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How to Calculate Total Addressable Market: An Intro for Startups

  • Understanding how to calculate and present Total Addressable Market (TAM) is crucial for startups during investor conversations.
  • There are two popular approaches to building a TAM: top-down and bottom-up, each with their own advantages and disadvantages.
  • Top-down TAM involves taking the total market size and estimating your share of the market based on analyst firm forecasts.
  • Bottom-up TAM pulls from your existing customers and sales, providing more credibility, but requires more data.

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