TAM, SAM and SOM
Three nested measures of market size that set the ceiling on how large a company can become.
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Market size sets the upper bound on a company’s value, so investors size it carefully. The standard framing uses three nested figures. TAM, the total addressable market, is the entire theoretical opportunity. SAM, the serviceable available market, is the part the product can actually serve. SOM, the serviceable obtainable market, is the share the company can realistically win given competition and execution.
A large and growing market raises the probability of the outsized outcome that venture investors underwrite. It does not guarantee it, because a big TAM with a tiny obtainable share is a weaker case than a smaller market a company can dominate.
Market size is one of the core value drivers covered in How to Value a Startup, alongside team, product and unit economics.
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