Market sizing

Today I am grateful for the ability to play golf. It’s an insanely frustrating game but even on a bad day, I am out in nature encouraging the fresh air and it sure as hell beats a lot of other things.

I had a call today with a friend of a friend who needed some help with her Peloton stock options. She had a common problem that I’ve heard hundreds of times by now. She didn’t plan around her stock options and now she’s in a tough situation. It’s the main reason why Secfi exists as a company.

In discussing her situation, I heard another common thing I hear from our clients, “I never would have thought the stock price would be where it is today.”

Of course, this is a bit of a product of where the market is right now with tech stocks valued at insane multiples. With that said, one of the most humbling things for many investors I’ve spoken to is how wildly wrong they are on market cap predictions.

People tend to forget that it’s more common for a $1b company to turn into a $10b company then for a new startup to become a $1b company.

This makes sense when you think of human nature.

It’s much easier to say the market cap for a company is a smaller finite number that can be calculated based on some back of the napkin math. It’s much harder to find all the possible flaws in the estimate and market participants that were not included.

Globalization and technology has also rapidly advanced connectivity expanding potential market sizes at exponential rates. Companies are now reaching untapped potential easier and faster. And of course, growth of technology and data has created a much larger market than ever imagined.

I explained to my friend at Peloton about how bullish I was about the company. I told her that yes the company may be 3x what she thought the stock price would be right now, but to come back to in 5 years and see where it is then. She may be even more surprised.