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When raising capital or planning your go-to-market, one of the most common investor questions is: “How big is your market?”. In his latest role, Franz played a key part in securing nearly seven figures in funding in a pre-seed round, underlining his expertise in early-stage startups. A well-structured market sizing analysis helps answer that by defining your TAM, SAM, and SOM. It shows not only the vision behind your product but also your understanding of what’s realistically achievable.
Without this analysis, startups often overestimate potential or fail to show focus, which are both red flags for investors.
In this blog post you will learn what TAM, SAM, and SOM mean, how to calculate them, and why they’re so critical. We’ll also explore the potential market size of two real examples from the Frankfurt School startup ecosystem: Alpenwuff and EnvioTech, two Startups from our Demo Day in February.
This hierarchy makes sure your growth narrative is both ambitious and grounded.
There are two common methods to calculate TAM/SAM/SOM: Top-down and bottom-up. Each has different strengths depending on your stage and data access.
The top-down method starts with high-level industry reports and narrows the scope based on relevant subsegments, geography, or product fit.
Alpenwuff is a bootstrapped pet nutrition startup with the mission to help dogs live longer, healthier lives through tailored nutrition. Recognizing that no pet parent wants their dog to suffer the effects of poor diet, they deliver personalized meal plans on a convenient subscription basis. Looking at the dog food market, they could structure their market size the following:
This approach is ideal when the market is well-established and detailed third-party research is available. It shows scale but must be backed by credible sources and reasonable assumptions.
The bottom-up method is built from real-world numbers: price per unit × number of customers × (conversion rate).
EnvioTech is a GreenTech startup developing smart upgrade kits that transform existing streetlights into energy-efficient, motion-responsive systems. By enabling up to 70% energy savings through intelligent dimming and significantly lowering maintenance costs, they offer municipalities a sustainable way to modernize urban infrastructure without full hardware replacements. They are based on a subscription model for the hardware, creating a Streetlight-as-a-Service model leading to the following market sizing:
This method is typically more accurate and compelling for early-stage startups. It shows an understanding of pricing, sales channels, and acquisition potential.
Investors don’t just want to know how big the market is; they want to know if you understand your target market and what you dan realistically win. A credible TAM/SAM/SOM analysis demonstrates that:
Too often, founders present large market figures without tying them to actual execution. A €10 billion TAM means little without a defined path to a meaningful SOM.
TAM, SAM, and SOM are more than pitch-deck buzzwords; they shape how you build, prioritize, and scale. By using a clear methodology and backing it with data, you show investors that your startup has not only potential but also a plan to realize it.
Whether you use top-down (like Alpenwuff) or bottom-up (like EnvioTech), your market sizing should serve as a bridge between vision and execution.
If you have a business idea and you need help with sharpening your Go-to-market strategy, book an Idea Talk with the FSEC team today!
Sources:
Frankfurt School gGmbH
Adickesallee 32-34
60322 Frankfurt am Main
