The TAM Paradox
Why Founders Who Chase TAMs Are Setting Themselves Up to Fail
July is scalability paradox month and this is my first of four posts on the topic — this week is about the TAM Paradox.
There’s a myth in startup land that refuses to die:
👉 “Build a solution for a large Total Addressable Market (TAM) and you’ve got the basis for a successful startup.”
It sounds logical. Big market = big business, right?
In fact, the graveyard of startups is filled with well-funded founders who confidently pitched $10B+ TAMs while failing to have the most important startup element: a real, painful, deeply felt problem worth solving.
I’ve sat in boardrooms, heard pitches, and worked with founders. And here’s the pattern I’ve seen over and over again:
Founders who chase TAMs fail. Founders who chase painful problems that they have personally experienced win.
Look: Market size matters — eventually. But at the earliest stages, obsessing over TAM is a distraction.
It leads you to build for a theoretical audience rather than for real humans.
It puts you in a mindset of capturing a slice of a pie rather than creating something people need.
Pain, Not Pie Charts
The foundation of a great startup isn’t a pie chart. It isn’t a spreadsheet.
Every founder I’ve worked with who’s built something successful started with a problem they personally couldn’t let go of. None of them started their business by first identifying a large TAM/SAM/SOM and then deciding to build something within it.
The foundation of a great startup is a problem you can’t stop thinking about.
A problem you’ve lived with. One that frustrates you so much, you’re willing to spend 7+ years solving it. Because that’s how long it will take. Probably longer.
And unless you care deeply, you won’t survive the hard days — of which there will be many.
The biggest opportunities often start by solving the narrowest problems.
In my book Sail to Scale, I talk about problem-market fit as the true starting point for a successful startup.
If you don’t have a meaningful problem to solve for a clearly defined group of people, you don’t have a startup — you have a slide deck.
Big Companies That Started Small
Some of the most iconic companies didn’t start by tackling massive TAMs. They started with razor-sharp focus on a specific user pain:
Facebook: Began as a social tool for Harvard students — a single campus. Zuckerberg started by pitching something students craved.
Airbnb: Started with air mattresses in their apartment during a sold-out conference. The TAM for “renting air mattresses to conference-goers” was basically zero. But they solved a real, immediate problem based on their own experience.
Stripe: Began by solving a painful problem developers faced: how insanely hard it was to accept payments online. Were they thinking about taking on VISA? Probably not. What they were focused on is trying to make it easy for devs to get paid.
Notion: Entered a crowded productivity space. But they focused on a niche group of designers and power users who wanted flexibility and aesthetic control — and built something that group loved until more people found out about it and loved it also.
These companies started by building something people actually wanted — and they knew they wanted it because the founding team needed it themselves. They created momentum through loyalty and word-of-mouth. And that’s what opened up larger market opportunities down the road.
The Passion Paradox
Here’s the paradox: investors do want to see large market potential. So show it to them. But don’t take it to heart! If you believe your TAM is your edge, you’re not focusing on the right things.
When I talk to founders, I don’t want to hear how big their market is. I want to know:
❓ Who is your user and how will you reach them?
❓ What problem are they facing?
❓ How do you know this problem is painful for them?
❓ Why are you the right person to solve their problem?
Startups are a long, messy, painful grind. You need an irrational level of commitment to get through it — and that only comes from personal, passionate connection to the real problem.
It’s about
Pain
Passion
Persistence
Do these three things exceptionally well and the TAM will find you.
📘 In Sail to Scale, I, along with my co-authors, dive deeper into this and other elements critical for your startup’s Launch phase.
#startups #founderadvice #entrepreneurship #productmarketfit #SailToScale #growthmindset #startupstrategy