Market size Mayhem

18 Jul Market size Mayhem

When you start a company, one of the questions that always comes up is: How big is your market? You might have a “feeling” that the market that you will address is big enough, but a feeling is not enough. Also doing a real research on your actual market might give some surprising results, in our case it even made us pivot. This post describes the market sizing exercise we’ve done during our first months at Treeveo.


The Market-size pivot

Treeveo’s origin lies in Post-Merger-Integration. We saw that there was no good tool available to help companies merge. Everyone we spoke to agreed that this is a big problem. But now let’s really take a real look at the size of this market. We made 2 assumptions. We assumed that we can sell one license per deal (annual subscription). So how much could potentially be sold in a market like this? We started doing research and discovered the following: In 2011 around 22000 deals were done in the US and Europe. But only 7300 of those deals were valued above €10M and suitable for a product like Treeveo. Then the figure starts to become less attractive. If we would think we could get to 10% of those deals we were looking at 730 projects annually. So depending on our per project annual fee we could end up with an annual revenue of €3.5M – €11m. This might seem like a very attractive number (and it is). But the resources we would have to put in place would be amazing as post-merger-integration is a very niche market. Getting to 730 projects in a year requires a very high-paid, international, highly specialized sales force as well as top-notch reputation and product combined with a very long sales cycle.

But, ever since we first started showing Treeveo to companies we have been getting a lot of feedback from companies that wanted to use Treeveo for other types of projects. So we went into a new market-sizing exercise.

Market sizing round 2

Before defining our new market, we had to re-define our customer. Post-merger-integration usually takes place in the strategy department of a company. However in our experience there are also other projects taking place in this same department that have the same challenges. Projects like: business development, strategy execution, cost-reduction, group synergy projects and others. So we took this realm as our new clients: (strategy) managers that need to implement strategic projects. After this pivot from PMI to strategy we are now faced with a re-calculation of the market. We’ve taken the following approach: We believe that Treeveo will take part of the spend in 3 markets. Firstly, we believe we can win part of the money spent on SaaS solutions (collaboration and business intelligence) because we have a unique product. Secondly we believe Treeveo can gain some share in the project Management market. Finally, because Treeveo replaces the structure that Strategy and Management Consultants bring, we also believe that Treeveo can gain market share in that area. Using data from Marketline we can then get some figures from these markets and subsequently distill our own market. Using the ranges from these 3 markets we can then distill our own. The table below shows that we can potentially address a market of $4Bn – $12Bn.

Market Contents Distilled range
SaaS Total 2013:$59Bn, And 2014: $75 BnCollaboration software: 5Bn$ (13%   growth)Business intelligence: $16Bn (11%   growth) $11Bn – $21Bn
Project Management Gartner: Worldwide project and portfolio management (PPM) software   revenue totaled $1.65 billion in 2012, with 11% growth (excluding consulting)Should add consulting $2Bn – $6Bn
Strategy / Management consulting Total: $353.5Bn (2014)18.6% Strategy consulting: $65.71BnAssumed 25% of spend replaceable by Treeveo: $16.44Bn $8Bn – $16Bn
Treeveo ~$8Bn $4Bn – $12Bn

This ~$8Bn is a much better market than PMI alone. Now the next challenge is to develop a precise pricing framework based on market feedback as well as an improved customer profile. But that will be another blog post 😉

Image credit: Mad House Photography


Jeroen Kemperman

Co-Founder of Treeveo, father of 2, IESE MBA

No Comments

Post A Comment