Raising Growth Capital: Addressable Target Market

Ivan Nikkhoo is Managing Director of Simer & Associates (ivan.nikkhoo@siemer.com). In this video he talks about addressable target mart when raising growth capital.

  1. Potentially large opportunity
  2. Expansion possible beyond target market
  3. Be realistic & maintain a narrow focus

In my frequent conversations with a lot of private equity groups, I often ask them what is it that they are looking for when they want to invest growth capital into companies. And one common theme currently is can this be a big play.

In other words, is this going to be a company that’s going to do 50-60 million in revenues or can it be a multi-hundred million dollar play? And that is a very, very important question.

So we want to make sure that we are building a company that is addressing a very big target market. It also has the ability to expand the target market once it reaches its critical mass within that target market.

Having said that, there’s a couple of do’s and don’ts. The most common mistake a lot of young entrepreneurs make is that they go and say this is a hundred billion dollar market, and we just want to capture a few percent of it. That is a don’t. Don’t ever do that because it’s a very clear signal that you haven’t played this game before.

Another way of doing is to very humble and say, “This is our very narrow focus as we enter and penetrate the market. We are going to increase our critical mass and then we are going to looking for either vertical or horizontal expansion place.”

Well, it could geographic, it could be product line, it could be a variety of things. But, enter with a narrow focus and expand into a large addressable target market.