👋 Hi, it’s CJ Gustafson and welcome to Mostly Metrics, my weekly newsletter where I unpack how the world’s best CFOs and business experts use metrics to make better decisions.

“How big is your TAM?”

Total Addressable Market is something you can’t unsee once you see it. It changes the way you assess the world around you. To the chagrin of my wife, I can’t visit a bakery without doing the back-of-the-envelope TAM on blueberry muffin sales in the greater Boston area.

Having built a plethora (vocab word!) of TAM analyses as an operator when either evaluating a new product launch or building a pitch deck to ask VCs for money, I finally got the chance to approach the topic in detail from the lens of an investor.

From the very first Salesforce export we poured over together, Sebastian Duesterhoeft has been one of my favorite investors to work with and learn from.

After a remarkable stretch at Coatue, where he invested in category defining companies like Snowflake, Databricks, Confluent, Lacework, and Airtable, Sebastian recently began a new chapter as a Partner at Lightspeed Ventures, focused on growth-stage investments in enterprise software. The firm raised more than $7B in new capital over the past year, with $4.5B dedicated to investing in growth-stage companies.

So grab your popcorn, and enjoy this masterclass from the Michael Jordan of TAM.

Let’s get it.

TL;DR:

  • Part I: Why is TAM important, and how do you calculate it?

    • Why is TAM important?

    • How much TAM is enough TAM?

    • Price x Quantity as a framework

    • TAM red flags

    • TAM vs SAM vs SOM

  • Part II: Using TAM for investment decisions

    • TAM during COVID

    • Vertical SaaS TAMs

  • Part III: Growing TAM

    • TAM timing

    • Maturity curves

    • Expansion dollars

  • Part IV: Companies nailing TAM

    • ServiceNow

    • DataDog

    • Rippling

  • Part V: Lightning Round

    • Career advice and reflections

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