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Airbnb estimated its total addressable market (TAM) by projecting its potential revenue growth. In 2008, the company assumed it could capture 15% of its TAM, which would lead to $2 billion in revenue in three years. However, this estimation was considered too optimistic by many investors. After some years of growth and an initial seed round, Airbnb revised its estimation and assumed it could capture 2% of its TAM, leading to a valuation of $1.3 billion in 2011.
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In 2008, Airbnb was a startup trying to raise money from investors across Silicon Valley. The company estimated it could grow to $2 billion in revenue in three years by capturing 15% of their total addressable market, or TAM. Airbnb was rejected by nearly all the investors it pitched because its assumption that it could capture 15% of its TAM was too optimistic. After an initial seed round and some promising years of growth, in 2011 Airbnb ended up raising $100M at a $1.3B valuation — a dramatically smaller valuation that assumed the company could capture 2% of its TAM.
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How do you take your product management to the next level? Due to popular demand, we've expanded our Product Development Toolkit to include more tools...
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