Startup Market Sizing, Revenue Models, and VPC Framework

Posted on Jun 14, 2026 in Marketing

Market Sizing and Target Strategies

TAM (Total Available Market): Refers to the total market demand for a product or service.
SAM (Serviceable Available Market): Is the section of the TAM that your product or service intends to target.
SOM (Share of Market): Is the portion of SAM that your company is realistically likely to reach.
Launch market: Creating a launch or niche market is like the beachhead and bowling pin strategies. It involves proving that you already have a group of launch customers that really want to buy your product.

Top-down approach: This method uses market analysis to determine potential revenues and is therefore driven by perceptions of market demand. This method is relevant and more appropriate when your target market is clearly defined, making it possible to make appropriate predictions regarding market shares. However, it doesn’t work well when your target market is very large relative to the size of your startup.
Bottom-up approach: The bottom-up approach focuses on the supply-side logic. That is, it estimates revenue by how much you can realistically manage to produce and sell.

Small market & not growing: If your startup idea is located in this type of market, then it will be extremely difficult to evidence a scalable project and one that has investable potential.
Large market & growth in the past: It would be really difficult as there are already giant players offering their (accepted) solutions to the customers. There is something referred to as “crowded uncrowded markets” that describe a market that is apparently saturated and well-served by incumbents yet still has a small opportunity for new entrants.
Small market & too early: You might think that you have an amazing business idea, but it could be just too early for the market to accept it.
Small market & growing quickly: This is the ideal location for your business idea. If you find yourself operating in this market, then you have entered just in time. The most likely context where this type of market emerges is when there is a change in user behavior or a change in technology.

Revenue: By revenue, we are talking about money given to you by customers in return for your solution to their problem.
Customer: And by customer, we mean the one who pays for whatever it is that you sell.
Analogs: Many companies use analogs, which are previous companies that have been successful and are worth copying in some way.
Antilogs: They also learn from antilogs—which are those previous companies (that may have failed) but explicitly try to do things differently.
Leaps of faith: These beliefs are known as “leaps of faith,” which are beliefs about which neither analogs nor antilogs can provide satisfactory evidence.

Commission: Revenue generated in exchange for facilitating a successful transaction between two parties (Examples: Real estate agents, financial services providers).
Usage-Based: Selling access to a good or service based on the amount of good/service used (Examples: Mobile phone data plans, utility companies).
Freemium: A marketing strategy, not a revenue model. (Many people mistake freemium as a revenue model when it’s actually a combination of a marketing strategy and a revenue model).
Subscription: Selling non-exclusive access to a good or service for a given period of time that repeats until canceled (Examples: Dropbox, Netflix).
Donation/Grant: Money given voluntarily by those wishing to support the work of your organization.
Data Reselling: Selling information about the customers of an organization.
Ad-Based: Selling the right to promote other people’s products and services to your customers.
One-Time Payment: Selling a good or service via a single transaction.
Rental: Selling exclusive access to a good or service for a given period of time.
Licensing/White Labeling: Selling permission for someone else to use a product you created.

Value Proposition Canvas (VPC): Is a useful tool that we can use to focus our efforts on creating value for the customer from the very beginning of the new venture creation process.
Customer Profile: Describes the specific customer segment that you want to target and breaks the customer down into jobs to be done, pains, and gains.
Value Map / Proposition: Describes the features of a specific value proposition in your business model in a structured and detailed way. It helps you to break down your value proposition into products and services, pain relievers, and gain creators.
Jobs to be Done: Describing what your customers are trying to get done in their work and in their lives, expressed in their own words (Types: Functional Jobs, Social Jobs, Personal/emotional Jobs).
Pains: The bad outcomes, risks, and obstacles related to the customer jobs.
Gains: The outcomes customers want to achieve or the concrete benefits they are seeking (Types: Required, Expected, Desired, Unexpected).
Use Case: A detailed overview of how your value proposition is made available to, and used by, your potential customers.

Problem-Solution Fit: Happens when you have evidence that customers care about certain jobs to be done, pains, and gains, and when the value proposition addresses these.
Product-Market Fit: Happens when you have evidence that your products and services, pain relievers, and gain creators are actually creating customer value and getting traction in the market.
Business Model Fit: Happens when you have evidence that your value proposition can be embedded in a profitable and scalable business model.

Competitive Position: By charting your competitive position, you can show how well your solution fulfills a customer’s need in a visual way and at the same time make a comparison of this against how your competitors do it.
Direct competition: Companies doing very similar things to your own.
Indirect competition: Companies selling different products or services but fulfilling the same need or solving the same problem.
Value Curves: Create a “value curve” by plotting the alternative offers in relation to the identified dimensions of value (those most prioritized by your persona).
The Petal Diagram: A diagram that can consider that we may be creating a new market or operating within one that is at the intersection of several different markets.