How to Size a Market That Doesn’t Exist Yet
To size a market that doesn't exist yet, use proxy markets, analogous industries, and bottom-up calculations based on the specific customer segment you'll serve first. VCs don't expect perfect numbers for novel markets — they expect you to show your reasoning and demonstrate that the opportunity is large enough to justify venture-scale returns.
TLDR:
If you’re creating a new category, you can’t use traditional market sizing because there’s no existing market data.
Instead, use one of three frameworks: analog markets (find a similar problem that’s been solved elsewhere), budget reallocation (show where the money is currently being spent), or value creation (calculate willingness to pay based on the value you deliver).
Each approach gives VCs a credible number without relying on analyst reports that don’t exist.
Last updated: February 2026
The bottoms-up market sizing framework I wrote about in my last post works great when you’re entering an existing category. Count the customers, multiply by price, show your math. But what if you’re creating something genuinely new? What if there’s no existing market data because the market doesn’t exist yet?
This is one of the most common questions I got from pre-seed and seed founders during my seven years as a VC Principal. And it’s a legitimate problem, because VCs still need to see a credible path to a large market even if that market is being created rather than captured.
Here are three frameworks that work.
Framework 1: Analog Markets
Find a similar problem that’s been solved in another domain and use it as a proxy for what your market could become.
The classic example: “The market for email security was $0 in 2000 and $4.8B in 2023. We’re building the equivalent for AI model security. As AI adoption follows a similar curve to email adoption in enterprises, we expect AI security to follow a similar growth trajectory.”
This works because you’re not making up numbers. You’re pointing to a real market that solved a structurally similar problem and saying “here’s what happened there, and here’s why we think our market will develop similarly.”
The key is finding an analog that’s actually analogous. The problem structure should be similar, the buyer should be similar, and the adoption dynamics should be comparable. If you’re stretching to make the comparison work, VCs will see through it.
Framework 2: Budget Reallocation
Show where the money is currently being spent on solving this problem, even if it’s being spent inefficiently on non-software solutions.
“Companies currently spend $50K per year on this problem using consultants, manual processes, and legacy tools. There are 40,000 companies in our target segment spending at this level. That’s $2B in annual spending we’re converting to software at a 70% discount, which yields a $600M SAM for our solution.”
This works because you’re not asking VCs to believe in new spending. You’re showing them that the budget already exists, it’s just being allocated to inferior solutions. Your product captures that existing budget more efficiently.
The key is proving that the current spending is real. Customer interviews, industry reports, or your own surveys can validate that companies are actually spending this money today. If you can’t prove the current spending exists, this framework falls apart.
Framework 3: Value Creation
Some products create new value rather than capturing existing budgets. In this case, you size the market based on willingness to pay as a percentage of value delivered.
“Our product generates $100K in annual savings per customer through reduced waste and improved efficiency. Based on conversations with 30 potential customers, they’re willing to pay 10-15% of realized value. At 10% value capture, that’s $10K in annual willingness to pay. Across 50,000 potential customers in our target segment, that’s a $500M market we’re creating.”
This works because you’re tying the market size directly to measurable value. VCs can follow the logic: if you deliver real savings or revenue gains, customers will pay some percentage of that value.
The key is proving the value creation is real and measurable. “Our product saves time” is too vague. “Our product reduces processing time from 4 hours to 20 minutes, which at an average fully-loaded labor cost of $75/hour saves $290 per transaction” is credible. You need to be specific about the value and how you measured it.
Which Framework Should You Use?
Use analog markets when there’s a clear historical precedent in an adjacent space, especially for platform plays or infrastructure products where adoption dynamics matter.
Use budget reallocation when you’re replacing an existing solution with something better, faster, or cheaper. This is common for vertical SaaS and workflow automation products.
Use value creation when you’re delivering measurable ROI that customers don’t currently capture. This is common for analytics, optimization, and efficiency products.
You can also combine frameworks. “Companies currently spend $30K on manual processes (budget reallocation), and we estimate an additional $20K in unrealized savings our product unlocks (value creation), for a combined $50K opportunity per customer.”
The Credibility Test
Whatever framework you use, ask yourself: can I defend every number in this calculation with real data or reasonable assumptions?
If your analog market comparison requires a 10-minute explanation of why email security is like AI security, it’s probably not a strong analog.
If your budget reallocation assumes companies are spending money you can’t actually prove they’re spending, it won’t hold up to scrutiny.
If your value creation math depends on customers caring about benefits they’ve never expressed interest in, you’re building on sand.
VCs have seen hundreds and hundreds of pitches. They can tell when a founder has done the real work versus when someone is backing into a number that sounds good. Do the work.
CREATING A NEW CATEGORY AND NEED HELP WITH MARKET SIZING?
Book a diagnostic sprint and we’ll figure out which framework fits your business and build a market size VCs will actually believe. See our services at www.decktovc.com/services
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KEY TAKEAWAYS
When creating a new category, use analog markets (find a similar solved problem), budget reallocation (show where money is currently spent), or value creation (calculate willingness to pay based on delivered value).
Analog markets work best when there’s a clear historical precedent with similar problem structure, buyers, and adoption dynamics.
Budget reallocation works best when you’re replacing existing solutions with something better, but you need to prove the current spending is real.
Value creation works best when you’re delivering measurable ROI, but you need specific numbers on the value delivered and evidence of willingness to pay.
Vicki Politis
Founder, DeckToVC · Former VC Principal
Vicki spent 7 years as a Principal at a $400M European VC fund reviewing thousands of pitch decks. She's a Managing Director at Golden Seeds and taught venture capital at Yale. Her clients have raised $17M+ across 15+ rounds. Work with Vicki →
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