Its not the size of your market, its what you do with it that matters.

brycedotvc:

One of the most pedestrain of questions that arise in many VC meetings is that of market size. How big is your market? Really. I’ve found that should this question arise more than once over a series of meetings, you’re better off looking elsewhere for funding than the blue shirt and khaki MBA staring at you pointedly from across the table.

If history is a guide you will not be able to answer this question with cleverly constructed Excel spreadsheets or elegantly cascading waterfall projections. For seed and early stage investors I’ve found that you either fundamentally and instinctively believe that something is a big market or you don’t. Because, often, the most interesting companies are operating in as-yet-undefined markets or are attacking and existing market from some niche that the large incumbents dismiss as not being big enough to warrant their attention and resources.

I posted a link a graph sizing the mobile ad market today at $215M. Now, most VCs say they won’t even look at markets that aren’t well north of a billion dollars in size. Also note that AdMob was funded pre-iPhone which seems to be making mobile ad networks a more reasonable bet. That market barely exists today and was even less obvious for the VCs who wrote the original checks to back a company in an undefined and, wait for it, small market.

The same could be said of the VCs who wrote the first checks for Facebook (social graph, wha?), Twitter (no, what you doing?) Zynga (a niche inside a niche) and many others.

Of the two new investments I made last year, I believe the current market sizing for each would be some approximation of zero. And that’s the point. Its not about the size of today’s market its what you do with it that really matters.