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The Growth Catalyst
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Uber and The Practical Aspects of Sizing the Market
- When it comes to sizing the market, even experts make mistakes while doing the exercise.
- In 2014, a debate around the valuation of Uber ensued between Aswath Damodaran and Bill Gurley.
- Damodaran valued Uber at around a third of its actual value, while Gurley argued that Uber has entered a new market - car ownership alternative.
- Uber's entry into new markets such as food delivery through UberEats has significantly expanded its total addressable market (TAM).
- Market estimation and valuation can be tricky for founders, product managers (PMs), and investors, given that it's hard to predict how innovation can change market behavior and the market size in the future.
- Confirmed market sizes can help product teams refine their growth and expansion strategies.
- Leveraging innovation and finding adjacencies to grow into can help companies expand their TAMs.
- The market rewards large ambition from startup founders because it is the first step to win in a much larger market. Additionally, in the absence of a distribution moat, innovation gets heavily rewarded.
- As a product leader, confirmed market size can help predict growth and saturation and identify adjacent markets to explore.
- MVP is somewhat equivalent to riskiest hypothesis testing. If you aren't thinking about the risks while designing MVP, you are doing it wrong.
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