Quantify Disruption

How do you quantify the market opportunity or value for technology that doesn’t yet exist in the market?  Here’s the problem:

• There is no historic usage or revenue data to draw from for a forecast, and the existing alternative is radically different.
• Industry analysts have not identified the market category that you see and so do not track or analyze it.
• Primary market research is unreliable as respondents don’t have real experience with something like your product, which is dramatically different.
• Key analysis assumptions such as price point, business model, adoption rate, usage levels, and competitive or regulatory response are speculative or simply unknown.

Yet investors and executives will require some credible financial due diligence before investing or funding.  Here’s a few guidelines that will help  provide credible analysis:

• Remember that the task is not to come up with an accurate number (that’s why it’s called a forecast), but a number that is believable and provides you the desired level of funding.
• Focus initially on unit forecasts, separating them from revenue forecasts that are much more speculative and usually subject to more scrutiny.
• Bound your addressable market, or the upper limit of your unit forecast, with an accepted, publicly available number from a credible and impartial industry or government source (e.g., demographics from the US Census).  This will avoid the tendency to over forecast (e.g., forecast more mobile subscribers than the population of the US) and reduce the challenges to your numbers .