While a strong business model is necessary, it doesn't generate outsized returns. The key to successful growth investing is identifying a Total Addressable Market (TAM) that consensus views as small but which you believe will be massive. This contrarian take on market size is where the real alpha is found.

The slow growth of public SaaS isn't just an execution failure; it's a structural problem. We created so many VC-backed companies that markets became saturated, blocking adjacent expansion opportunities and creating a 'Total Addressable Market (TAM) trap'.

Initial data suggested the market for design tools was too small to build a large business. Figma's founders bet on the trend that design was becoming a key business differentiator, which would force the market to expand. They focused on building for the trend, not the existing TAM.

When deciding between deepening a vertical, adding adjacent ones, or going horizontal, analyze two key factors: the extent of product modification needed and your ability to market and sell to the new audience. This framework simplifies a complex strategic choice.

The conversation around Ideal Customer Profile (ICP) has evolved beyond simple refinement. With newly accessible data, companies are fundamentally re-evaluating their Total Addressable Market (TAM), challenging long-held assumptions about who their potential customers are and how big the opportunity is.

Founders in deep tech and space are moving beyond traditional TAM analysis. They justify high valuations by pitching narratives of creating entirely new markets, like interplanetary humanity or space-based data centers. This shifts the conversation from 'what is the market?' to 'what could the market become?'.

Investors and acquirers pay premiums for predictable revenue, which comes from retaining and upselling existing customers. This "expansion revenue" is a far greater value multiplier than simply acquiring new customers, a metric most founders wrongly prioritize.

Companies like Amazon (from books to cloud) and Intuitive Surgical (from one specific surgery to many) became massive winners by creating new markets, not just conquering existing ones. Investors should prioritize businesses with the innovative capacity to expand their TAM, as initial market sizes are often misleadingly small.

Applying industry-average growth rates to an emerging category leader is a critical mistake. A business like Shopify, with a powerful flywheel and network effects, is a power law winner that defies regression to the mean of its stagnant competitors. Its performance is simply not comparable.