Taking the BS Out of Your TAM

Thanks very much for being here today Great panel looking forward to the Conversation just a word I think so Tam Is topical certainly in the downturn but Um to me as a startup veteran like Operationally it's one of those basic Issues everyone has to confront at some Point if you want to be a Founder so This is more of a how-to generic Conversation about Tam not much about Like the moment I think but diving right In um great panel so let's start with Our terms what are Tam Sam and Sam total Addressable Market serviceable Addressable market and serviceable Obtainable market so just an example Might be if we're thinking about natural Dog treats Tam might be anyone who goes To the pet food aisle Sam would be folks Who want Healthy dog food treats Specifically and some would be how much You could actually sell to that group in The second the second group is that more Or less correct or Okay great framework So yeah basically it's like it's guard This is a tool for investors let them Know like the upside potential for for Them basically so questions first Question When are back of the napkin calculations Okay for tab and I want to start with Kara Uh I I generally think if it depends on

The stage you're coming into an Investment but they're completely fine In the early days of an investment and Then I think you do need kind of a sense Of how either how big it is right now or How big it can become mostly to convince People to give you money Um I tend to think about Tam at the Earliest stage of investing as most Helpful in understanding why as a Founder or operator choosing to operate In this market and how do they think More so than are there numbers exactly Right because as we know so many of the Best businesses end up being ones that Create Tam or create Market size I mean My sneakers are a great example of that When up front invested in Goat in the Early stage everyone thought sneakers Was a team were there teeny market and I Can talk more about it later if it's Helpful but um you know if you buy one Pair of sneakers a year your Tim is one Size if you buy 10 you know in a year And you start buying a ton more because You're not wearing work shoes it's Another site so but to answer your Question I would say more important to Be articulate to be able to articulate How big something can become and to show That you have a thought process around Tim if it's early if you're going public You better know what your Tam is you're In all of the other acronyms otherwise

You're probably not going to get Um you're not going to get the equity Analyst to underwrite you in the right Way To you is it kind of is it okay to walk In with kind of numbers that seem okay Or do you need to research before you Like how much research you really need To do before you look I think the truth Of this is like looking at the title of The session I think with Tam it's almost Guaranteed you're going to be wrong it's Either going to be too large or too Small directional is important I think There are two things that we do more Than the 10 that we see on the Presentation or we hear from the Founders we do we do our own back-end Calculation because we're not even going To pick a conversation unless we're Interested in the market and if we are We're already looking at hey are there Public comps just to get an idea of like What the rough Market size is so that Was like a really great like analogy That I got from some of our Founders is Like listen like the public comps Represent if there is money in the Market or not and we also do just like Dina also Frontier deals where sometimes The market doesn't even exist so it's Hard to get the Tam I think the thing That we're looking more than anything Else is how the founders arrive at the

Number and part of that is we have this Like through North of like we want to See how articulate the founders are so How they got to that number is much more Important than the number itself I know For many VC disease they look at that Number as a proxy for or if it's big Enough then the company like if things Work it's going to be great I think the More important is is like you know You're starting to arrive at the formula Of if things work how it's going to work And how you're going to get it the great Result I think everybody looks at the Results but the more important part is The formula and I think the important Thing about Tam is in the quest to Calculate Tam you're essentially now Trying to reverse engineer what your Success formula is going to be going Through the steps so that is much more Important how they thought about it for Us as well as obviously having done our Homework like what is our own conviction And is there a Delta and variance and if So like how can we look into that And Dina to you how much of your due Diligence has been looking at this Number Yeah so you know I think Cara made a Really good point which I want to start By emphasizing in that the sort of Discussion around Tam and the focus on Tam is going to vary from stage to Stage

So I'll start by talking about the Earliest stage Um with another caveat that at Lux we Love to invest in you know what we call Matter that matters Frontier Tech deep Tech you know take your term of choice But we like to invest before it's Obvious and that usually means there Either isn't a tam or people think that There's a tan that's too small I think a Great example of that is an area where We've I've personally invested a lot Which is in the fertility space where Just a few years ago it was really Ignored by Venture because if you did a Very basic Tam calculation the number of Families going through IVF times Whatever the cost of a cycle is it does Look small the way that we thought about It when we started to invest relatively Early vis-a-vis other Venture funds was Actually looking at changing Global Demographics so the average age that Families are thinking about babies the Number of lgbtq couples that are that Are looking at going through surrogacy The trends in other countries where There actually are much better rates of Reimbursement and therefore fertility is More accessible that's how we thought About Tam and so I and at that early Stage where we're actually helping to Create a market that's where it's much More important so is it fair to say Tam

Is more of a it's a way of framing your Business not necessarily presenting like Who what you're going to do and how You're going to operate exactly I mean You know as Aiden said if we're taking The meeting we all sensibly think There's something there that's Interesting enough to be potentially Venture backable but also to your point The way it's calculated the way the Founder is thinking about it is is Telling to us not about necessarily the Business or its future but about how the Founder thinks about company creation And that's much more important at the Earliest stage So with in your experience and Collectively for all of you like Founders who have trouble uh fixing like Kind of framing Tam when they come when They come to you are they kind of Problematic with other things down the Road is that kind of a fair assumption Or I mean look I think when we think about How we make decisions and how we choose Funders I'm not really sure Tam is Really like the top three or even top Five of the factors the more important Thing is the product and the modes and The way that we think about it is like In addition to public comps as a reality Check a lot of the bets we made at Felices like if I look at the things

That did work is always hey if it works It's a platform or if it works it could Be used by a lot of people like Fertility is like a good example that Dina used but like you know we we had Some bets where like okay like Hey Listen like if this works it can cure Cancer or diagnose cancer without having Have to have a biopsy and that became a Public company you know we had a company That programmed bacteria and if it works Like it can like there are chemical Companies that really need this we have Ginkgo bioworks public company like Doing 100 million dollar deals you know If you can be the Commerce platform Shopify became 100 billion dollar Company payments like you almost don't Need a Time calculation payments is Literally how everybody business works So if a company can become a major Company you know they're going to Capture a lot of value out of it and you Can see that the largest Giants in that Field have huge market cap so I I think One of the most important things is like How does the founder choose a market and How do they think they can have a role In it so it's almost like time is an Excuse to actually go to the heart of The question which is hey if you want to Get to a great spot how much have you Thought about the formula to get there How much have you like planned and how

Articulate is applied and the plan Doesn't have to be accurate the plan has To be directionally correct and what Goes in the plan is kind of like what We're looking for Yeah I mean I I think that um it's just Really important to say again I think uh At the earliest stage the founders why Is so much more important than any Specific thing I used to actually have This like rubric of the five things I Would look at that were measurements of Should I spend time on something or not Um because I still think Fasteners are a Bigger gift much bigger gift than long Maybes for Founders Um and Um Market size was always something that Was important to consider right because You know if you're you're in a market Where if you're building you know I Invested in this company called endgame For example which is Um you know doing customer relationship Management for product-led growth Companies everyone understands that that Tam could be enormous and that's the way So many companies are going to market Then you have to assume that there's Going to be five or ten competitors Versus if you're trying to cure cancer It's kind of a little bit more bimodal Like does it work or does it does it not Work and if it works wow that could be

Real really big another company I backed Was a company called writer there's a Big I think article about a company in The consumer space you guys did today Called Jasper that they compete in the Enterprise space around AI writing and Style guides and language and when I First met that founder she was she was In the translation Market she was an Arabic woman who had an experience like Her why was she had to translate back And forth from English to Arabic and so She started in Translation what she's One of my best friends from college So we can celebrate mayor and she was Just remarkable her why was so real and She started in this little team any Segment and I had one on this journey to Call all of these investors who had been In predecessor companies on the Translation space to find out if anyone Would then fund it Downstream okay People have funded it Downstream because That was her small aperture on Tam to Now go into the massive Market of how do You help people write better Smarter on Style guide Etc and that's you know I Don't know how big it is I'll go with a Trillion but but it started in this Really teeny area so I think the why and Then understanding how much competition You're going to have for your early Customers are kind of the most critical Things to understand early stage and

Then later stage you have to show you Can get into bigger and bigger segments And take that early success and expand Yeah I just want to tease out something I think is very important which is a lot Of the discussion we're having right now Is Tam in a pitch I think the more Important function of Tam as a Founder Is what problem are you going to solve What company you're going to create so The two really interesting things that I Learned so we had this great Thunder uh Hans Robertson who's co-founder of Meraki and now co-founder and chairman Of Arcata and when he went after the Camera business everybody said camera Business that's commoditized there's so Many companies and his rule was listen If every building and every household is A camera that's a pretty big market like I don't have to worry that there is Money in this market and then I can Always use technology as an angle and Reinvent the product to such a degree Apple iPhone is a great example until it Came along everybody thought phones Could only be nine button 12 button Devices and now it's like the device to Rule them all and so the second Interesting example was from another Founder of ours who had a very simple Proxy is like listen all the businesses I'm interested in in founding or getting Involved in are simply if there is a

Business if there is an ad for them on TV because if there is an ad for Anything on TV it's big enough that People are spending money and it's a big Enough market that you know it's going To reach to enough people which then you Know will justify the ads anyway I'm not Saying that that is the rule I'm just Giving you a great example of maybe it's More relevant in how you choose like Which business you're going to go after And I don't I think us as a VCS is a lot Less that hey is it going to be a yes or No decision based on that calculation Even though it's more like hey you know That discussion might not you to then Pivot and you know think of something Else that might be bigger and more Interesting so that's where basically Can really be a great tool for you and a Great you know tool in your tool chest Yeah there's there's no seed deck that Looks anything like a series a let alone B C D and Beyond the public filing we All know that and so would we take with A grain of salt how a tan is calculated What's much more important is the Founder market fit which is you know Definitely come up here and the ability And the grit and the resilience of that Founder that we have to evaluate and so I think we can tell if a Founder has Just done some you know calculations and Got excited about a tam and things that

Could make a lot of money that's Probably not going to be a long-term Successful company right but if the Founder has that deep personal Connection and is willing to put what it Takes to take it to those next few Levels that's where the Tam starts to Look exciting okay so a crazy Tam in the Room is not a red flag necessarily that It's just a signal to consider not a red Flag could be a red herring I mean I can Speak about this as a Founder I Co-founded the first majority female Owned female-led professional sports Team in the country called Angel City We're a soccer team yes in La football For those of us from the land where Football was created when I was first Raising for it I got a hundred no's I Mean literally a hundred no's because There was no Tim right there even today There's a billion dollars of broadcast Revenue to watch women's sports versus 500 billion of for men's sports so That's a that's a trilling indicator you Know Flash Forward three years now lots Of people are offering US money we're Selling out stadiums we have 40 million In contracted sponsorship Revenue but The authenticity of the pitch he would Have heard from me was from my deep Conviction that the current Tim was not Indicative of where the Tam would be and So I think um I can't speak about it

From both angles just even in the last Few years and uh you know I probably did A pretty good job of explaining to him Having been on the other side of it for A long time but the reality is the best Leading indicator I had at the time was Instagram said you know if you see like If you see passionate connection and Commitment to wanting a thing like the Consumer Love part of it and that that Was the only indicator I had was player Following on Instagram and fortunately I Got one investor to believe that that Was a leading indicator in 99 who didn't I do want to chime in on that I think The reason why time is important is if This works is it exciting enough but What I will tell you what is a true red Flag we truly believe in intellectual Honesty in the quest to come up with a Really really large number thinking that That large number will be the true north And will influence and dry the VCS if That number is like you know not Correlated to a real calculation or real Thinking I do think that that is a red Flag right so like it is very like That's why how you arrived at the number Or at least it is directionally Interesting or correct is much more Important than absolute significance or The magnitude of the number but it Cannot be something that is literally Pull out of the thin air that you use

Like chewing gum and duct tape to like Say okay it's like roughly this and it Basically makes it obvious that you kind Of like came up with a very large number And tried to justify it versus really The true Bottoms Up calculation and Again it's not important what the number Is it's important that it's Directionally interesting enough but Make sure it is not like disconnected From reality which to me is a red flag Thanks for that uh and and actually Let's get into process you mentioned uh Kind of bottom up so there are different Ways to calculate Tam Um for different different sectors Different kinds of companies and Products uh do you For a first-time founder who has no Experience doing this before do you have A recommended you know do you recommend Top down bottom up something more like Value Theory where you're you know You're thinking about pricing what's uh Starting with you I mean I think the Insight behind it is more important than The absolute calculation like I was just Kind of reflecting on what Dina said and What Kara said Um we made a bet for instance in a Company that is Reinventing sugar I mean How do you even like figure out what the Tab is but all I thought about every Human being in the world loves sweet

Like I don't know if somebody that Doesn't like sweet maybe they like it Less but we all are driven you know like Naturally like to crave sugar and if we Had a better alternative of sugar that Had less calories less glycemic index It's actually good for you we might Solve obesity so the absolute number is Not as relevant so then the only thing Is look if you can make this can you Make it at enough scale and a price That's attractive enough if you do it's Going to be successful if not it's not Going to be successful whether that Market is like billions or 10 billions Look I know it's going to be important Because we've already seen what Impossible food did like hey how many Like how much demand is there for vegan Burgers and it looks like there is Pretty big demand so I think same thing Like when we were thinking about like Diagnosing cancer or curing cancer it Wasn't like yeah we do know that it Could be bimodal it's the kind of thing Is if it works is it significant enough When we thought about Shopify and like Commerce or adient payments or like many Other companies in Enterprise that we Think of it's all like listen would Every business care about this right or Would like every business need to do This and there are certain things that Every human being craves or wants to do

Like either personally or as a family And there are certain things that every Business like needs to process a payment They need to have an office blah blah Blah and so there are like 10 or 20 Things so like the most important thing Is that you're solving one of those Things and that's something that is such A niche and so esoteric that hey we have Technology the laws chip makers to do This like blah blah blah and I'm like 20 Like PowerPoints slides whatever and you Need a PhD understand it if it's that Complicated then I'm not interested so It doesn't matter if the calculation is Correct or great at that point you've Already lost me it's more important that Even an elementary school student can Understand that if it works why is it Going to be a big Market Uh I'll take a quick crack at it and Hand it over to Dean over there but I Think um here I'll go in a different a Slightly different direction I agree With everything I just said but if You're pitching VCS just find a friend From Boehner McKinsey get it all sorted Get ready to go what actually really Matters is how you're going to spend the Next minute hour week month and so in The beginning it's just how do you build Something people love and want to buy And want to buy again and want to tell Their friends about and then you have to

Do all the other things to build a Business but so how do you use Tam Calculations customer insights Segmentation you can get far too far Ahead of yourself in the beginning but To to answer those questions around how Do you as a Founder spend your time to On the most important things to figure Out how to build a business that people Love and want to pay pay for right now And then pay more for over time I think Once you get into the later stages I Started early as the first investor in a Company called parachute home back when They were raising I don't know hundreds Of thousands of dollars it was a very Hard segment to get funded by Venture Capitalists in the early days because You had companies like Casper and all These other companies who could sell a Couple thousand dollar mattresses one Time the thing the thing you know like When you're a Founder in a category like That that I would think about is um how Do you get different Behavior out of Your customer because a lot of VCS or Investors just take the kind of the Laziest thinking around cohorts and Repeat rates and things that they can Measure early versus taking a bet on how Do you get to bigger systemic changing Companies in an industry and for Parachute it was repeat rates he took Something that people were buying once

Every seven year sheets and you remove a Data up and they were getting people Buying it three four times a year Seasonally like a lot like sneakers and What we did would happen with goad and Then over time it's like okay sheets is An eight billion dollar Tam in the United States that's small right but Home Furnishings the third largest spend After probably insurance and and um and Homes Um in the United States so how do you as A founder think about you know a right To win adding on different skus changing Your pricing but it all starts with find People who love it are going to tell Their friends are going to come back and Are going to come back more often in a Different way than others and so I think An ability to articulate how it is you You do that and to hold yourself Accountable as a Founder is really Important okay that wasn't super short But now no I think that was great Um you know what what you both said I Totally agree with I'll add maybe a Healthcare specific Focus because that Is where I spend a lot of my time which Is you know I think where things can get A little complicated when it comes to Tan calculation it's one thing if you're Doing a purely cash paid direct to Consumer facing Healthcare product but If you're really scaling and trying to

Get deep into the Um you know the communities in in this Country especially that need health care The most you're talking about working With payers and managed care you need to Figure out how to align values and I Think we've seen recently what can Happen when you don't align those values And what can you know and the incentives Are skewed but there's a really big Opportunity when you can actually crack The nut around these really sticky Stakeholders in healthcare and so that's Something that we like to think about as Well and that gets that actually does Get a little more complex from a Calculation perspective what are the Billing codes you know how much are are Payers willing to pay now where I get as Excited is where none of those exist yet And where we can actually make a case to Improve outcomes and get the payers Excited about it our investment in Maven Clinic is an excellent example of that Where you know there wasn't a lot of Data about how virtual care can actually Improve outcomes reduce C-section Incidents of C-sections and and you know Helped support fertility counseling Nobody was thinking about fertility Counseling a few years ago what does That even mean and now we know that on The employer's side young people is as Young as 18 19 years old are starting to

Think about their future fertility and So this is actually a large driver and a Cost center so Um you know being able to learn from our Prior Investments and having the Insight From the big employers and payers is Also one way of calculating or thinking About calculating a tan before it really Exists think about something Kara just Mentioned you mentioned in passing I Think it said eight billion it's kind of A small Tamp and I you know I had wrap My head around that for a second I Understand that you know Venture Capitalists are thinking at a different Scale than I'm thinking about or a First-time founder but so in a row like Starting with you care what's what's too Small what's what's too small a term for You to even bother with someone said to You I've gotta I think I can tap into This amazing two billion dollar a year Of industry is that you're you're gonna Pass on that or well me as Karen nortman Nothing Um I honestly I I really I really think Over time if you know I've been in Venture and operating now for 25 years Even though I look so young it's hard to Imagine it started when you were two and Um you know and for my you know and I Think still the most important thing is Why is that person doing that thing and How did they get that insight and why is

It they're going to run through walls And make sacrifices that don't make any Sense in terms of their family and their Personal life so but to answer it I mean I think it's you know I think it's a Real thing in Venture it's a thing That's really changed over the course of The 25 years I started as an associate At battery ventures in the late 90s and You know we got excited about Multi-hundred million dollar outcomes It's one of the you know best Long-standing firms around Um I think it's a I think what is um I Mean it's a short answer I think Everybody went from how do I you know The unicorn and the billion dollar Company to the 100 billion dollar Company but I think we're going back a Little to fundamentals now which I think Is good for everyone including Founders In the lake because everyone who does Well in startup land will will will live A good life right from a from an Economic standpoint and so what I would Say is I think you're going to see firms That won't underwrite something that is Going to be less than a hundred billion Dollar company I don't think that's Going away but I also think you're going To see a segmentation in the market Where you can find people who really Care about the work they do in smaller Markets and smaller outcomes and what's

Most important to answer that question Is what's your handshake with your Investor you know what is the outcome That they're looking for over what Period of time and does that line up With your Tam your Ambitions how you Want to build your company how much you Want to burn how much risk you want to Take on as a Founder I think a lot of That dialogue was lost in the last few Years where everyone just wanted to Market that they wanted to be a hundred Billion dollar company and I think a lot Of people actually don't and I think It's important to acknowledge that a lot Of Founders sold early because of that Pressure and they probably were the some Of the most likely Founders to actually Get there so Um 8 billion is plenty for me plenty for Me I think this last point is really Important because every VC that comes on A panel here nobody ever talks about Like the small wins they have they only Talk about the biggest wins they have And I think this is an interesting point That gets lost especially to this last Point so to the 10 point like I can Think of two examples like one of our Companies like the bet that I made a Decade ago accompli was mobile email Before like Outlook and Gmail was Available oh Gmail was available on Mobile but Outlook wasn't and so it

Ended up being an acquisition in Microsoft and the team like help Microsoft Outlook become the one of the Biggest like mobile apps so the outcome For us was maybe small but the end Result was literally like the maximum That the company could be and we still Work with those funders and other things Have happened so I think one of the Point that I wanted to make and then There was a second case where you know Similar to Dina like I am really Passionate about education and I made a Bet in health education I was really Worried about health in this country and Then one of the things we have is a Supply shock we have limitations we Don't have enough nurses we don't have Enough people even if you want to fix People and cure people there are not Enough people that are doing that and we Just cannot train them fast enough so I Backed the company called osmosis and I Thought hey this works like could be Really big and that got acquired by Elsevier and probably like two three Steps later it's gonna go into it and Maybe it wasn't a big outcome as Shopify And ADM but it was still meaningful to Me that at the end it's going to like You know succeed with that mission and The reason why I'm saying that is you Know we're only giving you you the VC Perspective but from a Founder

Perspective it's also enough that if a VC believes in you even if the number is Maybe not eight billion dollars whatever Maybe eventually it can become like to That number but if they're literally Only looking at that number and whether That number is a yes or no that's also The wrong investor for you whether There's another investor that truly is Hard you know we believe in your dream We truly believe in you and we all truly Agree that this is a problem worth Solving this is just an excuse It's like Interesting enough to spend time on it And I think that's also something for You to think about Yeah um I'll just add you know I teach At Stanford Business School class called Startup garage which is the class that Doordash came out of in Guild education And um about 25 of them go on to be Venture-backed companies we have a whole Section on Tim I'm going to apply some Of these learnings thanks guys Um but one of the things I tell them Which is really very tactical and basic But good advice is like when you're Doing a pitch Think about who you're pitching to and It really is a different calculation and A different calculus for an angel for a Seed investor that has you know 10 uh You know 10 million AUM for a large fund That has 10 billion AUM and it's not a

Coincidence that'll you know the larger That aom gets it's usually at later Stage rounds where the calculation can Actually be made in a more mathematical Way and that number is going to be Different each time and so that basic Knowledge I would want to arm every Founder with because you know I'm not Going to say your Tams should be Different each time obviously you should Know what your Tam is but you should Know what your the VC you're pitching to Or the investor you're pitching to is Trying to do and returning their fund What outcome they're looking for because What might not be a big outcome for our Funds would be a life-changing outcome For an angel and a very big outcome for A seed fund so and all I wanted to say Is even those small numbers like add up Like I mean I add like nine IPOs now but I still remember my first exit which was Only one and a half and it was 75k okay And you know as a personal angel Investor I'm like I'm not going to fail At this money actually could also come Back as it can go out so it is it is a Really important thing and I love what You said I mean people who believe in The dream I mean I just think it's so Important to find investors who really Believe in you and your dream I think Probably all three of us have done Things that made no sense from attempt

Some standpoint simply because we wanted To work with this human being that Inspired us and I think about two Acquisitions in in the companies I was Fortunate enough to invest in uh during Covid one was a company called Fleet Smith that Apple bought another was a Company called strive talent that Franklin Covey bought both could have Gone on to be much much much much bigger Outcomes or some of my favorite Founders I've ever worked with they're all my Favorite and I was very sad the day that They that they that they left my Day-to-day life and I I think we put Each other on each other's personal Board of directors at that point in time But I think when we all look back on the Way we spent our time it's going to be Wanting to be on the personal board of Directors and vice versa of those people And the purpose and joy we get and the Energy we get working with each other And again I think a lot of that is lost In the heavy transactional nature Adventure and down markets prevent Present us all with an opportunity to Really reconsider why we're doing what We do totally A question I had and it's also a Question from the audience how should Pre-revenue startups consider a tam if You don't have anything or I'm sorry I Consider um

Sub in terms of approaching your Revenue How do you predict when you don't have Anything to draw from for supposed to Give a brand new thing like I'm going to Turn people's cars into taxis or turn Their homes into hotels How do you come up with a number for Something that really doesn't exist yet I mean I think one way to think about it Is so this is a really good example Because I did completely fail to Appreciate the potential of uber I love Driving cars and I would probably be the Lost investor because I'm like I love Driving a car why would anybody want a Car until you realize like how difficult It is to get a cab or whatever Um I in a similarly like I think I Overestimated risk of Airbnb I think This is where A good way to do it as a proxy is listen How large is the transportation Market Is in like cabs and private cars so and And I think like to Cara's point of like If all of a sudden it changes so much Where it becomes like utility if the Price and convenience increases would You do it like 10 times as much right so A lot of times like the markets are Limited not because the market is Limited but the UI is limited similarly Like hey you use your phone as a Communication device value is limited All of a sudden it's a computer value is

Like 100x right so similarly you're just Using cab like it's a sucky experience Uber it's a great experience now all of A sudden the time is like 10 to 100 Times larger that's the reason why we Like thinking of public com so like if It's airb well listen you look at hotel Companies they might be sucky and even Being sucky they have a huge comp like That was the interesting thing that Happened to us at ricotta is that Cameras it might be sucky it might be Commodity but you look at like camera Companies like Honeywell whatever They're like awful like dinosaur Companies and they have like tens of Billion dollars in like market value and You're like wow like maybe the market Doesn't suck that bad so the calculation Doesn't have to be super accurate but it Like tells you Hey listen this is like An important enough market that if You're brave enough to think of like a Unique solution that nobody thought About it's probably worth going after You know there are ways you can try to Convince yourself that you're Calculating some early on right you can Talk to would-be customers and so on and I think you know maybe some of the early Investors in Uber and Airbnb would like To think that they were Geniuses in Those early days and was totally Appreciative and imagine this whole

Thing but like let's be honest at the End of the day a lot of it most of it I Would say comes down to You see it you see it you believe in the Founder you believe in the team You think there could be something Interesting that this person does with This seat of an idea and that's that Yeah I mean so when I was at IAC I Incubated what turned into Tinder and That was a crazy story I was pregnant With my third daughter I was definitely Not using it and Um or at least that's the story I tell No I really was not using it Um and it was like one of those where Like everyone knew the song was going to Be huge but nobody knew how huge and but It was so important to IAC which owned Match at the time that the thing I ended Up incubating was incubated out of City Search which was a sort of like consumer Brand that was not easy to manage at the Time and it was being incubated all over The place so like there it was very well Understood you know there was a one-it Match there was one in OkCupid there was One in corporate there's one at City Search and we just couldn't afford to Get it wrong because the psalm was so Perceived to be so so so so large you Know right before you know I started Looking at mental health like every Other VC I think every VC starts looking

At mental health because we all question Our mental health it's like this part of Our journey no matter what what we do But it's it's an important area area Obviously and I you know somebody in my YPO Forum was incube was starting an Astrology company and it's like oh God What's the psalm of astrology on mobile Phones but you know this sort of thing But if you actually move it into or Coaching and therapy and actually you Know there's all the things beyond that The what is the that's one of those Things it's just very hard to explain And where analogies as to how people are Going to kind of show up and have a Hypothesis about how to be happier Healthier live a better version of Themselves who knows how you calculate That you just go out to people you get Them using their service and you try to Figure it out over time so I think it's A lot more art than science I truly Think it then it comes back to the why At the early stage and then you just Have to sharpen your pencils and be a Lot more crisp without it in the in the Later stage I mean look that's a really Good example under some point like on Mental Health like I don't know who was The earliest on record but I'd like to Claim that I was one of the earliest Where people like were asking when Facebook went public you've been like

Very early at Google what's the next Facebook and I told them actually could Be a mental health company because I Thought like health is 25 of GDP all the Physical health is sold mental health is Not solved we all have brains we all Have like mental issues and it can't be Diagnosed you could be 10 obsessive Compulsive I probably have 10 mental Diseases like I joke with my wife and I Can still be functional but like imagine Like if you could be a better person and Human being and so like we maybe got Like the first five Investments wrong But I guarantee you mental health is Going to be a huge area and so I think Like to this point like you can actually Really like use this more than the sum Itself Hey listen is this an interesting Area and then it gives you like an idea Of like why does this market like is not Not unlocked yet and it's until that and It like Tam then like or some leads you To the product inside it's like oh That's the Insight that if that changes The market changes and again like if you All can take away from today it's not The number itself but like thinking About the number can it actually lead You to something a lot bigger than what The number was going to do right like it Can lead you to the product inside or The mode that ends up like either like Having you do the biggest company that

You can create in that area or actually Like to correspond oh no like that made Me think of this other thing maybe That's the thing to go after rather than This thing that if I do you know and I Solve it what does it mean versus if This bigger thing if you solve it the Impact is going to be so much bigger So I've worked with a few Founders Helping them on their pitch decks and in Every case three or four people uh Tam Slide was the hardest most existential Dread and one I know one person who Basically decided not to start up Because they thought the numbers were Just too advancable and plugged from Thin air Um and what I'm hearing today I think my Biggest takeaway is that uh maybe I've Been overthinking this number and I Think the founders I've worked with have Also been overthinking this number is That a fair assumption it sounds like The process is more the thing than the Number itself so I mean I would say if The founder by the way didn't move ahead It means that they did the authenticity To what they wanted to do wasn't as real As it should have been and then that was Probably like it was a very positive for Thing them for them Um so yeah I mean I really think like The the you know the thing that I Started where I'm a maker this this

Soccer team called Angel City I it was Like an earned Insight over my life and It's sort of like you know I went yeah I I the Stanford disease and I went to Stanford too so I can say that I'm a Self-hater which is like everyone comes Through Stanford and wants to be an Entrepreneur and the greatest Entre Entrepreneurs in the world come through Stanford it's amazing but so many people Just sort of see the role played on Television and think they want to be That role and so Um I think you know I started a few Different things but the one I started That I didn't intend to start I didn't Intend to start a soccer team that Sounds crazy Um I had a full-time job and I'm a Working mom but it's it was so authentic Too I just believed this should exist in The world and there was nothing that was Going to stop me from doing it I didn't Need to own it I just wanted it to exist And so I don't think it's as important If that's how you feel about what needs To exist in the world and then have Somebody help you you talk about like How important is it it's really Important for you to get Tam right if You worked in an organization where you Learned how to scope Tams it's like Ray Dalio's believability Index right if you Worked at Bain BCG McKinsey you don't

Know how to talk about Tam that is Probably a problem if you are an Influencer who grew up on YouTube or a Scientist who's been in a lab trying to Cure cancer it's to me at the early Stage it's much less important it's sort Of how much do you care to learn about Getting that right over time so people Will listen to you who are a little bit More superficial in their analysis or to Show your thinking but it's not I don't Think it's as important if it's the work You're supposed to be doing and you're There for the right reasons and you're Not going to sleep until this thing gets Done Absolutely that's what every VC looks For is that that burning desire to solve A problem to work on something not you Know a hammer looking for a nail But truly dedicating your life in an Almost really irrational way to building Something and seeking Partners investors Who want to invest because it makes Sense for them too and that alignment of Incentives and that alignment of energy And that alignment of excitement can Produce really beautiful things and if Somebody wants to dedicate their life's Work to something that doesn't have a Big Tam great they can do that and they Can you know sell cool shoelaces on Etsy Or you know whatever it is that their Passion is and that doesn't have to be a

Venture-backed company but if they do And they want to go down that path We're here we're excited I mean I'm just Gonna like wrap maybe with an example This is really different like we're just Looking at a defense company and like How do you calculate the defense like Tam and there are like 100 billion Dollar plus companies like locate Whatever but it was until the founder Started showing us well this is how the US and the Allies are using it to help Ukraine and this would be like the Difference so like if we were to go Against China and they started Demonstrating the product and we all Fell off our chairs so I think where I'm Going with this is your motivation and The product you're building and the mode Is so much more important and I think The thing that we need more than Anything else is like how much heart is In this product and how cool is the Product tem is only one element of a Number Um and I think the bigger thing here is The storytelling you could also have Like a terrible Tam or some but have Such a great story that people still Want to work with you right like and I Think that's the reason why I wanted to Give you some examples of companies that Didn't end up being outcomes and it Hopefully eventually will as a result of

You know the m outcome or whatever but It's still I'm like I still had the Heart when I saw that like I cannot not Back this product and this founder like It's just like impossible and so I think Capturing that magic moment and being Good at storytelling is probably like More important than them and I'm not Saying time is not important but maybe Like use Tam as an excuse to get your Storytelling and the overall product uh Products though that's all the time we Have unfortunately thanks so much this Has been a great panel I appreciate it Yeah


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