Ashmeet Sidana Deciphering the Right Market Size for New Products

Ashmeet Sidana, a partner at Engineering Capital, a Silicon Valley-based venture capital firm focused on deeptech startups, has a unique perspective on evaluating market sizes for innovative products. His insights shed light on why top-down market sizing may not be the best approach for entrepreneurs and early-stage venture capitalists. Top-down market sizing is a common method of estimating market potential by extrapolating broad macro trends and survey data. However, Ashmeet suggests that entrepreneurs and early-stage VCs should avoid relying solely on top-down figures. He believes that top-down market sizes may not accurately represent the micro value proposition that startups need to capture, especially in their early stages.

Instead, Ashmeet emphasizes a bottom-up approach to market sizing. This approach focuses on guesstimating the potential market for revolutionary products. These groundbreaking innovations often have the advantage of being early movers, with a significant share of the market available for capture. Entrepreneurs can create valuable companies based on rough estimates of critical elements like the number of customers, pricing, and fundamental data. Ashmeet explains that creating a category in the market is a continuum. It typically begins as an evolutionary process. As startups develop and iterate on their products, they may introduce incremental changes that slowly transform their offering. However, with time, these cumulative changes can lead to a revolutionary breakthrough that defines a new category.

For early-stage entrepreneurs, the primary focus should be on finding product-market fit. Ashmeet underscores the importance of determining whether customers are willing to buy the product, how much they are willing to pay, and whether there is a positive gross margin in the business. These considerations are fundamental to success, especially in the early stages.

Ignore Precision, Focus on Accuracy:

Ashmeet draws from his experience at VMware, where they continued to enhance their software product over the years. While they added new features and attracted more customers, they also increased the value and pricing of the product. The key takeaway here is that entrepreneurs should focus on the right direction rather than precision. Guesstimating market size involves ballpark figures, buffers, and allowances for potential failures and surprises. It’s about giving oneself room to execute, build, and grow. The goal is to keep moving in the right direction and refine the product based on customer feedback and evolving market dynamics.

Beyond Market Size: Execution Matters Most

While analyzing data and market potential is essential, Ashmeet highlights that execution plays the most significant role in transforming startups into successful companies. While having a sizable market and accurate market sizing are crucial, they are not sufficient conditions for success. Entrepreneurial success is defined by hard work, dedication, and the ability to execute effectively.

In conclusion, Ashmeet Sidana’s perspective on market sizing emphasizes the importance of a bottom-up approach, especially for revolutionary products. Entrepreneurs should focus on finding product-market fit, stay committed to the right direction, and prioritize execution above all else. Market sizing is just one piece of the puzzle, and success depends on many other factors.