Big TAM Founders, Small TAM Startups
Theory #19 | So what’s your founder TAM? Your startup's TAM? And the delta?
What's one way to maximize your startup's chance of success? Be a big TAM founder working on a smaller TAM startup.1
This probably sounds unsavory. We're so used to talking about maximizing everything: Pick the biggest market. Tackle the largest problem. Chase the greatest outcome.
Investors definitely want you to do this. You want to do it too. It's brave. And if it works, you're brilliant. But it's also the most risky. You have less control in engineering its success.
So what's the polar opposite? Pick the smallest market. Tackle the smallest problem. Chase the smallest outcome. (Go ahead, you can cringe a little. But then actually think about it.)
Here's an example of this very idea in action: newsletters.2 You've seen the jokes about the smartest people in the Valley starting a Substack instead of an ambitious VC-backed startup.
Who are they? Big TAM founders. People who have the experience and skills to tackle something with huge potential. What are they doing? Working on a small TAM startup (at least a noticeably small-er TAM than they're believed to be capable of tackling). And why? Because they see a higher chance of success, even if the potential outcome is smaller.
To drill down more, they see less market risk. And even the execution risk seems manageable. Execution is largely a matter of operational consistency (e.g. sticking to a newsletter format and schedule) rather than niche expertise (e.g. retail supply chain management). As a result, a smart generalist can run the business, and it can just hire more smart generalists to help. A newsletter is also what I’d consider a positive-sum product, making it easier to succeed without strictly competing. Podcasts and other relatively low-budget, media-focused projects have similar attributes and appeal.