Brian Nichols is the co-founder of Angel Squad, a community where you’ll learn how to angel invest and get a chance to invest as little as $1k into Hustle Fund's top performing early-stage startups

You have seen this slide a hundred times. "Our TAM is $50 billion." A clean graph. Big numbers. The company sounds enormous.

And it tells you almost nothing useful about whether this is a good investment.

At Hustle Fund, we have backed over 600 startups. We almost never ask about TAM. Most VCs will disagree with us on this. But after seeing how early-stage companies actually succeed or fail, we are convinced that total addressable market is one of the most misleading metrics in startup investing.

Here is why, and what you should focus on instead.

Why TAM Falls Apart at the Early Stage

TAM seems logical on paper. Calculate the number of potential buyers, multiply by what they would pay, and you get a big number. Simple enough.

But TAM does not account for three things that actually determine whether a startup succeeds:

How hard it is to get customers. Travel is a massive market. People spend thousands of dollars on trips every year. But as Elizabeth Yin, General Partner at Hustle Fund, points out: scalably acquiring travelers through most customer acquisition channels is incredibly difficult. Just because you have a big TAM does not mean you can actually get the customers, even if you have a better product. A $50 billion TAM with brutal customer acquisition costs is a trap, not an opportunity.

How much you can upsell once you have them. If you sell hippo food to zoos (stay with me here), your initial TAM might look small. But once you have locked in those customers, you can sell grooming products, cleaning supplies, and supplements. Amazon built a trillion-dollar company on this principle. They spend way more resources expanding within their home market than trying to get new international customers.

Whether the market is accelerating or dying. A shrinking $50 billion market is far worse than a growing $500 million one. If you passed on crypto in 2015 because the market was "too small," you were looking at it completely wrong.

That last point is the big one. Trajectory matters way more than current market size.

What to Look For Instead: Market Pull

So if TAM is out, what should you actually evaluate? Market pull.

Market pull is a velocity measurement. It answers the question: how quickly are customers adopting this product? Not how big is the theoretical market, but how fast is demand growing right now?

Elizabeth Yin defines it as loosely measuring how quickly customers adopt your product. And with respect to startup success, she believes this matters more than anything else.

Here is what strong market pull actually looks like. To hit $100 million in annual revenue by year five, a startup's trajectory needs to look something like:

Year 1: $1M. Year 2: $6M. Year 3: $15M. Year 4: $40M. Year 5: $100M.

That is more than doubling every year, with much higher multiples in the early stages. This is extremely hard to pull off. But when it happens, the market size takes care of itself.

Where Market Pull Actually Comes From

Market pull does not come from clever marketing. It comes from shifts.

Technology changes, behavior changes, and regulatory shifts create openings where customer demand accelerates faster than existing solutions can keep up. Some industries are dying quickly. Others are accelerating quickly. The investors who do well are the ones who spot the acceleration early.

Bill Gross, a serial founder, gave a well-known TED talk about his study of hundreds of startups. His research found that timing was the single biggest factor in whether a startup succeeded. Bigger than the team. Bigger than the idea itself.

This is why the "why now" question matters so much more than the "how big" question. When Uber launched, the ride-hailing market did not really exist. There was no TAM slide that would have predicted it. The market was created by shifts in smartphone adoption, GPS technology, and changing attitudes about getting into a stranger's car.

How to Apply This to Your Investments

When you are evaluating an early-stage deal, stop asking "how big is the market?" and start asking:

Is this company riding a wave that is building, or fighting against a current? If customer behaviors are already shifting in this direction, the startup showed up at the right moment. If it has to convince people to change behavior first, that is a much harder path.

Are customers pulling the product into the market, or is the founder pushing? Companies with real market pull do not need to hard-sell. Customers are already looking for a solution.

What is the growth rate, and is it accelerating? Early revenue that is doubling quarter over quarter tells you more than any TAM analysis ever could.

This matters especially when you are writing smaller checks. You are not deploying $100 million into proven markets. You are making small bets on where things are headed. And for that, trajectory beats size every time.

At Angel Squad, Hustle Fund's investing community, members learn to evaluate deals using the same frameworks we use internally, including market pull analysis across the 1,000+ startup applications we review monthly. If you want to get better at spotting where markets are headed before the crowd catches on, check it out at Angel Squad.

The best early-stage investors are not the ones with the fanciest market sizing models. They are the ones who can feel when a wave is building.