TAM - that's Totally A Made Up Number. | Needs More Scientists In VC | VC Remote Jobs
Needs More Scientists In VC, SAFE Dominating In Q4....
Hi, Sahil here! Welcome to this bi-weekly venture curator newsletter. Each week, I tackle questions about building products, startups, growth, and venture capital! In today’s newsletter, we dive into -
Deep Dive: TAM - that's Totally A Made Up Number.
Quick Dive
Europe Needs More Scientists In VC.
Nvidia Is Worth As Much As The Whole Chinese Stock Market.
SAFEs Trump Convertible Notes in Q4 2023 Pre-Seed Funding.
Featured Articles:
Steve Jobs: 'The Half-Truth of First-Mover Advantage'Major News:
VC Fund With $3.5B AUM Shutting Down, OpenAI's Founding Scientist Leaving For Second Time & OpenAI's Board Member Launch AI Startup.Best Tweet Of This Week On Startups & Technology.
VC Jobs & Internships: From Scout to Partner.
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TODAY’S DEEP DIVE
TAM - that's Totally A Made Up Number.
Every Founder, “This is a trillion dollar total addressable market.,”
“If only we can capture 1% of trillion dollar market, We’re going TO BE RICH!”
While it may sound enticing, this mindset is known as the "1% market fallacy," and it's a common mistake many startups make. If you find yourself thinking that focusing on 1% of a trillion dollars will make you rich, you're falling into this trap.
It's easy to understand why the allure of a large, rapidly expanding market can be captivating. Founders often get excited about the sheer size of the opportunity and believe that securing even a tiny fraction of that market will guarantee a substantial payday. But let's take a closer look at why this line of thinking can be misleading.
So What’s the Problem With Saying You’ll Capture 1% Of A Giant Market?
First and foremost, 1% of a large market is still a significant number. Achieving such a milestone requires considerable resources, effort, and time. Merely stating the intention to capture 1% of a massive market does not automatically translate into achieving that goal. It's crucial to recognize that without a clear focus or differentiation, a startup may find itself lost in a vast landscape, struggling to gain traction and relevance.
Furthermore, assuming that capturing a small slice of a vast pie is an easily attainable goal is a fallacy in itself. If it were truly that simple, everyone would be doing it.
The reality is that building a successful startup and capturing a significant portion of any market is a complex and challenging endeavour. It requires strategic thinking, a deep understanding of customer needs, relentless execution, and continuous adaptation.
Also - There is no unfair advantage within a Big Market?
One more challenge with focusing on a big market is that most early-stage startups (and even later-stage ones) have no legitimate unfair advantage. You quickly become another player in the space clawing to get that mythical 1% market share.
You should never start a company on a level playing field.
It makes no sense to jump into a market without any advantage whatsoever, and yet many people do. They see a gigantic market, figure they’re smart and capable, and go for it. Those founders usually get chewed up. While a lot of startups aim to compete on speed versus incumbents it’s rarely enough on its own.
To overcome the 1% market fallacy, startups should adopt a different perspective—
one that focuses on capturing a substantial share of a smaller, well-defined market. By narrowing their focus, startups can better understand their target customers, tailor their offerings to meet their specific needs and develop a competitive advantage. This approach allows for a more concentrated effort, optimizing resources and increasing the likelihood of success.
Starting with a smaller market segment provides several advantages. Firstly, it enables startups to gain a deep understanding of their customers and build strong relationships. By delivering exceptional value to a specific group, a startup can create a loyal customer base that acts as a foundation for future growth. Success within this niche market can also provide valuable insights and a proof of concept that can be leveraged to expand into adjacent markets.
Secondly, by establishing a solid presence in a smaller market, startups can build credibility and a reputation for excellence. Customers are more likely to trust and engage with a company that demonstrates a deep understanding of their needs and consistently delivers outstanding products or services. This reputation can serve as a launchpad for further growth and market expansion.
Once a startup has secured a significant share of a specific market, it can then consider expanding its reach. Armed with a clear understanding of customer preferences, feedback, and emerging trends, the company can strategically target new market segments or even disrupt adjacent industries. This approach allows for more calculated expansion, reducing the risk of spreading resources too thin or losing sight of the company's core strengths.
In conclusion, the 1% market fallacy is a misconception that can lead startups astray. Instead of aiming for a tiny piece of a vast pie, entrepreneurs should prioritize capturing a substantial portion of a smaller, well-defined market. By focusing their efforts and resources on understanding and delivering value to a specific customer base, startups can lay a solid foundation for growth and expansion. Once success is achieved in one market segment, the lessons learned and the reputation built can be harnessed to conquer new challenges.
Remember, building a successful startup is not about grabbing a small piece of a giant pie; it's about creating an irresistible recipe that resonates deeply with a specific group of customers. Start small, think big!
A Quick Summary of Why Focusing on Big Markets is a Bad Idea
I appreciate the appeal of big markets. Those 💰💰💰 look so exciting!
But chasing a big market—certainly early on—is a mistake.
It’s hard to define a big market and understand your place in it. TAM, SAM, and SOM are generic and don’t do justice to how markets operate.
Focusing on a big market likely means you have a superficial understanding of users/customers, their needs and what will get them to try & buy your solution.
You set what seems like reasonable expectations (i.e. 1% of a big market) but it’s a meaningless number, and still almost impossible to achieve.
You have no real advantage in a giant market because there are too many competitors with too much money, history and control.
So, what should you do?
Define your niche:
Rather than pursuing a broad market, identify a specific segment where you can excel. Understand the unique needs and pain points of your target customers and develop a tailored solution that addresses them effectively. By becoming the go-to provider in a niche market, you can establish a strong foundation for future growth.
TODAY’S QUICK DIVE
Europe Needs More Scientists In VC
Europe's deep tech sector leads in research publications (28.1%), surpassing the US and China. Despite a higher percentage of STEM graduates, Europe struggles to commercialize breakthroughs.
Encouraging scientists to enter venture capital (VC) is seen as a key driver for innovation. With substantial government pledges (e.g., France €2.5 billion, Germany €1 billion, UK £3.5 billion), Europe aims for success. STEM graduates are crucial in VC, given the data-driven nature of deep tech. Challenges for scientist VCs include understanding business, accessing networks, overcoming cultural barriers, and gaining trust. Overcoming these challenges could lead to collaborative innovation, aligning with objective data over marketing dominance…More Here
Nvidia Is Worth As Much As The Whole Chinese Stock Market.
Nvidia has experienced an astonishing surge, with a $600 billion increase in value over the past two months, propelling its market cap to $1.7 trillion. This valuation is on par with the combined worth of all Chinese-listed companies on the Hong Kong Stock Exchange.
Nvidia's market cap has nearly quadrupled since the beginning of the previous year, with a remarkable 239% stock increase in 2023 and an additional 41% uptick this year. In contrast, China's economic challenges have resulted in a 26% decline in the Hang Seng index over the last year. Despite this, Bank of America sees potential for investors in select Chinese stocks with strong management, robust balance sheets, and solid earnings, drawing parallels to Japan's Nikkei collapse in the early 1990s, where a specific group of companies rallied to a 400% bull market.
New SAFE Valuation Caps for Fundraising Success
In a recent study by Carta - In Q4 2023, 89% of pre-seed funding (under $1 million) used Simple Agreements for Future Equity (SAFEs), surpassing convertible notes.
The surge in SAFE adoption since Q1 2020 reflects a dominant trend, especially in SaaS, Fintech, Gaming, and Edtech, where SAFEs constituted over 90% of funding. Notably, Medical Devices, Pharma/Biotech, and Energy still relied on convertible notes for at least 30% of funding. The shift is driven by founders raising multiple SAFE rounds before turning to priced equity, a strategy seen in 4 to 5 rounds before their first priced round.
FEATURED POST
Steve Jobs: 'The Half-Truth of First-Mover Advantage'
Being first in the market is often seen as a competitive advantage, but how real is this? For example, do you have to be first – new product, service, market?
Moving quickly and striving to establish your business as the ‘go-to’ product/solution in a new market sounds like a competitive advantage, but the reality is often different.
What History Taught Us,
If you study any new industry, you will find that most pioneers didn’t build truly great products/services, incumbents did!
Example: Apple was relatively late to the smartphone market. Blackberry, Nokia, and Windows had at least five years of a head start on the first iPhone – released in 2007. By 2009, the iPhone surpassed Blackberry sales.… Read More Here
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THIS WEEK’S NEWS RECAP
Major News In VC, Startup Funding & Tech
Y Combinator's latest announcement is to back healthcare, defence tech and manufacturing startups in the upcoming YC batch. Read More
Cisco to cut 4,000 jobs, Morgan Stanley trims 100 in Wealth Management. Read More
OpenAI board members, Former Salesforce co-CEO Bret Taylor and ex-Google employee Clay Bavor have launched Sierra. Read More
Foundry Group, an 18-year-old venture firm with $3.5 billion AUM, unexpectedly decides to shut down. Read More
Nvidia launched the "Chat with RTX" tool that allows owners of GeForce RTX 30 and 40 Series GPUs to run offline on PC. Read More
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TWEET OF THIS WEEK
Best Tweet I Saw This Week
Here’s the simple test: Can you name the first person you’d try to go sell this product to?
TODAY’S JOB OPPORTUNITIES
Venture Capital Jobs & Internships
Web 3.0 Analyst - King River Capital | Sudney (Remote) - Apply Here
Finance Manager - B Capital | USA - Apply Here
Venture Partner - Cancer Fund | US (Remote) - Apply Here
Investment Intern - Photon Venture | Netherland - Apply Here
VC Internship - Collateral Venture | Swiss - Apply Here
Associate - Quona Capital | India - Apply Here
Portfolio Analyst - PS27 Venture | Florida - Apply here
Investment Officer - World Bank Group | Singapore - Apply Here
Partner - Novo Holding | USA - Apply Here
Analyst - Kathyawad Ventures | India - Apply Here
Special Opportunities Associate, Investments - S2G Venture | USA - Apply Here
Food & Agriculture Associate, Investments - S2G Venture | USA - Apply Here
Investment Associate - Giant Venture | UK - Apply Here
Communications Administrator - Fuel venture | UK - Apply Here
Associate - Investment Manager | Australia - Apply Here
Venture Analyst | Insurtech - Plug and play tech centre | Spain - Apply Here
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That’s It For Today! Will Meet You on Tuesday!
Happy Thursday! 🥂
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✍️Written By Sahil R | Venture Crew Team