There are three things that every VC looks at when they evaluate a company, market, product and team, and I will look at each in my next three posts in the series. The emphasis between the three varies between VC with perhaps the most important difference coming with the stage of investment. Earlier stage investors look more to team whereas later stage investors look more to market and product, a natural reflection of the fact that for young businesses the product and market are typically evolving fast which places greater emphasis on having the right team. With later stage businesses by contrast if you have a great market and a strong product it is less important that the team is full of A-Star players.
The first, and probably most important, evaluation of market size comes from an assessment of the problem the company solves (or entertainment value it brings) and how much people and companies will pay for the solution. Pretty obviously, the market opportunity is comes from multiplying the number of potential customers by the amount each will pay and the first order assessment looks at how painful the problem is as a proxy for how much people will pay and how wide the appeal will be. On the consumer side the market is usually cut by age, geography, or gender. On the corporate side the market is usually cut by geography, industry or company size.
To read the full, original article click on this link: How does a VC estimate market size? « The Equity Kicker
Author: Nic Brisbourne
