The second most common reason why VCs pass on an investment is some version of “it’s not big enough.” For a VC to generate a great fund-level return, they typically need to invest in at least one company that has billions of dollars of enterprise value. To do that, most VCs decide that each one of their investments needs to have the potential to exit at or above that amount, even if it’s very unlikely to be the reality for every single investment.
The problem is, most really exciting companies seem “not big enough” to a lot of investors, especially really early on. These startups are often going after markets that don’t currently exist or seem like a niche opportunity (but in reality, are much bigger).
So if you’re a founder choosing to take the VC path, how can you counter investors’ objections about market size?
Below are some different approaches. Keep in mind that some of these are left-brain sort of approaches and others are more right-brain. Both are important and could be effective for different sorts of investors (and different sorts of founders). And if you gravitate towards one, keep in mind that investors that make team decisions will come at this question from multiple angles.