While startups must focus on their SOM to drive initial traction and ensure lean operations, VCs are often more interested in the TAM. This creates a tension between the need to act narrowly and the need to think broadly. Start too broad, and you risk spreading your resources too thin; fail to communicate the TAM, and you may struggle to attract investor interest.
The solution lies in embracing both perspectives. Founders should:
- Start Narrow for Execution: Concentrate on the SOM to achieve early wins. These tangible results demonstrate product-market fit and prove your business can execute effectively.
- Showcase TAM for Vision: Present a clear roadmap that illustrates how your business can expand from SOM to SAM, and eventually scale toward the TAM. Investors need to see the long-term growth potential without questioning your focus.
How to Navigate the TAM-SOM Paradox
- Articulate Your Strategy: Develop a clear narrative that links your current focus (SOM) to future growth (TAM). For example, explain how capturing a small segment today positions you to scale over time.
- Be Realistic, Yet Aspirational: While SOM defines immediate goals, your TAM should outline a bold vision. Investors appreciate a balanced approach that shows ambition without naivety.
- Prioritise Efficiency: Build your operations, marketing, and sales strategies around the SOM. Resource efficiency at this stage is critical to survival and credibility.
Key Takeaway
Founders don’t need to compromise vision for execution. The TAM-SOM Paradox is not a barrier but an opportunity to demonstrate both strategic clarity and tactical discipline. By perfecting your SOM while keeping an eye on your TAM, you can attract investors, optimise resources, and build a foundation for long-term success.
For startups, the road to market leadership starts uncomfortably narrow but widens over time. The key is to communicate that journey effectively — showing not just where you are today, but where you could be tomorrow.
