For most startups, market research only goes as far as finding a really big revenue number to put on their addressable market size slide of their investment pitch
It’s a big deal when a well known industry analyst provides some credibility to the startup’s hockey-stick revenue projections. This is what’s known as the “top-down” method of estimating one’s market. The founders think that putting an industry analyst’s name on one of the slides will prevent VCs or Angel investors asking the basic questions on product viability, market reach and customer acquisition.
The other way is the “bottom-up” approach, which requires more hard work . Using this method, you usually come up with “estimates”. You come up with the estimates of number of customers you will acquire, how much product they buy and for what price. The tricky thing here is the estimation part. One of the best ways to do that is to ask customers specific questions. Ask specific questions like – “Would you buy a gadget for $20 to synchronize your mp3 files?”
Put up a poll on a website where you think your future customers browse frequently. Pay the website money for the space or for hosting the poll. Get answers quickly and then change the poll and ask the next question till you can confidently come up with a decent estimate. Show this as proof to the investors when they invest in your company!.