It’s difficult to not miss the TAM, SAM and SOM slide. I have seen a ton of them when startup founders pitch. On one particular instance, someone used multiple currencies for each of the metrics. Do not do that as it shows you didn’t proofread your work - this might also be a reflection of how you do the rest of your work.
“How you do one thing is how you do everything.”
Before we dive into the most important part, let’s cover the basics - meaning, purpose, and how to identify each metric.
The Basics
Total addressable market (TAM) is the total demand for a service or product if every customer bought it. It helps investors in identifying the total revenue opportunity in this space. Basically, how big can this go. Serviceable available market (SAM) is the realistic slice of the pie that you can capture based on your target audience, geography, business model, and product. Serviceable obtainable market (SOM) is the subset of SAM that you can realistically capture in the short term based on the resources that you have.
Image generated by an LLM: Gemini
waveup has provided three examples of TAM, SAM, and SOM for companies within different sectors - transportation, canning, and CRM software.
waveup’s example on Uber
Typically, founders follow a top-down approach when it comes to market sizing but investors aren’t a fan of this approach. Logically, you start small before expanding, so using a bottom-up approach provides investors with a more realistic view of the potential growth for your startup. Also, when you come up with a realistic projection, you can design a better short, medium, and long-term strategy that fits well with your startup’s vision.
Of course, the data for each of the metrics come from different sources, so there are chances of two startups competing with each other citing different data.
That begs the question.
Does TAM, SAM, and SOM matter?
Do they matter?
Not really because the metrics have a tendency of increasing or decreasing. To put simply, I’d think of it this way.
What was the market size of e-commerce when Amazon first started selling books online as opposed to the market size this year?
The online retail industry back in 2005 was $86.3B and only 2.3% of total US retail sales. 1 Twenty years later, it’s a $1.23T market, and that accounts only 16.4% of everything Americans buy. 2 Twenty years later, it’s a $1.23T market, and that accounts only 16.4% of everything Americans buy. Look at the table below by the US Census Bureau on the increasing retail sales and % increase of e-commerce from the total figures. This indicates that e-commerce’s market size is on an upwards trajectory.
US Census Bureau’s Quarterly Retail E-Commerce Sales Report
There is also live commerce that has been growing in adoption. China is already dominating the sector. Live commerce essentially entails a host selling products in real time on video. It begun with Alibaba’s Taobao Live, and McKinsey found it converting at up to 10x the rate of conventional online commerce. 3 According to the Asian Business Review, the live commerce market in China has already reached $900B, almost the size of the US’s e-commerce market. 4 This shows that a different segment can spin out of an existing market so it reduces the emphasis we place on market sizing metrics.
The transportation sector is another notable example of an increasing market size. Take Uber as an example. It launched in 2010 with no specific market size attached to it except the closes proxy - the taxi industry. Grab, before becoming one of Southeast Asia’s super-app started as MyTeksi in 2012, a taxi booking app based in Kuala Lumpur. 5 The following year, a 19 year old in Tallinn started Bolt as Taxify with a €5,000 loan from his parents. 6
In 2014, Aswath Damodaran, a Professor at NYU Stern argued that Uber’s valuation was about $5.9B treating it as a taxi company with an app. Bill Gurley disapproved the claim and wrote an article rebutting Professor Damodaran’s claim.
Here’s an excerpt from Bill Gurley’s article.
The number he uses for this TAM estimate is $100 billion. He then guesses at a market share limit for Uber – basically a maximum in terms of market share the company could potentially achieve. For this he settles on 10%. The rest of his model is rather straightforward and typical. In my view, there is a critical error in both of these two core assumptions.
Bill Gurley’s post on X
Here are my three takeaways from Bill Gurley’s analysis
Bill Gurley argues that Damodaran’s TAM estimates assume Uber’s future market will mirror the historical taxi market, when in fact Uber’s improvements to pick-up times, coverage, payment, civility, and safety are actively expanding the market itself. This was shared in 2014, and the improvements had played out well. In fact, we’re discussing robotaxis now. They are in the early stages and I am confident, the same argument of market sizing still exists. The point is - when a tech is in the earliest stages, it’s hard to truly know their market size. We can make assumption but it should be based on relevant metrics like what Bill Gurley had laid out in his article.
Bill Gurley then challenges the 10% market share cap by arguing Uber benefits from network effects through pick-up times, coverage density, and utilisation. Because of network effects, all these three elements will compound as more people use the service.
Bill Gurley went on to make a bold claim - Uber is framed as a substitute for car ownership itself, a market he pegs at roughly $6T globally, which is what ultimately lets him argue Uber’s TAM could be 25x Damodaran’s estimate.
I agree with Bill Gurley on this albeit it written in 2014.
So, are these metrics important?
Well, take it with a pinch of salt. You still need it because market sizing shows investors how big your startup can become. If you're building in a blue ocean, use assumptions - explain clearly what you are basing these assumptions on and why did you choose them.
Take Uber as an example.
Assumptions
Safety - through the app, you know who will pick you up so more people warm up to the tech. Network effects.
Pick-up times. I know when the driver will arrive so I can plan things out. I don’t have to wait at a taxi stand until a taxi shows up. People will like this. Why? We love convenience and info. Network effects then plays out.
Extra Tips: The best way to pitch your market sizing slide is to tie it with your short, medium, and long-term strategy. That’s your “so what” layer to your metrics.
I hope this has been useful. Let me know if you have any questions.
1 U.S. Census Bureau e-commerce data, reported by Finovate (2006), total 2005 US retail e-commerce sales estimated at $86.3 billion, 2.3% of total retail sales.
2 U.S. Census Bureau, Quarterly Retail E-Commerce Sales, total 2025 US retail e-commerce sales estimated at $1,233.7 billion, 16.4% of total retail sales.
3 McKinsey & Company, "Ready for prime time? The state of live commerce" (2023), live commerce launched in 2016 with Alibaba's Taobao Live and can convert at up to ten times the rate of conventional e-commerce.
4 Asian Business Review, "China's $900B live commerce market nears US e-commerce scale" (2026), citing NielsenIQ's "The Commerce Revolution: Where East Meets West" report.
5 Grab Holdings, Wikipedia, founded as MyTeksi in June 2012 in Kuala Lumpur by Anthony Tan and Tan Hooi Ling.
6 Bolt started life as Taxify, launched in Tallinn in August 2013 by Markus Villig.