What startups need to know about understanding your market

Market sizing slides in pitch decks can feel like a charade — but understanding your market is one of the most consequential exercises a founder can undertake. This guide moves beyond top-down TAM calculations to show founders how market understanding actually drives product, pricing, and go-to-market decisions.

In this series, TechNexus provides insights on growth strategies for startups. Follow along with the entire series here . As a founder, I once considered the obligatory “market sizing” slides in pitch decks to be a bit of a charade. I thought, just show the investors what they want to see—choose a top-down or bottom-up market sizing approach, do some hypothetical consulting exercise to come up with reasonable figures, and focus your real energy on the important aspects of scaling the business. But this mindset was a mistake. Now, sitting on the venture side of the table, I can see when a founder is just going through the motions of market sizing versus when they REALLY get it—when they truly grasp their market size, the growth opportunity, and how much of the market they can reasonably capture over time. This understanding is critical because, in addition to solving a problem that resonates with consumers, knowing your market size is essential for shaping your growth strategy. To prove this point, I’m going to break down three key pillars to understanding your market: developing a market size, creating a growth strategy for your market, and forming financial projections based on market penetration. Definitions First, let’s define some key venture capital terms to make sure we’re all on the same page. The Serviceable Obtainable Market (SOM) is the market size of your target customer—it’s a subset of your total market that you believe you can capture the most market share in. Next is your Serviceable Available Market (SAM), which includes your target customer plus the most tangential (horizontal or vertical) customer bases you can reasonably expect to capture. Finally, your Total Available Market (TAM) represents the total market value of any customer base that might use your product or service—it’s the maximum possible value if every single potential customer in your market(s) buys your product. For reference, think of the typical three-ring market size diagram below