hey you all, I'm prepping for growth equity recruiting and would love to hear more thoughts on how you'd answer a very vague/broad market size estimation question.
QUESTION: please ignore the title regarding "vertical software" - I actually need help with horizontal software/a software category. specifically, what are the layers/factors/segmentation criteria you'd use to estimate the US and/or global market size for a horizontal software category (such as a vendor management software, expense management software, etc.)? also, how would you refine your estimation/model if you have more time (let's say a week) to build out a model - what are some things you can add to increase sophistication?
MY THOUGHTS: currently where I'm stuck is, this question is so broad that I don't know where to start using a bottom-up approach. There are many types of products within a broad category like "talent management software" from onboarding to training to evaluation, and what am I supposed to assume what prices/different tiers of pricing could be charged?
I don't think a top-down approach would work here, since this is about estimating the entire market size of a category, rather than estimating the potential revenue of a company's product.
I hate market estimation. The're like pulling shit out of thin air. Wework was once estimated to be worth $47 billion:)
but someone please help me with this interview question, cuz ultimately I still need a job to pay bills:(
My brother in christ you just gave examples of horizontal software
yea yea I realize vertical software is all about providing a one-stop shop to industry niches, but same idea here - how would you do an estimation question for a software market
Will circle back with complete framework
Industry Revenue x Industry SG&A as % of Revenue x Cost savings from software x Value capture = TAM
Number of companies in industry, segmented by size or sub / industry times % logo penetration per segment times segment ACVs? Not too difficult
but this is supposed to be an in-depth 300-word answer; i mean, i just don't see how i can put enough complexity into it to make it 300 words
also if we're estimating the entire market size of a horizontal software (e.g. vendor management software) here, and you're staring from an industry client level, then do you actually go through all the industries in the NAICS and repeat the process for each of them
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