TAM vs. SAM vs. SOM: What Founders Should Focus On | Index Ventures

The Significance of Total Addressable Market (TAM) for Startups

Founders in the early phases of building a company often find themselves preoccupied with Total Addressable Market (TAM) – determining the potential scope for disruption and growth. However, Jahanvi Sardana, a partner at Index Ventures, offers a crucial perspective: numerous successful startups have originated in markets that were, initially, virtually nonexistent.

During TechCrunch’s 2025 All Stage event in Boston, Sardana posed a thought-provoking question to the audience: “Prior to Google’s emergence, what demand existed for search?” She extended this line of inquiry to operating systems before Microsoft and cloud computing before Amazon.

TAM as a Surfing Analogy

Sardana draws a parallel between TAM and surfing, explaining that significant opportunities arise periodically. The internet initiated this pattern, followed by the mobile revolution, then cloud technology, and currently, she asserts, the most substantial opportunity yet: artificial intelligence.

She emphasizes the importance of product alignment with these major trends, stating, “Is your product designed to capitalize on this wave?” This alignment, she clarifies, is what defines product-market fit.

Categorizing TAM

Sardana categorizes TAM into three distinct groups: known, emerging, and invisible markets.

Known Market

A known market is one that already exists, where a founder aims to displace an established leader. In this scenario, the founder must demonstrate to investors the superiority of their offering.

“Consider the ubiquitous act of brushing teeth,” she illustrates. “You must articulate why your toothbrush represents a significant improvement.”

Emerging Market

An emerging market represents a sector where product adoption is growing, with the potential to reach widespread acceptance.

“Reflect on the evolution of non-alcoholic beer before its recent surge in popularity,” Sardana suggests.

Invisible Market

The invisible market, which Sardana identifies as “the biggest trap” and “a somewhat elusive art,” presents the greatest challenge.

In this case, the market itself is yet to be formed, requiring the founder to create it and provide compelling evidence of their innovative capabilities.

“Consider the state of smartphones in 2006; consumer demand was undefined, yet they fundamentally altered the world,” she notes, adding that “often, consumers are unaware of their needs until presented with possibilities.”

Investor Perspectives on TAM

Attendees at the All Stage event, primarily early-stage founders, frequently inquired about investor expectations. Specifically, they asked whether a TAM slide is essential in a pitch deck.

“Presenting a TAM slide and outlining the underlying calculations is acceptable,” Sardana responded. However, she cautioned against over-reliance on industry metrics, emphasizing the value of original insights. She also advised founders to avoid excessive dependence on external reports, as this could indicate a lack of in-depth market understanding.

Sizing TAM in Marketplaces

One audience member asked about determining TAM for large marketplaces.

Sardana acknowledged the difficulty, recalling Index Ventures’ initial skepticism towards Airbnb, due to perceived TAM limitations.

“Airbnb ultimately generated a new inventory source, now exceeding the scale of major hotel chains, and fundamentally changed travel behavior,” she explained, adding that marketplace TAMs are complex. “Focus on unlocking supply, and then analyze how behavior will evolve.”

What Makes a Company Stand Out?

The audience also sought Sardana’s insights on what attracts investors like herself.

She stated that a deep understanding of the customer and their willingness to purchase the product is paramount. If a founder can clearly articulate these elements, the company will be well-positioned to impress investors.

“Our primary focus is evaluating founders, rather than markets or products,” she concluded. “Your market assessment ultimately reflects your ambition.”