Perception can make or break a software startup. One key metric under scrutiny is Total Addressable Market (TAM) — the revenue ceiling a company could achieve. Between 2020 and 2021, many tech companies experienced accelerated growth, buoyed by pandemic-driven demand. This phenomenon led investors to assign sky-high valuations based on lofty TAM projections.
The problem? Many startup growth rates have since normalized or declined, revealing that earlier TAM assumptions may have been inflated — or even delusional. As the market corrects, founders and investors must reassess their TAM frameworks and ground their strategies in a more pragmatic reality
That conversation took center stage at TechCrunch Disrupt 2022, where three leading VCs — Aydin Senkut (Felicis Ventures), Deena Shakir (Lux Capital) and Kara Nortman (Upfront Ventures) — joined the session titled “Taking the BS Out of Your TAM.” Their goal: to help founders avoid overly ambitious projections and instead build sustainable, defensible businesses
Aydin Senkut, founder and managing partner at Felicis Ventures, is a nine-time Midas List veteran who led early funding rounds for notable companies like Shopify, Fitbit, Credit Karma and SoundHound.At Disrupt, he emphasized that while TAM remains a crucial signal for product-market fit,
Deena Shakir, a partner at Lux Capital, invests in transformative industries like women's health, digital infrastructure and food tech
TAM assessments must incorporate technological feasibility and customer adoption curves, not just slide deck buzzwords.
Kara Nortman, managing partner at Upfront Ventures, also brings operational insight from her work with consumer brands like Parachute Home and Time by Ping.She urged founders to break down TAM into serviceable obtainable markets, use top-down versus bottom-up models, and tie them to real price-performance trade-offs.
Why this matters
When TAM estimates are detached from market behavior, startups can over-pivot, burn resources, and ultimately underperform. In an environment of cooling valuations and investor scrutiny, misleading metrics can derail even the most promising companies.
The session underscored three core takeaways:
Anchor TAM in evidence — verified market signals, not aspirational charts.
Update continuously — recalibrate TAM as market conditions, pricing, or channel economics shift
Going forward
Looking ahead, startups aiming to ride the next wave — AI, healthtech, Web3 — must resist hype and return to grounded fundamentals. Unpacking TAM correctly not only boosts credibility with investors but also lays the foundation for stronger, more defensible business models.
