Of the various factors that influence a startup’s outcome, the market is probably the most important one. Therefore, understanding the target market, its size, its growth, and its segmentation, is crucial for founders. While there may not be sufficiently detailed data at the early stages of a new venture, entrepreneurs must nevertheless. To explore market sizing in the entrepreneurship context, I gave a talk in 2021 – hosted by Venture Center – on market research and segmentation for early-stage ventures focused on materials, chemicals, and biological sciences.



Clearly, secondary market research is the most common approach to estimate the size of a market segment. This involves compiling data from various public and/or private sources, making assumptions, and building a logical model to estimate target market size and growth.

However, a more accurate and valid estimate of market size requires primary market research (PMR). Large companies usually have the time and budget for PMR – entrepreneurs should instead employ lean startup principles such as customer discovery, value proposition canvas, and ideal customer profile to gain insights into their market segments.


Market Segmentation, Research, Sizing for Technology Startups


As startups engage with customers via proof-of-concept projects and pilot programs, they can begin to build a bottom-up estimate of market size by asking the 3 questions in the figure above. Once the revenue per customer estimate is robust, it is simply a matter of converting it into an annual revenue estimate for the company by factoring in the total number of ‘similar’ customers that the new venture can pursue.