Building a Cybersecurity TAM from First Principles
Built a bottom-up TAM for a cybersecurity company under active consideration, starting from customer segments and pricing before validating against top-down industry data.
Ektha S
Financial Research Associate at The D. E. Shaw Group
From their time as
Financial Research Associate
The D. E. Shaw Group • 2023
Overview
Ektha was asked to build a market sizing analysis for a cybersecurity company the New York ventures desk was actively evaluating. The brief was open-ended: understand the market and help the team form a view on whether the opportunity was worth pursuing.
The Story
Ektha was asked to build a market sizing analysis for a cybersecurity company the New York ventures desk was actively evaluating. The brief was open-ended: understand the market and help the team form a view on whether the opportunity was worth pursuing.
Rather than starting from the company's own narrative, she started from the market structure. She mapped how cybersecurity breaks into distinct sub-segments, then narrowed her focus to endpoint security buyers in the US, specifically SMBs, because that was where the company's product actually competed. She looked at how those buyers make decisions, what switching costs look like, and how the company's approach compared to alternatives in the real world.
With the customer segment and geography defined, she built the TAM bottom-up: she identified the customer base, found pricing points, made explicit assumptions, and documented her guesstimates. She then validated the bottom-up figure against a top-down view of the broader endpoint security segment. The two figures converged closely, which gave her confidence in the output.
When she handed the analysis to the NY team, one of the analysts came back directly to say the figures were not what they had been hoping to see. The TAM analysis shifted their conviction on whether the deal was worth pursuing.