Size the Prize: TAM, SAM, SOM Without the Fiction

Every investor has read a deck that claimed 1% of a $50bn TAM. Every investor has also passed on it. Top-down sizing tells the reader you have not done the work — and worse, that you do not understand who actually pays you.

The bottom-up version that survives diligence

TAM is the number of buyers in the world who could ever pay for the category, multiplied by what they would pay per year. SAM is the subset you can reach with your current product, language, regulation and channel. SOM is the slice you can credibly win in 36 months given the team, capital and competition you actually have.

All three numbers must be built from a buyer count and a price — never from a McKinsey market report ÷ arbitrary percentage. If you cannot name the buyer, you cannot size the market.

A 2023 study by DocSend of 200 seed-stage decks found that decks with bottom-up market sizing closed rounds 23% faster than decks using top-down. Investors do not punish small TAMs — they punish lazy ones.

Worked example

Selling a £6k/year compliance tool to UK fintech CFOs. UK fintechs registered with the FCA: ~2,500. Of those with 20+ staff (the buyer threshold for this product): ~900. SAM = 900 × £6k = £5.4m ARR. SOM at 12% in 36 months = £648k ARR. That is a real number. It is also small — and that is fine, because it is true and the sequel markets are visible.

Now layer the sequel: same product, US fintechs, then UK insurers, then EU. Each sequel is its own bottom-up calculation. Stack them and the investor sees a path, not a fantasy.

The diligence test

If a partner at the firm Googles your buyer count and gets within 20% of your number, you pass. If they get a number 10x smaller than yours, you have torched the round. Always cite the source of your buyer count on the slide — Companies House, FCA register, ONS, IBISWorld — and link to it in the appendix.

A small market sized honestly will raise. A big market sized lazily will not.