To understand the potential of a project we have to analyze a single key variable, the market size.
Now, this is extremely important when it comes to investors.
Consider that the average VC (venture capitalist) firm speaks to around 1,200 companies before narrowing it down to a list of 10 – just 1% of their initial outreach.
How do they narrow down their choice from the thousands of great ideas they come across? It’s impossible to invest in them all, right?
They do so by looking at the potential upside a startup has. Is it likely to be confined to a smaller, local market? Or is there substantial evidence indicating they could go global?
Similarly, both VCs and angel investors are looking to de-risk their investment. They also want to know the minimum investment capital needed to discover whether or not this product has a good market fit.
So how do they do this?