Excellent Example of Realistic Market Sizing by a Startup

In my previous article I wrote about a rigorous,  defensible and repeatable method for sizing a market for a new product within an enterprise or a startup. The simple approach is to start with biggest possible market but consciously apply filters to size what is serviceable by your venture and see what factors will help grow the opportunity. I could not share with you models I have done for a more concrete example of such method. I showed you a hypothetical market but the filters applied are as real and practical.

size-waterfall

Looking for something more concrete and relatable I came across this excellent market sizing exercise published by a San Francisco based scale-out storage startup Scality. This report from Scality is not only an example of market sizing approach I recommended, it is an excellent read on how to triangulate the real opportunity from all directions – two ways of Top down and two ways of bottom up. That is for another discussion.

Here is a brief discussion of how Scality CEO, Jérôme Lecat, measures his startup’s market size. Scality builds scale out object storage software for managing petabytes of data. Their core principle is based on Marc Andreessen’s statement, “Software is eating the world!”. So their value delivery vehicle  that is the product to solve the multi petabyte storage problem is a pure software offering.

scality-sizing

  1. Scality approach starts not with the entire data storage market or every bit of data generated but specifically with the Object storage market. This is about $15.4 Billion in 2015. So this has already applied other filters to remove those that are not releant and not attractive.
  2. Adding a even more rigorous step than what I showed,  this exercise breaks down the $15.4 billion into its constituent parts. This step is indeed worthwhile to help you see filters for each of the smaller sub-segment and hence get better estimate than applying filters to the whole market.
  3. Once that is done the next step is sizing what is addressable in each sub-segment to determine fit. Note how this step completely yields certain sub-segments like the Public-cloud DIY.
  4. This gives the total target addressable market for Scality’s software only offering.
  5. Could they one day serve the entire market? Sure but it keeps the focus for next five years realistic and aligned with their chosen product strategy of software only.

This is an excellent example of showing discipline, rigor and focus on sizing the opportunity.