---
title: "Lazy TAM vs. Bottom-Up TAM"
section: "Market"
sectionId: "market"
date: "2026-05"
---

Early-stage investors typically don't need to see a TAM slide. But if you include one, make sure it's credible — a bad TAM slide can destroy your pitch instantly.

## Lazy TAM

"Lazy TAM" is quoting a large, uncorrelated industry number (often from Gartner or a similar research firm) as your addressable market.

**Example:** A startup building an IT setup marketplace for startups and SMBs opens with: *"Worldwide IT spending is expected to reach $4.4T in 2022."*

That number has almost nothing to do with their actual market. Using it signals to investors that you haven't thought carefully about your business. **Don't do this** — it instantly loses you credibility.

What great early-stage investors actually care about:

- A great product
- A great team
- Obsessed customers

## Bottom-Up TAM

Bottom-up TAM starts with reality and builds upward. You identify the specific customer segment you're going after and calculate from there.

**Example — Acme Corp (SaaS for dentist offices, $1,000/month per office):**

1. Find your actual addressable pool: there are ~187K dental offices in the US (IBISWorld, 2021)
2. Estimate realistic penetration: if you capture 10% over ten years, that's 18,700 offices
3. Calculate revenue: 18,700 × $1,000/month = **$18.7M/month** or **$224M/year**

$224M in annual revenue is a great business. And walking investors through that logic makes you look prepared and credible — far better than citing $139B in total dental spending.

**Key rules:**
- Only count the customer segment that actually fits your product. Acme Corp doesn't care about toothbrush revenue.
- A "looking ahead" slide can show markets you could expand into later — but keep it separate from your core TAM calculation.

## Expansion can make great companies go supernova

Companies that expand their addressable market correctly can multiply their value:

- **Amazon / AWS** — through the first 9 months of 2021, AWS was 13% of Amazon's revenue but ~70% of Amazon's profits ($13B out of $19B total)
- **Uber** — expanded from black cars → UberX (creating the gig economy) → delivery (which kept the business growing when rides collapsed during the pandemic)