Getting TAM wrong

Yesterday I mentioned how there is an increasingly special group of software companies laying the digital groundwork for the OT market.

With each Energize investment we do our best to put together a framework on market size and near-term opportunity for our prospective investments. Looking back at our Fund 1 portfolio companies there are now a few, clear examples where we underestimated the TAM.

The top 3 consistent themes for underestimating TAM are:

1- Product-led growth allowed the companies to expand into other soft-cost opportunities in the vertical

2- Situational-driven budget expansion as a forcing function to try new products to maintain business operations (COVID, workforce turnover, etc.)

3- Distribution channels built into product accelerate go to market and open up new verticals

Notably, there is no “a-ha” moment from a customer group. Markets get unlocked as small wins compound, team grit persists, and effort-driven “luck”all collide. As the tailwinds for the energy and industrial verticals continue to blow, the winning firms are going to be the ones that continue to iterate and hustle as the market develops.