Hi! I’m glad you’re here. You’ve made it to issue #40 of VC Demystified🪄.
My name’s Nicole - I’m a Principal at an early stage venture fund, and I know firsthand that VC can often be a black box. Breaking into the industry may feel daunting and resources can seem scarce and inaccessible. I wanted to put together a newsletter to give others the playbook I wish I had when I first started.
I’ve gotten to speak with some of you who have signed up for the 1×1 conversations with me over the last two weeks and it’s been incredible hearing about your journeys! Keep pushing forward 💪.
Today’s deep dive: The explanation of why VCs chase businesses in big markets with high revenue potential
My personal mission is to open as many doors as possible for other people and this newsletter is just one avenue to do that. As always, I will continue to post VC insights daily for free across my socials.
VC Job Openings Preview (4 of 14)🪄
Harlem Capital is hiring Interns.
Location: Remote
https://harlem.capital/internship/
Spacecadet Ventures is hiring a Chief of Staff.
Location: Remote
https://spacecadet.notion.site/chief-of-staff-spacecadet
Elevation Capital is hiring an Associate.
Location: San Francisco
https://www.linkedin.com/jobs/view/4122984416/
645 Ventures is hiring a Principal.
Location: San Francisco
https://airtable.com/appKI2sN5fGxsVplg/shrFUMxoCXThjzU3C?utm_source=venturecapitalcareers
The explanation of why VCs chase businesses in big markets with high revenue potential
Welcome back! In last week’s newsletter, we walked through how to build a revenue forecast model, discussing why $100M in annual revenue by Year 7–10 is a common VC benchmark for startups.
Today, we’ll expand on how that revenue target ties directly to market size — with real-world examples of large companies that remain a small slice of an even bigger pie.
Why $100M Revenue Matters for VCs
VCs typically invest in a startup with the assumption that they will be able to scale to $100M in revenue in 7-10 years. Here’s why:
Higher Exit Outcomes
VCs often apply revenue multiples at exit (e.g., 10×). A company that can reach $100M in annual revenue may exit at several hundred million dollars or even billions.Better Chances to “Return the Fund”
VCs expect a few big winners to drive the bulk of their fund’s returns. Startups hitting $100M+ in revenue are best positioned to become these breakout successes.
Why a $1B Market Floor?
VCs also typically like to invest in startups building in large markets. After all, in order to build a big business, you need to be serving a big market.
Realistic Market Share
If the total addressable market (TAM) is $500M and you’re aiming for $100M revenue, that’s 20% of the entire market — which is huge (and unrealistic) for a young company.
If the TAM is $1B, you need 10% to reach $100M — still tough, but not impossible.
If the TAM is $10B, you need 1% to reach $100M — much more probable.
Avoiding Unrealistic Assumptions
VCs look for large markets so startups don’t have to achieve 20%+ of the entire space to become “venture-scale.”
Even capturing 5–10% of a $1B+ market can lead to meaningful revenue.
I’d say VCs like to see market share requirements under 5%, with 10% being the absolute max. Hence, the $1B market floor usually.
Real-World Examples: Big Revenues, Small Market Shares
Even the world’s most recognizable brands are often single-digit or teens as a percentage of their full global market.
There are VERY few companies that achieve more than 20%+ market share so most VCs don’t bank on that happening.
Let’s look at the 2024 Global Social Media Market as an example:
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