Brigid O’Brien has seen her share of pitches from founders, and he or she has a message for a lot of of them: Not each investor might be impressed by your large TAM, brief for whole addressable market.
“Often persons are chasing massive TAMs, which makes plenty of sense, as a result of we’re investing in enterprise capital, so we’re in search of outsized returns,” O’Brien, a accomplice at RA Capital Planetary Health, mentioned at TechCrunch Disrupt 2024. “You must have a market that may assist assist that.”
“That’s most likely one of many favourite slides lots of people love to do on a pitch deck,” she mentioned. “I’ve seen plenty of pitch decks which have a trillion-dollar TAM. Sometimes I see $100 trillion.”
But that considering also can lead founders astray, O’Brien added.
“I typically say to founders, actually be intentional about what your market entry is in a market. Sometimes chasing the most important TAM isn’t essentially step one in your journey constructing an organization. Think about the place you might have the doubtless and highest chance of market entry to generate income. And then you can even go and chase that bigger TAM later by with the ability to have that money to assist capitalize your organization and de-risk a number of the tech.”
By approach of instance, O’Brien pointed to the method taken by fellow panelist, Gurinder Nagra, co-founder and CEO of Furno Materials. The startup is constructing small, modular kilns that produce cement with a a lot decrease local weather influence. They stand in stark distinction to the huge, $1 billion kilns which have turn out to be the usual amongst business incumbents.
“What the incumbents have been actually good at is constructing actually giant capital-intense property, which have been their moats for the final 100 years,” Nagra mentioned. “But in an setting the place you have to change, that unexpectedly turns into a weak point. So how are you going to leverage that as a startup? Because pace is your benefit.”
But slightly than confront incumbents head on, Furno is beginning by discovering prospects in markets which can be presently underserved by cement producers.
“We did boots on the bottom journey and journeys and talked to a few of these concrete producers. And positive sufficient, they’re like, ‘I hold getting unallocated cement. I acquired some final week, however I didn’t get it this week.’ Because they’re not a precedence. They’re a smaller-scale buyer,” Nagra mentioned.
Eventually, when the corporate has established itself, it’s doubtless it’ll begin wooing prospects who have already got cement provide contracts with incumbents. “There’s not a lot loyalty within the cement enterprise,” he mentioned.
