian Duesterhoeft from Lightspeed Ventures joins CJ Gustafson to discuss Total Addressable Market importance for investors, frameworks for calculating TAM, market maturity, extensibility, and the crucial initial insertion point in business growth.
51:23
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Quick takeaways
- Investors prioritize TAM to gauge business potential.
- Extensibility and multi-product strategy drive revenue growth.
Deep dives
The Importance of TAM and Extensibility in Scaling Businesses
TAM, or Total Addressable Market, plays a crucial role in the growth and success of a business. Investors consider TAM as a key metric to determine the potential size and revenue opportunities of a business. Startups need to assess whether the TAM is large enough to support substantial growth and returns for investors. However, it is important to understand that TAM alone is not sufficient. Businesses also need to focus on extensibility, which involves expanding into new use cases, user bases, geographies, or even different parts of the value chain. Companies like ServiceNow and Datadog have successfully demonstrated the power of extensibility by diversifying their product offerings and expanding into new markets.
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